BEAR: A person who believes that the price of a particular security or the market as a whole will go lower.

Size: px
Start display at page:

Download "BEAR: A person who believes that the price of a particular security or the market as a whole will go lower."

Transcription

1 Trading Terms

2 ARBITRAGE: The simultaneous purchase and sale of identical or equivalent financial instruments in order to benefit from a discrepancy in their price relationship. More generally, it refers to an opportunity to make risk-free returns that are greater than the risk-free rate of return. ASK or OFFER: The price of a stock or option at which a seller is offering to sell a security, that is, the price that investor may purchase a stock or option. BASIS POINT: A.01% tick on a 1.00% scale used to describe the yields of interest rates or interest rate products. For example, when the U.S. Fed raises the discount rate 25 basis points, the discount rate goes from 5.00% to 5.25%. BEAR: A person who believes that the price of a particular security or the market as a whole will go lower. BEARISH: The outlook of a person anticipating lower prices in a particular security or the market as a whole. BEAR MARKET: Any market in which prices are trending lower BETA: A measure of the return (in percentage terms) on a stock relative to the return (in percentage terms) of an index. BID: The price of a stock or option at which a buyer is willing to purchase a security; the price at which a client may sell a security. Trading terms 1

3 BID/ASK (OFFER) SPREAD: The di rence between the bid and ask prices for a particular stock or option. BOND: A debt instrument or promissory note of a corporation, municipality, or the U.S. Government. BROKER: A broker is an individual or firm that charges a fee or commission for executing, either on the oor of an exchange or electronically, buy, sell, or spread orders submitted by a client or firm. BULL: A person who believes that the price of a particular security or the market as a whole will go higher. BULLISH: The outlook of a person anticipating higher prices in a particular security or the market as a whole. BULL MARKET: Any market in which prices are trending higher CANCELED ORDER: An order to buy or sell stock or options that is canceled before it has been executed CASH ACCOUNT: An account in which all positions must be paid for in full CHICAGO BOARD OF TRADE (CBOT): Founded in 1848 with 82 original members, today the CBOT is the one of the largest futures and options exchanges in the world. It is known for its grain and U.S. Treasury Bond futures. Futures and futures options are traded at the CBOT. Trading terms 2

4 CHICAGO MERCANTILE EXCHANGE (CME): Originally formed in 1874 as the Chicago Produce Exchange, where products such as butter, eggs, and poultry were traded, the CME is now one of the biggest futures and options exchanges in the world. The CME trades futures on stock indices, foreign currencies, livestock, and Eurodollars. Futures and futures options are traded at the CME. CLIENT: Any person or entity that opens a trading account with a broker-dealer CLIENT STATEMENT: This document displays a client's trading activity, positions and account balance. CLOSING PRICE: The price of a stock or option at the last transaction of the day. COMMISSION: The one time fee charged by a broker to a client when the client executes a stock or option trade through the brokerage firm CONTRACT SIZE: The number of shares of the underlying stock that an options contract would deliver if exercised. CONTINGENCY ORDER: When you place a stock or options order you can choose to place contingencies on that order, meaning that the order will be filled only when a specific event has occurred CORRECTION: A temporary reversal of direction of the overall trend of a particular stock or the market in general CURRENT MARKET VALUE (CMV): The current worth of the securities in an account. The market value of listed securities is based on the closing prices on the previous business day Trading terms 3

5 DAY TRADING: Buying and selling the same stock or option position in one day's trading session, thus ending the day with no position. DIVIDEND: A payment made by a company to its existing shareholders. Dividends are usually cash payments made on a quarterly basis. Dividends can also be in the form of additional shares of stock or property. DOWNTREND: Successive downward price movements in a security over time EQUITY: Equity can have several meanings, including 1) stock, as it represents ownership in a corporation, or 2) in a margin account, equity represents a client's ownership in his account EXCHANGE: An association of persons (members) who participate in buying and selling securities. It also refers to the physical location where the buying and selling takes place. EXECUTION: The actual completion of an order to buy or sell stock or options. FEDERAL OPEN MARKET COMMITTEE (FOMC): A committee of the Federal Reserve Board which operates by buying and selling government securities in the open market. This buying and selling is how the Federal Reserve Board controls the U.S. money supply. The FOMC decides whether to change the discount rate or not. FEDERAL RESERVE BOARD (FRB): A seven-member board of governors of the Federal Reserve System, appointed by the U.S. President and confirmed by the Senate, that is responsible for monetary policy within the United States. It controls the supply of money and credit to try to control inflation and create a stable, growing economy. Trading terms 4

6 FUNDAMENTALS: Factors that are used to analyze a company and its potential for success, such as earnings, revenues, cash flow, debt level, financial ratios, etc. FUTURE(S) CONTRACT: A forward contract for the future delivery of a financial instrument (ex. Treasury bond) or physical commodities (corn), traded on a futures exchange (ex. CBOT, CME). GOOD- - TILCANCELED (GTC): A type of limit order that is active until it is filled or canceled. As opposed to a day order, a GTC order can remain active for an indefinite number of trading sessions INDEX: A proxy for the overall stock market or segments of the stock market. An index is typically made up of a group of stocks that are selected to represent all stocks in the stock market or market segment (such as technology stocks or big capitalization stocks). The performance of the index gives an idea of how individual stocks might be performing. The S&P 500 (Standard & Poor's 500) and Dow Jones Industrial Average are two well-known indices INITIAL MARGIN REQUIREMENT: The amount of equity a client must deposit when making a new purchase in a margin account. INITIAL PUBLIC OFFERING (IPO): A corporation's first sale of stock to the public. INSTITUTIONAL INVESTORS: Organizations such as mutual funds, pension funds, endowment funds, and insurance companies that typically have very large sums of money to invest. INTEREST: Money paid when borrowing money or money earned when lending money. INTEREST RATE: A percentage that is charged when borrowing money, or that is earned when lending money Trading terms 5

