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CFD Trading | CFD Trading Glossary

    Market
  • Actual Hedging
    Risk management by a hedger of an open position, either long or short, when occupied in offsetting the risk in a transaction.
  • Against Actuals
    A deal, usually between two hedgers, in which futures are swapped for cash positions. Also referred to as ‘Exchange for Physicals,’ and ‘Versus Cash.’
  • Any-and-All Bid
    An any-and-all bid is a term used predominately with takeovers. Specifically, it refers to one company purchasing all shares offered, for a specific time, from another company. An example would be company XYZ purchasing all of ABC’s shares at its current price. XYZ would continue to do this until it gathered enough shares to either gain a majority interest or actually acquire ABC.
  • ASX
    The ASX is an acronym for the Australian Securities Exchange. The ASX is similar to the NYSE in the United States.
  • Ax
    The ax is usually the person closest to the movement of a particular security. The ax is a market maker and can have a tremendous impact upon how a security trades.
  • Badwill
    Badwill is the opposite of goodwill. During badwill, a company is engaged in a specific event that hurts its shareholders. Examples include failed acquisitions, forced divestments and hostile takeovers.
  • Basket Trading
    Basket trading refers to trading multiple securities at once, though the event is usually executed under a single transaction.
  • Bet
    Another way of saying "market position."
  • Bid Form
    A file turned in by an underwriter as a municipal security bid.
  • Blotter
    A record of trade details usually recorded by a software program.
  • Bridge Bank
    An organization meant to serve as a means of transporting damaged loans from a weakening institution.
  • B/D
    (acronym) Broker/Dealer
  • Buy Break
    A signal to go long a particular security on a technical breakout.
  • Buy-In
    Takes place when the securities necessary to fulfill a transaction's terms cannot be delivered by the short seller.
  • Capital Surplus
    The monetary difference between the amounts taken in by a corporation for the total sale of their stock minus the average value of said stock.
  • Carrying Broker
    A FCM which terminates positions for customers as well as other FCMs.
  • CATS
    (acronym) Certificates of Accrual on Treasury Securities.
  • Cheap
    A term indicating that a particular good or service can be procured for a relatively low cost.
  • CHECCS
    (acronym) Clearing House Electronic Check Clearing System.
  • CHIPS
    (acronym) Clear House Interbank Payments System.
  • CIF
    (acronym) Cost of Insurance and Freight.
  • Clawback
    A clawback is a significant retracement in the price of a security after an substantial gain.
  • Closed End Investment Company
    An investment vehicle in which the quantity of shares outstanding is mostly fixed. This is in contrast to Open End Investment Companies, which have an variable quantity of shares outstanding.
  • Closing Range
    Technical reference to the upper and lower limits a security trades in just before the market closes.
  • CMBS
    (acronym) Commercial Mortgage Backed Securities.
  • CNS
    (acronym) Continuous Net Settlement systems.
  • Collateralized Obligation
    Type of structured security that divides and redistributes cash flows from a set of assets, and arranges them into similar assets.
  • Commission Run
    A report produced by a brokerage firm which enumerates the revenue brought in by each broker, as well as the commission each broker received.
  • Conversion Clause
    A clause in a mortgage loan, that allows for a Adjustable Rate Mortgage (ARM) to be converted into a Fixed Rate Mortgage (FRM).
  • Corporate Resolution
    A document which stipulates which employees and departments within the corporation can partake in investment decisions, such as hedging or trading, on behalf of the corporation.
  • Credit Crunch
    Occurrence which results in such restriction of credit availability that the functioning of the economy is greatly affected.
  • Credit Rating Services
    Firms that evaluate and offer credit ratings for different types of entities.
  • Crossed Market
    When the best offers made by one broker are lower than the bid of another broker, or vice versa.
  • CSCE
    (acronym) Coffee, Sugar, and Cocoa Exchange
  • CSE
    (acronym) Chicago Stock Exchange
  • CEO
    (acronym) Chief Executive Officer
  • CFO
    (acronym) Chief Financial Officer
  • CMO
    (acronym) Chief Marketing Officer
  • CTO
    (acronym) Chief Technology Officer
  • Current Principal Factor
    The statistical methodology used in finding the outstanding current principal value. Outstanding Principal Amount = Current Principal Factor x Initial Principle Amount.
  • Current Principal Value
    The monetary value of debt on a mortgage.
  • Cusp
    The term that refers to securities that are at-the-money.
  • DEA
    (acronym) Designated Examination Authority.
  • DEaR
    (acronym) Daily Earnings at Risk. This represents the maximum amount a trader can expect to lose on a daily basis.
  • Death Cross
    A technical event that describes a short-term moving average crossing below a shorter-term moving average. The opposite of a Golden Cross.
  • Dispersion
    A statistical indicator of variability.
  • Divided Account
    A new issue underwriting in which each party member is held responsible to allot his assigned piece of the contract. Once this member has sold his piece, he is no longer liable for the remainder of the syndicate.