7 INVESTOR: Someone who purchases a stock with the intent of holding it for a some amount of time and profiting from the transaction. Compare to day trading. JOINT ACCOUNT: An account that has two or more owners who possess some form of control over the account and these individuals may transact business in the account JUNK BOND (HIGH - YIELD BOND): A bond with a credit rating of BB or lower, carrying higher risk of default than investment grade bonds. LEVERAGE: The ability to control of a larger amount of money or assets with a smaller amount of money or assets, typically done by borrowing money or using options. If prices move favorably for a leveraged position, the profits can be larger than on an unleveraged position. However, if prices move against a leveraged position, the losses can also be larger than on an unleveraged position LIMIT (PRICE) ORDER: An order that has a limit on either price or time of execution, or both LIMITED TRADING AUTHORIZATION: This authorization, usually provided by a limited power of attorney, grants someone other than the client to have trading privileges in an account LIQUIDATION: A transaction or transactions that offsets or closes out a stock or options position. LIQUIDITY: The ease with which a transaction in stock or options can take place without substantially affecting their price LONG: As a noun, it refers to people who have bought stock or options. As an adjective, it refers to a position of long stock or options. Compare to short Trading terms 6

8 LOT: Contract MAINTENANCE MARGIN: An amount of cash or margin-eligible securities that must be maintained on deposit in a client's account to maintain a particular position. MARGIN: The amount of equity contributed by a client (in the form of cash or margin-eligible securities) as a percentage of the current market value of the stocks or option positions held in the client's margin account. MARGIN ACCOUNT: An account that allows a client to borrow money from a brokerage firm against cash and margin-eligible securities held in the client's margin account at that brokerage firm. MARGIN CALL: A brokerage firm's demand of a client for additional equity in order to bring margin deposits up to a required minimum level. If the client fails to deliver more equity in the account, the client's positions may be liquidated. MARGIN REQUIREMENT: The minimum equity required in an account to initiate or maintain a position in stock or options MARKET MAKER: A term for a trader at the CBOE or PCX who trades for his own account. They compete with each other to provide the best bid and ask prices for options to the public. MARK -TO - MARKET: The daily updating of the value of stocks and options to re account ct profits and losses in a margin NET POSITION: The di option. rence between a client's open long and open short positions in any one stock or Trading terms 7

9 NEW YORK STOCK EXCHANGE (NYSE): Founded in 1792, it is the oldest and largest stock exchange in the United States. Options are not traded on the NYSE. OFFER: Another name for the ask price. The price of a stock or option at which a seller is offering to sell. ONE CANCELS OTHER (OCO): Two orders submitted simultaneously by one client, where if one order is filled, the other is canceled immediately. OPEN EQUITY: The value of all open positions in stock and options, less the margin requirements of those positions. OPTION: A call or a put, an option is a contract that entitles the buyer to buy (in the case of a call) or sell (in the case of a put) a number of shares of stock at a predetermined price (strike price) on or before a fixed expiration date ORDER: An instruction to purchase or sell stock or options. POINT: The minimum change in the handle of a stock or option price. For stock or options in the U.S., a point means $1. If the price of an option goes from $2.00 to $7.00, it has risen 5 points. PROFIT/LOSS (P/L) DAY: P/L Day is the amount of money made or lost on your position from last night's close to the current mark plus any intra-day profit and loss Trading terms 8

10 PROFIT/LOSS (P/L) OPEN: P/L Open is the amount of money made or lost on your position the inception of the trade. You can see execution price for any stock or option in your position by going to the Monitor tab and left clicking on the P/L Open dollar amount. QUOTE: The bid to buy and the offer to sell a particular stock or option at a given time RALLY: A rise in the price of a stock or the market as a whole. Compare to reaction. RANGE: The high and low prices of a stock or option recorded during a specified time REALIZED GAINS OR LOSSES: The profit or loss incurred in an account when a closing trade on a stock or option is made and matched with an open position in the same stock or option. REVERSAL (MARKET REVERSAL): When a stock's direction of price movement stops and heads in the opposite direction. ROUND LOT: A standard quantity of trading. For example, in U.S. equities, a round lot is 100 shares of stock. SCALP: A quick entry and exit on a position SECONDARY MARKET: Markets in which securities are bought and sold subsequent to their being sold to the public for the first time. SEGREGATION: The holding of client-owned securities separate from securities owned by other clients and securities by the brokerage firm. Trading terms 9

11 SETTLEMENT: The conclusion of a stock or options trade through the transfer of the security (from the seller) or cash (from the buyer). SHARES: Stock. SHORT: As a noun, it refers to people who have sold stock or options without owning them first. As an adjective, it refers to a position of short stock or options. Compare to long. SINGLE ACCOUNT: An account type in which only one individual has control over the investments and may transact business. SPECULATOR: Someone who buys or sells stocks or options hoping to profit from favorable moves in their price or volatility. Generally, a speculator does not hedge his positions. SPLIT: An action taken by a corporation in which the number of outstanding shares is increased and the price per share decreases. SPREAD: 1) a position or order involving two or more different options or stock and options (see leg), or 2) the difference between the bid and offer prices of a stock or option. SPX: SPX is the symbol for the Standard & Poor's 500 cash index STATEMENT: A summary of a brokerage account's activity and balances. Trading terms 10