  • DPMs
    (acronym) Designated Primary Market Makers
  • DTB
    (acronym) Deutsche Terminborse
  • DTC
    (acronym) Depository Trust Company
  • Due on Sale
    A clause requiring the immediate payment in full of a current mortgage given the occurrence of a transfer of ownership, or other event resulting in the transfer of ownership, such as sale, or death.
  • Dynamic Analysis
    The study of market conditions throughout time.
  • Envelope
    A technical analysis tool that is used to forecast the upper and lower bounds of price action by shifting moving averages.
  • Flipper
    A short-term trader who attempts to quickly buy then sell a specific stock to take advantage of an IPO.
  • Flowback
    Flowback gives an investor the right to convert an ADR and its shares to the original country’s shares. An example would be Company XYZ — a Japanese company trading in the United States. An investor in the US has the right to exchange his ADR shares into Japanese XYZ shares if he so pleases.
  • Focus List
    A focus list is a list that an institutional investor or highly regarded analyst produces. This list specifically states certain stocks or other securities that the investor feels confident in owning.
  • Freeze Out
    A term to describe major shareholders trying to oust minority shareholders. The purpose for this is to have a greater control of the company for voting rights, dividend rights, or takeover efforts. There are often questions over the legality of Freeze Outs.
  • Gadfly
    A gadfly is a representative for many shareholders who attends company shareholder meetings. Their purpose is to act for the best interest of the shareholders, which often sets them in opposition to management.
  • Gazelle Company
    A gazelle company is a company that is growing very rapidly in terms of sales. Such companies are usually new or small cap.
  • Godfather Offer
    Making reference to pop culture, this is a term that refers to an offer to a soon-to-be acquired firm that would be considered difficult to refuse.
  • Golden Cross
    A technical event that describes a short-term moving average crossing above a shorter-term moving average. The opposite of a Death Cross.
  • H-Shares
    Chinese based shares that are listed on foreign exchanges. An example would be Chinese company XYZ trading on the NYSE. XYZ, however, would still be regulated under Chinese laws. The only difference would be denomination.
  • Impact Day
    The day when a company offers a secondary or seasonal offer of its shares. This action usually depresses a stocks value.
  • Inside Quote
    The most attractive (narrowest) bid and ask spread among a number of different offers.
  • Installment Receipt
    An installment receipt is similar to a company’s issuance of either debt or equity. However, with an installment receipt, instead of paying the full amount for the security, the purchaser only pays an initial fraction of the security’s cost. The purchaser will pay the remaining cost in installments later on. The “shareholder” will still maintain dividend and voting rights, even before he finishes his installments.
  • Investing Sage
    An investing sage is someone considered a very smart and successful investor. An example would be George Soros or Warren Buffet.
  • Junior Capital Pool
    A means for a legal corporation that lacks a specific line of business to issue stock. Typically used as a means for young firms to raise capital.
  • Law of Supply
    The response of a product’s price to a market’s demand for that particular good. Usually, an increase in demand leads to a drop in price and visa versa.
  • Law of Supply
    The response of a products price to its availability. Usually, an increase in supplies leads to a drop in price and visa versa.
  • Mad Hatter
    A mad hatter is an authority figure for a company who is considered a poor manager.
  • Mapping
    The graphical or tabular presentation of financial positions that is used in risk and portfolio management.
  • Market
    The buying or selling of an instrument at its bid and offer prices. A buy order would thereby execute at the prevailing offer price and a sell order would match the prevailing bid.
  • Market Efficiency Hypothesis
    The theory that markets reflect all possible information.
  • Market Overhang
    A term referring to a significant build up in selling pressure that takes time to play out on a market.
  • Market Reporter
    An employee of the exchange who works in the vicinity of the trading pit to document real time price actions throughout the trading session.
  • Market Swoon
    A situation where the general market sees a large drop in value. This event is usually measured by a broader index.
  • MBSCC
    (acronym) Mortgage Back Securities Clearing Corporation
  • MEC
    (acronym) Modified Endowment Contracts
  • Mega Cap
    A company is a company’s whose market value is $200 billion or higher.
  • MidAM
    (acronym) Mid-America Commodity Exchange
  • Misappropriation Theory
    The misappropriation theory is a synonym for insider information.
  • Mosaic Theory
    The mosaic theory is way of collecting as much data as possible from as many reports as possible and making a recommendation on a particular security based on these recommendations.
  • MSRB
    (acronym) Municipal Securities Rulemaking Board. The MSRB makes rules regulating dealers who deal in municipal bonds, municipal notes, and other municipal securities.
  • NAII
    (acronym) National Association of Independent Insurers.
  • Non-Operating Asset
    Assets that are considered non-essential for a business’s normal functioning.
  • NRCE
    (acronym) Northeast Regional Check Exchange.
  • NSCC
    (acronym) National Securities Clearing Corporation
  • NYCE
    (acronym) New York Cotton Exchange.
  • NYACH
    (acronym) New York Automated Clearing House.