12 STOCK: Another name for equity, it is a security that represents ownership in a corporation. STOP (STOP LOSS) ORDER: A type of order that turns into a market order to buy or sell stock or options when and if a specified "stop" price is reached SYSTEMATIC RISK: The broad macroeconomic factors that affect all companies in a stock market. It is also known as market risk. TECHNICAL ANALYSIS: Calculations that use stock price and volume data to identify patterns helping to predict future stock movements. Some technical analysis tools include moving averages, oscillators, and trendlines. TICK: The smallest possible price increment for a stock or option. TICKER: The telegraphic system which prints or displays last sale prices and volume of securities transactions on exchanges on a moving tape within a minute after each trade. Also known as the "tape". TRADING AUTHORIZATION: Written permission from the owner of an account authorizing another person to enter trades on behalf of the owner. Also called Power of Attorney. TRADING FLOOR: The part of an exchange where the stocks and options are actually bought and sold. TREND: Either an uptrend or a downtrend, successive price movements in the same direction in a security over time Trading terms 11

13 UPTREND: Successive upward price movements in a security over time VIX (VOLATILITY INDEX): Created by the CBOE, the VIX is an index of volatility calculated from the extrinsic value of out of the money SPX index options. VOLATILITY: Generically, volatility is the size of the changes in the price of the underlying security. In practice, volatility is presented as either historical or implied. VOLUME: The total number of shares of stock or option contracts traded on a given day Trading terms 12

INVESTMENT DICTIONARY

INVESTMENT DICTIONARY INVESTMENT DICTIONARY Annual Report An annual report is a document that offers information about the company s activities and operations and contains financial details, cash flow statement, profit and

More information

Types of Stock. Common Stock most common form of stock. Preferred Stock. Companies may customize other classes of stock.

Types of Stock. Common Stock most common form of stock. Preferred Stock. Companies may customize other classes of stock. Stock Market Basics What are Stocks? Stock is ownership in a publicly traded company. Stock is a claim on the company s assets and earnings. The more stock you have, the greater your claim as an owner.

More information

Virtual Stock Market Game Glossary

Virtual Stock Market Game Glossary Virtual Stock Market Game Glossary American Stock Exchange-AMEX An open auction market similar to the NYSE where buyers and sellers compete in a centralized marketplace. The AMEX typically lists small

More information

General Forex Glossary

General Forex Glossary General Forex Glossary A ADR American Depository Receipt Arbitrage The simultaneous buying and selling of a security at two different prices in two different markets, with the aim of creating profits without

More information

THE STOCK MARKET GAME GLOSSARY

THE STOCK MARKET GAME GLOSSARY THE STOCK MARKET GAME GLOSSARY Accounting: A method of recording a company s financial activity and arranging the information in reports that make the information understandable. Accounts payable: The

More information

ACTIVITY 20.1 THE LANGUAGE OF FINANCIAL MARKETS: DEFINITIONS

ACTIVITY 20.1 THE LANGUAGE OF FINANCIAL MARKETS: DEFINITIONS ACTIVITY 20.1 THE LANGUAGE OF FINANCIAL MARKETS: DEFINITIONS AMEX: The acronym stands for American Stock Exchange, formerly an independent market but now part of the New York Stock Exchange; the AMEX s

More information

Chapter 3. How Securities are Traded

Chapter 3. How Securities are Traded Chapter 3 How Securities are Traded Primary vs. Secondary Security Sales Primary: When firms need to raise capital, they may choose to sell (or float) new securities. These new issues typically are marketed

More information

Futures Contract Introduction

Futures Contract Introduction Futures Contract Introduction 1 The first futures exchange market was the Dojima Rice exchange in Japan in the 1730s, to meet the needs of samurai who being paid in rice and after a series of bad harvests

More information

SAVI TRADING 2 KEY TERMS AND TYPES OF ORDERS. SaviTrading LLP 2013

SAVI TRADING 2 KEY TERMS AND TYPES OF ORDERS. SaviTrading LLP 2013 SAVI TRADING 2 KEY TERMS AND TYPES OF ORDERS 1 SaviTrading LLP 2013 2.1.1 Key terms and definitions We will now explain and define the key terms that you are likely come across during your trading careerbefore

More information

Review for Exam 1. Instructions: Please read carefully

Review for Exam 1. Instructions: Please read carefully Review for Exam 1 Instructions: Please read carefully The exam will have 21 multiple choice questions and 5 work problems. Questions in the multiple choice section will be either concept or calculation

More information

RISK DISCLOSURE STATEMENT FOR SECURITY FUTURES CONTRACTS

RISK DISCLOSURE STATEMENT FOR SECURITY FUTURES CONTRACTS RISK DISCLOSURE STATEMENT FOR SECURITY FUTURES CONTRACTS This disclosure statement discusses the characteristics and risks of standardized security futures contracts traded on regulated U.S. exchanges.

More information

BASKET A collection of securities. The underlying securities within an ETF are often collectively referred to as a basket

BASKET A collection of securities. The underlying securities within an ETF are often collectively referred to as a basket Glossary: The ETF Portfolio Challenge Glossary is designed to help familiarize our participants with concepts and terminology closely associated with Exchange- Traded Products. For more educational offerings,

More information

CHAPTER 11 INTRODUCTION TO SECURITY VALUATION TRUE/FALSE QUESTIONS

CHAPTER 11 INTRODUCTION TO SECURITY VALUATION TRUE/FALSE QUESTIONS 1 CHAPTER 11 INTRODUCTION TO SECURITY VALUATION TRUE/FALSE QUESTIONS (f) 1 The three step valuation process consists of 1) analysis of alternative economies and markets, 2) analysis of alternative industries

More information

CHAPTER 22: FUTURES MARKETS

CHAPTER 22: FUTURES MARKETS CHAPTER 22: FUTURES MARKETS PROBLEM SETS 1. There is little hedging or speculative demand for cement futures, since cement prices are fairly stable and predictable. The trading activity necessary to support

More information

Financial Markets and Institutions Abridged 10 th Edition

Financial Markets and Institutions Abridged 10 th Edition Financial Markets and Institutions Abridged 10 th Edition by Jeff Madura 1 12 Market Microstructure and Strategies Chapter Objectives describe the common types of stock transactions explain how stock transactions

More information

Comparing E-minis and ETFs

Comparing E-minis and ETFs STOCK INDEXES Comparing E-minis and ETFs SEPTEMBER 15, 2012 John W. Labuszewski Managing Director Research & Product Development 312-466-7469 jlab@cmegroup.com CME Group E-mini stock index futures and

More information

Brief Overview of Futures and Options in Risk Management

Brief Overview of Futures and Options in Risk Management Brief Overview of Futures and Options in Risk Management Basic Definitions: Derivative Security: A security whose value depends on the worth of other basic underlying variables. E.G. Futures, Options,

More information

A stock is a share in the ownership of a company. Stock represents a claim on the company s assets and earnings.

A stock is a share in the ownership of a company. Stock represents a claim on the company s assets and earnings. Stock Market Basics What are stocks? A stock is a share in the ownership of a company. Stock represents a claim on the company s assets and earnings. As an owner (shareholder), you are entitled to your

More information

TMX TRADING SIMULATOR QUICK GUIDE. Reshaping Canada s Equities Trading Landscape

TMX TRADING SIMULATOR QUICK GUIDE. Reshaping Canada s Equities Trading Landscape TMX TRADING SIMULATOR QUICK GUIDE Reshaping Canada s Equities Trading Landscape OCTOBER 2014 Markets Hours All market data in the simulator is delayed by 15 minutes (except in special situations as the

More information

Web. Chapter FINANCIAL INSTITUTIONS AND MARKETS

Web. Chapter FINANCIAL INSTITUTIONS AND MARKETS FINANCIAL INSTITUTIONS AND MARKETS T Chapter Summary Chapter Web he Web Chapter provides an overview of the various financial institutions and markets that serve managers of firms and investors who invest

More information

INVESTMENT TERM GLOSSARY

INVESTMENT TERM GLOSSARY A Accrued Interest - Interest that has been earned but not yet credited to a bond or other fixed-income investment, such as a certificate of deposit. Active Management The use of professional investment

More information

Reading: Chapter 19. 7. Swaps

Reading: Chapter 19. 7. Swaps Reading: Chapter 19 Chap. 19. Commodities and Financial Futures 1. The mechanics of investing in futures 2. Leverage 3. Hedging 4. The selection of commodity futures contracts 5. The pricing of futures

More information

Lecture Two Essentials of Trading. Andy Bower www.alchemetrics.org

Lecture Two Essentials of Trading. Andy Bower www.alchemetrics.org Lecture Two Essentials of Trading Andy Bower www.alchemetrics.org Essentials of Trading Why People Trade Money What People Trade Market Where People Trade Exchanges How People Trade Brokers Orders Margin

More information

Understanding Stock Options

Understanding Stock Options Understanding Stock Options Introduction...2 Benefits Of Exchange-Traded Options... 4 Options Compared To Common Stocks... 6 What Is An Option... 7 Basic Strategies... 12 Conclusion...20 Glossary...22

More information

Chapter 1 - Introduction

Chapter 1 - Introduction Chapter 1 - Introduction Derivative securities Futures contracts Forward contracts Futures and forward markets Comparison of futures and forward contracts Options contracts Options markets Comparison of

More information

Chapter Five: Risk Management and Commodity Markets

Chapter Five: Risk Management and Commodity Markets Chapter Five: Risk Management and Commodity Markets All business firms face risk; agricultural businesses more than most. Temperature and precipitation are largely beyond anyone s control, yet these factors

More information

Bid - An expression indicating a desire to buy a commodity at a given price, opposite of offer.

Bid - An expression indicating a desire to buy a commodity at a given price, opposite of offer. Actuals - An actual physical commodity someone is buying or selling, e.g., soybeans, corn, gold, silver, Treasury bonds, etc. Also referred to as actuals. Analogous Years Analysis - An analytical methodology

More information

Currency Futures and Forward Contracts

Currency Futures and Forward Contracts Currency Futures and Forward Contracts by Geneviève Payette presented to Gregor Smith Queen s University January 28, 2005 In the past 30 years exchange rates have become much more volatile and less predictable

More information

JA Take Stock In Your Future Session Two

JA Take Stock In Your Future Session Two JA Take Stock In Your Future Session Two Objectives You will be able to: Identify pieces of information from a stock table (Section 2); Use that information to distinguish if the stock would be a suitable

More information

The SPX Size Advantage

The SPX Size Advantage SPX (SM) vs. SPY Advantage Series- Part II The SPX Size Advantage September 18, 2013 Presented by Marty Kearney @MartyKearney Disclosures Options involve risks and are not suitable for all investors. Prior

More information

Fundamentals of Futures and Options (a summary)

Fundamentals of Futures and Options (a summary) Fundamentals of Futures and Options (a summary) Roger G. Clarke, Harindra de Silva, CFA, and Steven Thorley, CFA Published 2013 by the Research Foundation of CFA Institute Summary prepared by Roger G.