  • NYCHA
    (acronym) New York Clearing House Association.
  • NYMEX
    (acronym) New York Mercantile Exchange.
  • OATS
    (acronym) Order Audit Trail System. Monitors order executions for securities listed on the NASDAQ.
  • One Cancels the Other
    An order that is voided by the execution of another order.
  • Open End Investment Company
    Mutual funds that offer and redeem their shares daily.
  • Ordinary dividend
    A payment from a corporation to a shareholder.
  • OTS
    (acronym) Office of Thrift Supervision
  • Out
    A term referring to a completed sale of a previously held position.
  • Outliers
    Statistically independent variables. They are considered unlikely to happen or remote events because they diverge so widely from the mean.
  • Overreaction
    An unreasonable response by investors after the release of new information.
  • Paper Millionaire
    Situation when an investor gains has a large account balance, but profit is unrealized until all positions are closed and converted to currency.
  • Partial Close
    The settlement of only a portion of a full position.
  • PHLX
    (acronym) Philadelphia Stock Exchange
  • Pitchbook
    An informative book about a company that investment banks prepare for potential investors for marketing purposes.
  • PAC
    (acronym) Planned Amortization Class. A structured security with a reasonable life expectancy. Principle and interest payments are stable are for these relative to other parts of the deal
  • Pot is Clean
    Situation when an underwriter is able to issue all the shares required by a capital-desiring company.
  • Power Share
    A comparable statistic used in the media industry which takes into account a company’s revenue, audience share, and overall market share.
  • Price Continuity
    Occurs when there is a large number of buyers and sellers in the market, so that price changes are minimal with every transaction.
  • Price Talk
    Discussion during an IPO of where a company’s share price should be.
  • Pricing Power
    How much demand will change if a company changes the price of its goods or services.
  • Pullback
    A retracement in a security’s price that is only a percentage of a larger, initial rally.
  • Rectangle
    A period of range bound price action.
  • Red Chip
    Chinese based shares that are listed on other exchanges. The Chinese company, however, would still be regulated under Chinese laws. Also known as H-Shares.
  • Revlon Rule
    Rule that when a company is to be acquired, management needs to take the highest bid (in support of shareholders).
  • Scalper
    A short-term trader who attempts to make many quick, small profits throughout a trading session.
  • Semi-Strong Form Efficiency
    Theory that all public knowledge about a company is already integrated into a company’s price.
  • Shanghai Stock Exchange
    an exchange where stocks, bonds, and some other securities are traded in China.
  • Sheep
    An investor who follows the general consensus of a usually uninformed market group.
  • Soft Economic Moat
    An intangible competitive advantage that a company holds
  • Stalking-Horse Bid
    when a bankrupt company chooses another company to set a bid for its assets.
  • Standstill Agreement
    A negotiated agreement between a lender and borrower to create a new contract with new terms.
  • Street Expectation
    The common or consensus forecast for an event.
  • Stub
    Risky, overleveraged company stock.
  • Stuckholder
    An investor who is unable to sell off a company’s stocks due to liquidity reasons.
  • SFE
    (acronym) Sydney Futures Exchange
  • Synthetic Dividend
    Using financial instruments like options to create a way of gathering cash, from a non-dividend paying corporation.
  • Tax Exempt
    Types of investments, property, or income that are not subject to tax. For example, interest on Municipal bonds and interest on treasury bonds are not subject to tax.
  • Tax-Free Spinoff
    When a company divests a business segment into a newly traded company. However, the company does not incur any capital taxes for this event.
  • Tech Street
    the technology sector
  • Time Limit Order
    An order in which the customer details the exact time at which the trade may take place.
  • Time-Stamped
    Both when an order hits the trading floor, and when it is completed, it is stamped with the time of day, as this is part of the protocol for order-routing.
  • Toronto Stock Exchange
    Main exchange to trade equities in Canada
  • Touchline
    The best spread available for a security during a day.
  • Transparency
    The level for which all information for a security is accessible by the entire public.
  • Tunneling
    When management does something not in the best interest of its company’s shareholders.
  • Upstairs Trader
    An institutional trader or money manager that is present on the floor of an actual exchange.
  • Unbundling
    Buying a company with many business segments, only to sell some of components at a later date.
  • Undersubscribed
    IPO demand is less than desired shares to be issued.
  • Vice Fund
    fund that invests in gambling, tobacco, gaming, and alcoholic type of companies.
  • Vulture Funds
    Investment vehicles that concentrate mostly on acquiring real estate properties that are available due to financial troubles in companies whom do not have the liquidity benefits of an exchange.
  • Wash Trading
    Illegal trading of a company’s shares though two different brokers.
  • Whitemail
    Issuing a lot of cheap shares to the public to avoid an undesired takeover attempt.
  • White-Shoe
    Major financial firm that is positioned against a hostile takeover.
  • White Squire
    Like a white knight, but the acquirer takes a minority interest instead of a majority interest.
  • Working Ratio
    Measure to see if a company can recover operating costs from its revenue.