More information

October 2003 UNDERSTANDING STOCK OPTIONS

October 2003 UNDERSTANDING STOCK OPTIONS October 2003 UNDERSTANDING STOCK OPTIONS Table of Contents Introduction 3 Benefits of Exchange-Traded Options 5 Orderly, Efficient, and Liquid Markets Flexibility Leverage Limited Risk for Buyer Guaranteed

More information

Answers to Concepts in Review

Answers to Concepts in Review Answers to Concepts in Review 1. Puts and calls are negotiable options issued in bearer form that allow the holder to sell (put) or buy (call) a stipulated amount of a specific security/financial asset,

More information

Closed-End Funds. A closed-end fund is a type of investment company. whose shares are listed on a stock exchange

Closed-End Funds. A closed-end fund is a type of investment company. whose shares are listed on a stock exchange a guide to Closed-End Funds A closed-end fund is a type of investment company whose shares are listed on a stock exchange or are traded in the over-the-counter market. Contents What Is a Closed-End Fund?...2

More information

LEAPS LONG-TERM EQUITY ANTICIPATION SECURITIES

LEAPS LONG-TERM EQUITY ANTICIPATION SECURITIES LEAPS LONG-TERM EQUITY ANTICIPATION SECURITIES The Options Industry Council (OIC) is a non-profit association created to educate the investing public and brokers about the benefits and risks of exchange-traded

More information

11 Option. Payoffs and Option Strategies. Answers to Questions and Problems

11 Option. Payoffs and Option Strategies. Answers to Questions and Problems 11 Option Payoffs and Option Strategies Answers to Questions and Problems 1. Consider a call option with an exercise price of $80 and a cost of $5. Graph the profits and losses at expiration for various

More information

UNDERSTANDING EQUITY OPTIONS

UNDERSTANDING EQUITY OPTIONS UNDERSTANDING EQUITY OPTIONS The Options Industry Council (OIC) is a non-profit association created to educate the investing public and brokers about the benefits and risks of exchange-traded options.

More information

Answers to Concepts in Review

Answers to Concepts in Review Answers to Concepts in Review 1. (a) In the money market, short-term securities such as CDs, T-bills, and banker s acceptances are traded. Long-term securities such as stocks and bonds are traded in the

More information

Financial Instruments. Chapter 2

Financial Instruments. Chapter 2 Financial Instruments Chapter 2 Major Types of Securities debt money market instruments bonds common stock preferred stock derivative securities 1-2 Markets and Instruments Money Market debt instruments

More information

J. Gaspar: Adapted from Jeff Madura, International Financial Management

J. Gaspar: Adapted from Jeff Madura, International Financial Management Chapter5 Currency Derivatives J. Gaspar: Adapted from Jeff Madura, International Financial Management 5. 1 Currency Derivatives Currency derivatives are financial instruments whose prices are determined

More information

Investment Finance 421-002 Prototype Midterm I

Investment Finance 421-002 Prototype Midterm I Investment Finance 421-002 Prototype Midterm I The correct answer is highlighted by a *. Also, a concise reasoning is provided in Italics. 1. are an indirect way U. S. investor can invest in foreign companies.

More information

Glossary of Futures Terms

Glossary of Futures Terms NATIONAL FUTURES ASSOCIATION Glossary of Futures Terms An Introduction to the Language of the Futures Industry 1 Glossary of Futures Terms: An Introduction to the Language of the Futures Industry National

More information

Understanding Leverage in Closed-End Funds

Understanding Leverage in Closed-End Funds Closed-End Funds Understanding Leverage in Closed-End Funds The concept of leverage seems simple: borrowing money at a low cost and using it to seek higher returns on an investment. Leverage as it applies

More information

Options on. Dow Jones Industrial Average SM. the. DJX and DIA. Act on the Market You Know Best.

Options on. Dow Jones Industrial Average SM. the. DJX and DIA. Act on the Market You Know Best. Options on the Dow Jones Industrial Average SM DJX and DIA Act on the Market You Know Best. A glossary of options definitions appears on page 21. The Chicago Board Options Exchange (CBOE) was founded in

More information

Risk Disclosure Statement for CFDs on Securities, Indices and Futures

Risk Disclosure Statement for CFDs on Securities, Indices and Futures Risk Disclosure on Securities, Indices and Futures RISK DISCLOSURE STATEMENT FOR CFDS ON SECURITIES, INDICES AND FUTURES This disclosure statement discusses the characteristics and risks of contracts for

More information

1 Regional Bank Regional banks specialize in consumer and commercial products within one region of a country, such as a state or within a group of states. A regional bank is smaller than a bank that operates

More information

The Young Investor s Guide To Understanding The Terms Used In Investing.

The Young Investor s Guide To Understanding The Terms Used In Investing. The Young Investor s Guide To Understanding The Terms Used In Investing. The Young Investor Dictionary compliments of Integrity Mutual Funds. YOUNG INVESTOR DICTIONARY Asset Something of value. The property

More information

Strategies in Options Trading By: Sarah Karfunkel

Strategies in Options Trading By: Sarah Karfunkel Strategies in Options Trading By: Sarah Karfunkel Covered Call Writing: I nvestors use two strategies involving stock options to offset risk: (1) covered call writing and (2) protective puts. The strategy

More information

Market Overview Fal 2015

Market Overview Fal 2015 Market Overview Fall 2015 Agenda Equities o What is a stock/etf? o Why do companies issue stock? o Debt vs Equity o Different types of stocks o How stocks trade Derivatives o Futures/Forwards o Options

More information

Investing Offers Rewards And Poses Risks. Investment Basics: The Power of Compounding. How Do Americans Invest Their Savings? (HA)

Investing Offers Rewards And Poses Risks. Investment Basics: The Power of Compounding. How Do Americans Invest Their Savings? (HA) How Do Americans Invest Their Savings? (HA) Learning how to save money for future use is an important first step in reaching your long-term goals. But saving alone is not enough. You will also need to

More information

Saving and Investing. Chapter 11 Section Main Menu

Saving and Investing. Chapter 11 Section Main Menu Saving and Investing How does investing contribute to the free enterprise system? How does the financial system bring together savers and borrowers? How do financial intermediaries link savers and borrowers?

More information

THE EQUITY OPTIONS STRATEGY GUIDE

THE EQUITY OPTIONS STRATEGY GUIDE THE EQUITY OPTIONS STRATEGY GUIDE APRIL 2003 Table of Contents Introduction 2 Option Terms and Concepts 4 What is an Option? 4 Long 4 Short 4 Open 4 Close 5 Leverage and Risk 5 In-the-money, At-the-money,

More information

Lecture 12. Options Strategies

Lecture 12. Options Strategies Lecture 12. Options Strategies Introduction to Options Strategies Options, Futures, Derivatives 10/15/07 back to start 1 Solutions Problem 6:23: Assume that a bank can borrow or lend money at the same

More information

Introduction. Part IV: Option Fundamentals. Derivatives & Risk Management. The Nature of Derivatives. Definitions. Options. Main themes Options

Introduction. Part IV: Option Fundamentals. Derivatives & Risk Management. The Nature of Derivatives. Definitions. Options. Main themes Options Derivatives & Risk Management Main themes Options option pricing (microstructure & investments) hedging & real options (corporate) This & next weeks lectures Introduction Part IV: Option Fundamentals»

More information

Commodity Options as Price Insurance for Cattlemen

Commodity Options as Price Insurance for Cattlemen Managing for Today s Cattle Market and Beyond Commodity Options as Price Insurance for Cattlemen By John C. McKissick, The University of Georgia Most cattlemen are familiar with insurance, insuring their

More information

ADVISORSHARES YIELDPRO ETF (NASDAQ Ticker: YPRO) SUMMARY PROSPECTUS November 1, 2015

ADVISORSHARES YIELDPRO ETF (NASDAQ Ticker: YPRO) SUMMARY PROSPECTUS November 1, 2015 ADVISORSHARES YIELDPRO ETF (NASDAQ Ticker: YPRO) SUMMARY PROSPECTUS November 1, 2015 Before you invest in the AdvisorShares Fund, you may want to review the Fund s prospectus and statement of additional

More information

Derivative Users Traders of derivatives can be categorized as hedgers, speculators, or arbitrageurs.

Derivative Users Traders of derivatives can be categorized as hedgers, speculators, or arbitrageurs. OPTIONS THEORY Introduction The Financial Manager must be knowledgeable about derivatives in order to manage the price risk inherent in financial transactions. Price risk refers to the possibility of loss

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. ECON 4110: Sample Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Economists define risk as A) the difference between the return on common

More information

EXECUTE SUCCESS. {at work}

EXECUTE SUCCESS. {at work} EXECUTE SUCCESS TM {at work} VIX T H E C B O E V O L A T I L I T Y I N D E X 1 W H AT I S V I X & W H AT D O E S I T M E A S U R E? T H E I N D U S T R Y S TA N D A R D I N V O L AT I L I T Y MEASUREMENT

More information

www.optionseducation.org OIC Options on ETFs

www.optionseducation.org OIC Options on ETFs www.optionseducation.org Options on ETFs 1 The Options Industry Council For the sake of simplicity, the examples that follow do not take into consideration commissions and other transaction fees, tax considerations,

More information

How Securities Are Traded

How Securities Are Traded How Securities Are Traded What is this project about? You will learn how securities are traded on exchanges, particularly how to conduct margin trades, short sales, and submit limit orders. What case do

More information

Glossary of Investment Terms

Glossary of Investment Terms online report consulting group Glossary of Investment Terms glossary of terms actively managed investment Relies on the expertise of a portfolio manager to choose the investment s holdings in an attempt

More information

There are two types of returns that an investor can expect to earn from an investment.