  • Zombies
    Bankrupt companies that continue to operate despite a lack of business.

    • Options
  • American Option
    Type of option that grants the buyer/hold of the option the right to early exercise. Typically, the buyer/holder pays a premium for the right to early exercise.
  • Bank Guarantee Letter
    A document produced by an approved bank verifying that the writer of a put option possesses enough funding in the bank to cover the write. The amount of the funding must be equal to the price of the put option, which is equivalent to the strike price times the amount of shares.
  • Barrier
    Based on predetermined stipulations, this is the threshold which will activate or deactivate an option feature.
  • B/D
    (acronym) Broker/Dealer
  • Bear Spread
    The combination of options designed to profit when the underlying asset value declines.
  • Bet
    Another way of saying "market position."
  • Binary Option
    An option with two outcomes. Usually, these options are designed to pay a certain value if in the money or pay nothing if out of the money.
  • Binomial Options Pricing Model
    The simplest model for pricing an option, and assumes that the price of the underlying asset may only increase or decrease till the expiration date. The model allows an investor to calculate the value of the option at any point in time, and is commonly used for pricing American options.
  • Black-Scholes Option Pricing Model
    Options pricing model which uses the underlying asset to determine the value of the option. It is commonly used to price European option, and takes into account the price change of the underlying asset, the time value of money, the strike price, and the time to expiration of the option.
  • Blotter
    A blotter is used in all security markets to grab customized details made over a certain time period. These details would include how much an investor, company, or individual would have made, what times these trades took place, how many lots or shares, etc. For example, a trader might have bought the EUR/USD and the USD/CAD on a particular day. The blotter would include this information as well as the number of lots traded, leverage used, time the trade was made, and other details as well.
  • Buckets
    Categories of derivatives or securities
  • Bull Spread
    The combination of options designed to profit when the underlying asset value increases.
  • Butterfly Spread
    The combination of a bull and bear spread, where three strike prices are used to limit risk and profit. The two lower strike prices are used in the bull spread, while the highest strike price is used in the bear spread. This strategy is often used when investors expect small movements in the price of the underlying asset.
  • Buy-In
    Takes place when the securities necessary to fulfill a transaction's terms cannot be delivered by the short seller.
  • Callable Bond
    A bond where the seller/write has the option to buy back the bond prior to the maturity date. The issuer typically pays a premium for the option.
  • Clearing
    Process where an intermediary takes the role of a buyer or seller in order to reconcile buy and sell orders.
  • CNS
    (acronym) Continuous Net Settlement system.
  • Complex Order
    An order with many different requirements such as stops, stop limits, and contingencies, to name a few.
  • Compliance Registered Options Principal
    The supervisor of a firm responsible for ensuring that the firms as well as its employees adhere to the rules and regulations which apply to the options market.
  • Compound Option
    A derivative where the underlying asset is an option. There are four types of compound options—Call on a Put, Call on a Call, Put on a Call, and Put on a Put.
  • Covered Warrant
    A warrant typically issued by a financial institution, which permits the buying and selling of a particular quantity of equities by the holder at a specified time and price.
  • Crossed Market
    When the best offers made by one broker are lower than the bid of another broker, or vice versa.
  • CSE
    (acronym) Chicago Stock Exchange
  • Cusp
    The term that refers to the at-the-money for securities.
  • DEA
    (acronym) Designated Examination Authority.
  • DEaR
    (acronym) Daily Earnings at Risk. This represents the maximum amount a trader can expect to lose on a daily basis.
  • Delta
    A ratio that compares the change in price of the underlying asset relative to the change in price of the derivative, and is often referred to as the ‘hedge’ ratio.
  • Delta Neutral
    A term which refers to the occurrence of the offsetting of a position's market risk exposure by derivatives, whether they relate to prices or to interest rate levels.
  • Down-and-In
    An options feature which activates a derivative contract after some indicator, like price, falls past a trigger point.
  • Down-and-Out
    An options feature which closes a derivatives contract after some indicator, like price, fall past a trigger point.
  • DPMs
    (acronym) Designated Primary Market Makers
  • DTB
    (acronym) Deutsche Terminborse
  • DTC
    (acronym) Depository Trust Company
  • European Option
    A type of option that may only be exercised at expiration.
  • Gamma
    Measures Delta’s rate of change relative to the underlying asset, and measures the price of the option relative to the amount it is in or out of the money.
  • Inside Quote
    An inside quote is combing many different market makers of a particular security and collecting the highest bid (sell) and lowest ask (buy) price. Another way of saying an inside spread.
  • OATS
    Order Audit Trail System. In Nasdaq securities, it refers to the monitoring the efficiency of order execution.
  • One Cancels the Other
    An order that is canceled because of another order. The instructions of the previous order are then replaced with the instructions of the new order.
  • Option Adjusted Duration
    Reduces duration statistic for options. In embedded securities such as mortgages, it is a target time duration for the first option (put or call) to exercise.
  • Order Splitting
    splitting stock orders to allow them to trade on the Small Order Execution System.
  • OTS
    (acronym) Office of Thrift Supervision
  • Out
    Designated that the client has canceled the order prior to its execution.
  • Partial Close
    Partial closing is an event that occurs when a large position needs to be bought or sold in the market. Depending on liquidity levels a broker might offer partial closing if there are no buyers or sellers opposite to the position of the big closing trade. For example, a trader decides to close (sell) his EUR/USD 100,000 lot position at 1.5600. However, because his trade is so big, it is possible that only 50,000 lots gets filled at 1.5600 while the other 50,000 gets filled at 1.5603.
  • PHLX
    (acronym) Philadelphia Stock Exchange
  • Price Continuity
    occurs when there is a large number of buyers and sellers in the market, so that price changes are minimal with every transaction.
  • Put-Call Parity
    A combination of options which produces the same return as hold the actual underlying asset.
  • Puttable Common Stock
    a type of insurance for equity investors to sell back their shares at a predetermined price.
  • Quadrix
    A valuation system that uses many different values to determine the value of a stock.
  • Ratio Spread
    Option strategy where an investor holds varying numbers of long and short positions.
  • Reprice
    switching options that are not in the money for options that are at the money.
  • Rho
    Measures the rate of change in the price of the derivative relative to the change in the risk-free interest rate.
  • Runner
    link between a trader at an exchange and the customer to make sure an order gets filled in.
  • Saitori
    like a specialist on the NYSE, except he or she works for the Tokyo Stock Exchange. He or she tries to match buy and sell orders for different securities.
  • Sensex
    abbreviation of the Bombay Exchange Sensitive Index—a broad index similar to the Dow Jones Industrial in the United States.
  • Shanghai Stock Exchange
    an exchange where stocks, bonds, and some other securities are traded in China.
  • Share Purchase Rights
    similar to mix of a warrant and stock option, share purchase rights, allow a trader to purchase predetermined number of shares at a predetermined price.
  • Spread
    The difference between the market price and strike price.
  • SSE Composite
    A broad indicator on the Shanghai Stock Exchange
  • Standstill Agreement
    a negotiated agreement between a lender and borrower to create a new contract with new terms.
  • Stock Ahead
    when two bids are made for a security at the exact same price, but only one gets executed.
  • STOXX
    group of tradable indexes that cover global and European markets
  • Straddle
    Option strategy where an investor buys a call and a put with the same strike price and expiration date, and is typically used when the investor expects the price of the underlying asset to move considerably.
  • Sum Certain
    contract settlement price
  • Telephone Booth
    phone terminals on the NYSE to receive orders
  • Theta
    Measures the rate of devaluation of the option as it moves closer to expiration.
  • Toronto Stock Exchange
    Main exchange to trade equities in Canada
  • Touchline
    The best spread available for a security during a day
  • Trading Arcade
    group where traders get together and trade their own accounts
  • Transparency
    Readily available information for the public to trade on
  • Upstairs Trader
    An institutional trader or money manager that is present on the floor of an actual exchange.
  • Value Date
    Value date can be said as another name for settlement date. Usually this date occurs a certain number of days after the transaction is announced. For example, investor A buys a 100k lot of EUR/USD from a 100k lot EUR/USD seller. The settlement is made two days later.
  • Vega
    Measures the change in the price of an option relative to a 1% change in volatility.
  • Volatility Smile
    how a graph of option volatility vs. strike price looks like
  • Walrasian Market
    collection of buy and sell orders pushed into batches by a broker to sell where liquidity lies.
  • Warsaw Stock Exchange
    Polish exchange that is also one of the largest in Eastern Europe
  • Xetra
    Flexible trading system in Germany.
  • Zero Cost Collar
    Transaction that has low or zero cost for the initiating person. Used as a strategy to hedge or secure a return. For example, the purchase of a put option and sale of a call option with a lower strike price. The premiums for the credit and debit are nearly the same. Any falls in price will be protected by the sale of the call, but it will offset the purchase of the put as well.
  • Zero-Sum Game
    Principle where wealth is transferred from one participant to another, and the net change in total wealth between the participants sum equals to zero. One participant’s loss becomes the other participants gain.

    • Futures
  • Add-on method
    An interest payment method in which the interest is added to the fully matured premium or on the dates where the interest payment is due.
  • Aging
    The idea that mortgages more recently issued have a tendency to prepay at a slower rate than older mortgages.
  • Anticipatory Hedging
    Takes place when a hedge is placed before placing the actual trade. This is done when an investor knows for certain he will soon receive some type of investment capital, and wants to hedge against possible risks prior to receiving that capital.
  • Approved Delivery Facility
    Any location or facility that is approved by the exchange for the delivery of exchange contracts.
  • Associated Person
    A person who handles commodities and futures orders, and is registered to do so.
  • Assumption of Mortgage
    A stipulation which permits the newest purchaser of a property to take on a past mortgage provided the buyer has the lender's approval.