There are two types of returns that an investor can expect to earn from an investment. Benefits of investing in the Stock Market There are many benefits to investing in shares and we will explore how this common form of investment can be an effective way to make money. We will discuss some

More information

THE UNDAMENTALS AND ECHNIQUES RADING OMMODITY PREADS. c s

THE UNDAMENTALS AND ECHNIQUES RADING OMMODITY PREADS. c s c s THE UNDAMENTALS AND ECHNIQUES OF RADING OMMODITY PREADS The purpose of this booklet is to give you a better understanding of various aspects of spread trading in the futures market. Center for Futures

More information

Assumptions: No transaction cost, same rate for borrowing/lending, no default/counterparty risk

Assumptions: No transaction cost, same rate for borrowing/lending, no default/counterparty risk Derivatives Why? Allow easier methods to short sell a stock without a broker lending it. Facilitates hedging easily Allows the ability to take long/short position on less available commodities (Rice, Cotton,

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Survey of Macroeconomics, MBA 641 Fall 2006, Quiz 4 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The central bank for the United States

More information

DERIVATIVES Presented by Sade Odunaiya Partner, Risk Management Alliance Consulting DERIVATIVES Introduction Forward Rate Agreements FRA Swaps Futures Options Summary INTRODUCTION Financial Market Participants

More information

Understanding Portfolios. Reading the Portfolio

Understanding Portfolios. Reading the Portfolio Understanding Portfolios Reading the Portfolio The Portfolio Menu Navigation Menu provides access to various areas in a team s portfolio. It is available on all the pages of a team s online portfolio.

More information

central Options www.888options.com By Marty Kearney

central Options www.888options.com By Marty Kearney www.888options.com YOUR RESOURCE FOR OPTIONS EDUCATION SM Options central IN THIS S U M M E R 2 0 0 2 ISSUE: F E A T U R E : S E L L I N G P U T S O P T I O N S C E N T R A L M O V E S O N L I N E W H

More information

Basic Investment Terms

Basic Investment Terms Because money doesn t come with instructions.sm Robert C. Eddy, CFP Margaret F. Eddy, CFP Matthew B. Showley, CFP Basic Investment Terms ANNUITY A financial product sold by financial institutions pay out

More information

How CFD Trading Works?

How CFD Trading Works? What are CFD s In finance, a contract for difference (CFD) is a contract between two parties, typically described as "buyer" and "seller", stipulating that the seller will pay to the buyer the difference

More information

Five Things To Know About Shares

Five Things To Know About Shares Introduction Trading in shares has become an integral part of people s lives. However, the complex world of shares, bonds and mutual funds can be intimidating for many who still do not know what they are,

More information

Nine Questions Every ETF Investor Should Ask Before Investing

Nine Questions Every ETF Investor Should Ask Before Investing Nine Questions Every ETF Investor Should Ask Before Investing UnderstandETFs.org Copyright 2012 by the Investment Company Institute. All rights reserved. ICI permits use of this publication in any way,

More information

Using The Stock Market Game (SMG)

Using The Stock Market Game (SMG) Using The Stock Market Game (SMG) Created by Amy Cornelisen, Garin College What is a Company? A is a person or group of persons that create a product for others to buy. The product may be something that

More information

OPTIONS MARKETS AND VALUATIONS (CHAPTERS 16 & 17)

OPTIONS MARKETS AND VALUATIONS (CHAPTERS 16 & 17) OPTIONS MARKETS AND VALUATIONS (CHAPTERS 16 & 17) WHAT ARE OPTIONS? Derivative securities whose values are derived from the values of the underlying securities. Stock options quotations from WSJ. A call

More information

Comparing E-minis and ETFs

Comparing E-minis and ETFs RESEARCH AND product DEVELOPMENT Comparing E-minis and ETFs John W. Labuszewski, Research and Product Development Brett Vietmeier, Equity Products April 2009 13,000 cmegroup.com 12,000 1 10,000 9,000 8,000

More information

Brown Advisory Strategic Bond Fund Class/Ticker: Institutional Shares / (Not Available for Sale)

Brown Advisory Strategic Bond Fund Class/Ticker: Institutional Shares / (Not Available for Sale) Summary Prospectus October 30, 2015 Brown Advisory Strategic Bond Fund Class/Ticker: Institutional Shares / (Not Available for Sale) Before you invest, you may want to review the Fund s Prospectus, which

More information

Currency Derivatives Guide

Currency Derivatives Guide Currency Derivatives Guide What are Futures? In finance, a futures contract (futures) is a standardised contract between two parties to buy or sell a specified asset of standardised quantity and quality

More information

In effect CFD s are financial derivatives, originally known as Traded Options, that allow traders to take advantage of prices moving up (long

In effect CFD s are financial derivatives, originally known as Traded Options, that allow traders to take advantage of prices moving up (long What are CFD s In finance, a contract for difference (CFD) is a contract between two parties, typically described as "buyer" and "seller", stipulating that the seller will pay to the buyer the difference

More information

RISK DISCLOSURE STATEMENT

RISK DISCLOSURE STATEMENT RISK DISCLOSURE STATEMENT You should note that there are significant risks inherent in investing in certain financial instruments and in certain markets. Investment in derivatives, futures, options and

More information

FINANCIAL ENGINEERING CLUB TRADING 101

FINANCIAL ENGINEERING CLUB TRADING 101 FINANCIAL ENGINEERING CLUB TRADING 101 WHAT IS TRADING TRADING/INVESTING is the act of putting capital to use, by either buying or selling securities, for the purpose of gaining profits. Buy low, sell

More information

January 2001 UNDERSTANDING INDEX OPTIONS

January 2001 UNDERSTANDING INDEX OPTIONS January 2001 UNDERSTANDING INDEX OPTIONS Table of Contents Introduction 3 Benefits of Listed Index Options 5 What is an Index Option? 7 Equity vs. Index Options 9 Pricing Factors Underlying Instrument

More information

Contingent Claims: A stock option that is a derivative security whose value is contingent on the price of the stock.