  • Backwardation
    Theory that suggests futures contracts nearer to expiration trade at premium to contracts of more distant expiries. The theory rationalizes this by suggesting near term contracts earn a convenience premium. Backwardation is the opposite of contango.
  • Barrel
    The standardized measure of volume for crude oil and other oil products. One Barrel is the equivalent of 42 U.S. gallons.
  • Basis Grade
    The commodity grade used as the contract standard.
  • BCF
    (acronym) Billion Cubic Feet
  • B/D
    (acronym) Broker/Dealer
  • Bid Form
    A file turned in by an underwriter in desire of a municipal security bid.
  • Bridge Bank
    An organization whose main responsibility is to administer deposits and liabilities of a failed bank.
  • Buy-In
    A notice where a seller fails to meet delivery of the financial instrument and the broker takes on the responsibility of delivering the instrument on the seller’s behalf. The seller is then obligated to pay the broker.
  • Carrying
    The quantity of inventory that is taken over into a season.
  • Carrying Broker
    A commodity exchange member who elects to clear trades on behalf of another party.
  • Carryover
    The quantity of leftover inventory held at a season's end which will be carried over to the next season.
  • Cash Contract
    An agreement which guarantees the payment of cash at the expiration of a futures contract
  • Cathode
    A reference to copper when it is shaped as a flat bar.
  • CATS
    (acronym) Certificates of Accrual on Treasury Securities.
  • Century Bonds
    This is a security with a maturity period of 100 years.
  • CFD
    (acronym) Cubic Feet per Day. This is a measurement of the flow rate at a pipeline.
  • CHECCS
    (acronym) Clearing House Electronic Check Clearing System.
  • CHIPS
    (acronym) Clear House Interbank Payments System.
  • CIF
    (acronym) Cost Insurance and Freight.
  • Clearinghouse
    A futures exchange agency responsible for resolving accounts and other financial duties.
  • Clearing Margin
    Financial safeguards put in place by members of exchange clearinghouses on the open contracts and positions of their customers.
  • Closing Range
    Specifically referring to the market close, this is the range between long and short positions.
  • CMBS
    (acronym) Commercial Mortgage Backed Securities.
  • CNS
    (acronym) Continuous Net Settlement system.
  • Commission Run
    A report produced by a brokerage firm which enumerates the revenue brought in by each broker, as well as the commission each broker received.
  • Commodity Credit Corporation (CCC)
    A United States Government Agency which monitors farm loans and subsidies.
  • Commodity Exchange Act
    Federal act passed in 1936 establishing the Commodity Exchange Authority and placing futures trading in a wide range of commodities under the regulation of the government.
  • Commodity Month Alphabetic Symbols
    letters of the alphabet which denote particular delivery months for contracts. F– denotes January Delivery Month G– denotes February Delivery Month H– denotes March Delivery Month J– denotes April Delivery Month K– denotes May Delivery Month M– denotes June Delivery Month N– denotes July Delivery Month Q– denotes August Delivery Month U– denotes September Delivery Month V– denotes October Delivery Month X– denotes November Delivery Month Z– denotes December Delivery Month
  • Commodity Year Color Codes
    Colors used to differentiate the many different trading years available.
  • Complex Order
    An order with many different requirements such as stops, stop limits, and contingencies, to name a few.
  • Contango
    Contango is the opposite of backwardation. More specifically, contango means that future or forward prices are higher than spot prices. For example, if the spot EUR/USD is trading at 1.5600, and the forward EUR/USD is trading at 1.6000, then it is reasonable to say that the currency pair is in contango.
  • Convenience Yield
    The estimated profit gained from maintaining a purchased position in a physical commodity.
  • Conversion Clause
    In a mortgage loan, this specifies and permits the conversion of a Fixed Rate Mortgage (FRM) From an Adjustable Rate Mortgage (ARM).
  • Covered Warrant
    A warrant typically issued by a financial institution, which permits the buying and selling of a particular quantity of equities by the holder at a specified time and price.
  • Cross hedge
    A cross hedge involves hedging one cash commodity with the purchase of a other futures contracts centered on a different commodity
  • CSCE
    (acronym) Coffee, Sugar, and Cocoa Exchange
  • Cusp
    The term which refers to the At-the-Money for securities.
  • Corn/Hog Ratio
    Price relationship between the cost of feeding a hog to its actual value in dollars.
  • DEA
    (acronym) Designated Examination Authority.
  • Deferred Futures
    Futures contracts that expire during the more distant months.
  • Delivery Charges
    The accumulated expense involved in the futures or cash markets when taking or making delivery orders. As well, this term refers to the fact that holding the closest month in commodity futures contracts may carry with it added risks.
  • Discriminant Analysis
    A mathematical attempt to differentiate between classes, groups, or categories, mainly utilized as a means of Credit Scoring or foretelling bankruptcies.
  • Dispersion
    A statistical indicator of variability.
  • DPMs
    (acronym) Designated Primary Market Makers
  • DTB
    (acronym) Deutsche Terminborse
  • DTC
    (acronym) Depository Trust Company
  • Evening Up
    Buying or selling to offset an existing market position. Similar to liquidation.
  • Exchange for Physicals (EFPs)
    A technique in which a physical commodity position is traded for a futures position.
  • Feed ratio
    A ratio which expresses the relationship between the costs of feeding livestock and their actual dollar value.
  • Full carrying charge market
    a futures market whose costs of storage, interest, and insurance indicated by the difference in the price between months of delivery.
  • Futures Exchange
    A regulated market where participants meet to buy and sell futures and options contracts.
  • Grading Certificate
    A document that signifies the quality of a commodity.
  • Hedger
    a person or entity who protects currently open positions from loss by purchasing positions on the opposite side of the same or similar trade so that regardless of whether the market is up or down, part of the trades are losing, and the other part is winning, thus offsetting the size of any potential loss.
  • Hedging
    protecting currently open positions from loss by purchasing positions on the opposite side of the same or similar trade so that regardless of whether the market is up or down, part of the trades are losing, and the other part is winning, thus offsetting the size of any potential loss.
  • Interest Arbitrage
    The buying of foreign debt instruments in order to benefit from the higher interest rate offered by the foreign country. The forward rate on the foreign currency must be selling at a discount less than the premium on the interest rate.
  • Interest rate parity
    The difference between the interest rates paid on two currencies should be equal to the difference between the spot and forward rates of the same currencies.
  • Invisible Supply
    Stocks of a commodity held by manufacturers and producers which remain uncounted, so their exact quantities are unable to be precisely ascertained.
  • Loan Rate
    The amount of money lent to farmers for each one of their units of a commodity. Loan Rate = Money lent to Farmer/ # of Farmer's Commodities
  • Maintenance Margin
    Maintenance margin is a term used frequently in the futures market. Typically in the futures market, there is an initial margin and a maintenance margin. The initial margin is the amount needed to deposit in order to trade. If the security falls and the investor’s margin falls, the investor is at risk for a margin call. However, the margin would need to fall below the maintenance margin (which is usually 75% of the initial margin). If this event happens, the investor is required to recapitalize his or her account back to initial margin levels. If he or she does not recapitalize, then if the security falls further, the investor’s positions may all get liquidated. For example, consider an investor trading a forward EUR/USD contract. The broker sets the initial margin at 5% and the maintenance margin at 3.5%. Unfortunately, the EUR/USD falls and the investor is now sitting with 3.0% margin. In this case, the investor is required to put in more money into the position, so that his or her margin stands at 5%.
  • Managed Futures
    An industry made up of commodity trading advisors who, as professional money managers, handle the assets of a client who has money invested in global futures markets.
  • Market Information Data Inquiry System (MIDIS)
    Historical information collected by the Chicago Board of Trade containing market information such as price and volume which can be accessed by computers in the CBOT building.
  • Marked to Market
    Futures Commission Merchants use the most recent market price to calculate margin calls and/or account balances.
  • Market Price Reporting and Information System (MPRIS)
    A computer system which reports prices for the CBOT.
  • Market Profile®
    A service provided by the CBOT used for price analysis by technical traders consisting of the Time and Sales ticker as well as the Liquidity Data Bank
  • Marking-to-Market
    To add or remove funds daily from a margin account determined by the trading session's close. This practice protects buyers and sellers from possible contract defaults.
  • MBSCC
    (acronym) Mortgage Back Securities Clearing Corporation
  • Mean Reversion
    The mathematic logic that short term rates will move toward longer term averages.
  • MidAM
    (acronym) MidAmerica Commodity Exchange
  • Midget
    A fixed rate security with a 15 year maturity. Issued by the Government National Mortgage Association (GNMA).
  • MSRB
    Municipal Securities Rulemaking Board. The MSRB makes rules regulating dealers who deal in municipal bonds, municipal notes, and other municipal securities.
  • MTN
    (acronym) Medium Term Note.
  • NAII
    (acronym) National Association of Independent Insurers.
  • Natural Hedge
    The state in which a firm’s or investor’s holdings are set so that some components offset others.
  • Nearby
    The contract nearest its expiration date
  • Negative Leverage
    The concept that there is an opportunity cost loss associated with the purchase of an option on a future. This is because futures can be margined with certain approved securities whereby the client continues to collect interest.
  • Netting
    Process that determines the marginal risks and demands for funds. Most often used by institutions and clearinghouses.
  • Nominal price
    Price quotation on futures for a period in which no actual trading took place.
  • NSCC
    (acronym) National Securities Clearing Corporation
  • NYCE
    (acronym) New York Cotton Exchange.
  • NYACH
    (acronym) New York Automated Clearing House.
  • NYCHA
    (acronym) New York Clearing House Association.
  • NYMEX
    (acronym) New York Mercantile Exchange.
  • Opening Range
    Specifically referring to the market opening, this is the range between which long and short positions took place.