Contingent Claims: A stock option that is a derivative security whose value is contingent on the price of the stock. Futures and Options Note 1 Basic Definitions: Derivative Security: A security whose value depends on the worth of other basic underlying variables. E.G. Futures, Options, Forward Contracts, Swaps. A derivative

More information

Financial Markets And Financial Instruments - Part I

Financial Markets And Financial Instruments - Part I Financial Markets And Financial Instruments - Part I Financial Assets Real assets are things such as land, buildings, machinery, and knowledge that are used to produce goods and services. Financial assets

More information

UNDERSTANDING INDEX OPTIONS

UNDERSTANDING INDEX OPTIONS UNDERSTANDING INDEX OPTIONS The Options Industry Council (OIC) is an industry cooperative created to educate the investing public and brokers about the benefits and risks of exchange-traded options. Options

More information

Online Share Trading Currency Futures

Online Share Trading Currency Futures Online Share Trading Currency Futures pic Currency Futures Introduction Currency futures contracts can be hard-working additions to any investor s or trader s portfolio. They provide a way to hedge the

More information

WHS FX options guide. Getting started with FX options. Predict the trend in currency markets or hedge your positions with FX options.

WHS FX options guide. Getting started with FX options. Predict the trend in currency markets or hedge your positions with FX options. Getting started with FX options WHS FX options guide Predict the trend in currency markets or hedge your positions with FX options. Refine your trading style and your market outlook. Learn how FX options

More information

Learning Curve Interest Rate Futures Contracts Moorad Choudhry

Learning Curve Interest Rate Futures Contracts Moorad Choudhry Learning Curve Interest Rate Futures Contracts Moorad Choudhry YieldCurve.com 2004 Page 1 The market in short-term interest rate derivatives is a large and liquid one, and the instruments involved are

More information

CBOT Precious Metals AN INTRODUCTION TO TRADING CBOT ELECTRONIC GOLD AND SILVER

CBOT Precious Metals AN INTRODUCTION TO TRADING CBOT ELECTRONIC GOLD AND SILVER CBOT Precious Metals AN INTRODUCTION TO TRADING CBOT ELECTRONIC GOLD AND SILVER Introduction The Chicago Board of Trade offers electronic trading on two of the world s most actively traded precious metals

More information

FIXED-INCOME SECURITIES. Chapter 11. Forwards and Futures

FIXED-INCOME SECURITIES. Chapter 11. Forwards and Futures FIXED-INCOME SECURITIES Chapter 11 Forwards and Futures Outline Futures and Forwards Types of Contracts Trading Mechanics Trading Strategies Futures Pricing Uses of Futures Futures and Forwards Forward

More information

Interest Rate Options

Interest Rate Options Interest Rate Options A discussion of how investors can help control interest rate exposure and make the most of the interest rate market. The Chicago Board Options Exchange (CBOE) is the world s largest

More information

Currency Options. www.m-x.ca

Currency Options. www.m-x.ca Currency Options www.m-x.ca Table of Contents Introduction...3 How currencies are quoted in the spot market...4 How currency options work...6 Underlying currency...6 Trading unit...6 Option premiums...6

More information

Module 2 How do ASX Listed CFDs work?

Module 2 How do ASX Listed CFDs work? Module 2 How do ASX Listed CFDs work? Course #: Title Topic 1: Basic features... 3 Opening and closing CFD positions... 3 Novation... 3 CFD pricing... 4 Competition between DPMs... 4 Arbitrage opportunities...

More information

9 Questions Every ETF Investor Should Ask Before Investing

9 Questions Every ETF Investor Should Ask Before Investing 9 Questions Every ETF Investor Should Ask Before Investing 1. What is an ETF? 2. What kinds of ETFs are available? 3. How do ETFs differ from other investment products like mutual funds, closed-end funds,

More information

Describe the functions of the Federal Reserve System (the Fed).

Describe the functions of the Federal Reserve System (the Fed). The Monetary System Chapter CHAPTER CHECKLIST Define money and describe its functions. Money is any commodity or token that is generally accepted as a means of payment. Money serves as a medium of exchange,

More information

Learning Curve Forward Rate Agreements Anuk Teasdale

Learning Curve Forward Rate Agreements Anuk Teasdale Learning Curve Forward Rate Agreements Anuk Teasdale YieldCurve.com 2004 Page 1 In this article we review the forward rate agreement. Money market derivatives are priced on the basis of the forward rate,

More information

BARUCH COLLEGE DEPARTMENT OF ECONOMICS & FINANCE Professor Chris Droussiotis LECTURE 2. Chapter 3 SECURITIES MARKETS

BARUCH COLLEGE DEPARTMENT OF ECONOMICS & FINANCE Professor Chris Droussiotis LECTURE 2. Chapter 3 SECURITIES MARKETS LECTURE 2 Chapter 3 SECURITIES MARKETS IPO Required Docs: Amendment to the certificate of incorporation Corporate Governance (Private are far less formal responsibility) Recruit Independent Board Members

More information

DEFINITIONS. ACT OR CEA The term "Act" or CEA shall mean the Commodity Exchange Act, as amended from time to time.

DEFINITIONS. ACT OR CEA The term Act or CEA shall mean the Commodity Exchange Act, as amended from time to time. DEFINITIONS ACT OR CEA The term "Act" or CEA shall mean the Commodity Exchange Act, as amended from time to time. BLOCK TRADE A privately negotiated futures, option on futures or swaps transaction that

More information

Advantages and disadvantages of investing in the Stock Market

Advantages and disadvantages of investing in the Stock Market Advantages and disadvantages of investing in the Stock Market There are many benefits to investing in shares and we will explore how this common form of investment can be an effective way to make money.

More information