  • Operating Netback
    a sales figure used in gas and oil industries to compare performance between competitors.
  • OTS
    (acronym) Office of Thrift Supervision
  • Out
    Designated that the client has canceled the order prior to its execution.
  • PAC
    (acronym) Planned Amortization Class. A structured bond with the purpose of minimizing the effect of prepayment risks.
  • Packs
    A variety of strip trades, bought or sold, that enable a trader or risk manager to place a group of contracts in one transaction. Each pack contains four contracts.
  • Partial Close
    Partial closing is an event that occurs when a large position needs to be bought or sold in the market. Depending on liquidity levels a broker might offer partial closing if there are no buyers or sellers opposite to the position of the big closing trade. For example, a trader decides to close (sell) his EUR/USD 100,000 lot position at 1.5600. However, because his trade is so big, it is possible that only 50,000 lots gets filled at 1.5600 while the other 50,000 gets filled at 1.5603.
  • Payment in Kind Program
    A government program whereby farmers who voluntarily leave fallow a specified percentage of their acreage receive certificates which they can exchange for stocks of grain owned by the government.
  • Performance Bond Margin
    Much like a security deposit, this is the amount of money that both parties, the buyer and the seller, of a futures contract deposit to guarantee the performance of the contract's terms.
  • Price Limit Order
    an order in which the customer details the exact price at which the trade may take place.
  • Pricing Power
    how much demand will change if a company changes the price of its goods or services.
  • Purchasing Hedge
    The purchase of futures contracts in order to protect potential purchases of cash commodities in the future from price increases. In this type of hedge when the trader buys the cash commodities, he/she then closes out the open futures contracts by selling an equivalent number of shares of the same type of futures contracts he previously bought.
  • Ratio hedging
    Using futures to hedge a cash position in a ratio other than one for one.
  • Reverse Crush Spread
    Purchasing soybean oil and meal futures while concurrently selling soybean futures.
  • Security Deposit Call
    A demand for additional cash funds because of adverse price movement.
  • SFE
    (acronym) Sydney Futures Exchange
  • Spoo
    S&P 500 contract that trades on the Chicago Mercantile Exchange
  • Steer/Corn ratio
    price relationship between the cost of feeding cattle to their actual value in dollars. Steer/Corn Ratio = Price of Cattle/Price of Corn
  • Suspension
    The term for the termination of the evening session at the CBOT for certain options and futures markets.
  • Time and Sales Ticker
    An online part of the Market Profile provided by the CBOT which broadcasts information about time and price during the course of the day.
  • Versus Cash
    A deal, usually between two hedgers, in which futures are swapped for cash positions. Also called Exchange for Physicals.
  • Volume of Trading
    the total amount of futures transactions traded. Also known as Open Interest
  • WCE
    (acronym) Winnipeg Commodity Exchange.
  • Writer
    A person who sells an option to a buyer and receives a premium payment for it.

    • Equities
  • Any-and-All Bid
    An any-and-all bid is a term used quite frequently with takeovers. Specifically, an any-and-all bid would mean one type of company purchasing all shares offered, for a specific time. An example would be company XYZ purchasing all of ZYXs’ shares at its current price. XYZ would continue to do this until it gathered enough shares to either gain a minority interest in ZYX or actually acquire ZYX.
  • Credit Rating Services
    Companies which evaluate credit ratings for different entities.
  • Drill-Bit Stock
    Typically another name for a penny stock. These types of stocks are trading less than one dollar in fraction format. However, as stocks have moved to the decimal system, drill-bit stocks are not too common anymore. An example would be company XYZ trading at 2/8 instead of 0.25.
  • Dividend Recapitalization
    A dividend “recap” is a process usually used to help private company shareholders. When shareholders are to earn a dividend, and the company does not have the sufficient funds to provide the dividend, the company will take on debt to pay these individuals. An example would be company XYZ owing $ 500 million to its private shareholders. However, because of insufficient cash, XYZ would take on a loan or issue debt to pay off these individuals.
  • Freeze Out
    An event where major shareholders try to oust minority shareholders. The purpose for this is to have a greater control of the company for voting rights, dividend rights, or takeover speculation. An example would be shareholder A who owns 35% of company XYZ, but wanting to own 51% of XYZ by trying to obtain more shares from different minority shareholders.
  • Gadfly
    A gadfly is a representative for many shareholders who attends many company shareholder meetings. He or she usually attacks corporate management and tries to get management to act for the best interest of the shareholders. Usually these individuals are abrasive and dominating until they get management to listen to them.
  • Gazelle Company
    A gazelle company is a company that is growing very rapidly in terms of sales. Usually these types of companies are new or small cap stocks that have a lot of momentum to the upside. An example would be the $110 million capitalized company XYZ, who saw year over year growth of 28% in 2008.
  • High Flier
    A high flier is a term to describe a stock that has grown to incredible share price levels. Sequentially, this event causes the stock’s valuation to rise as well. For example, consider company XYZ. In the past six months, the company’s share price rose 90% compared to the market gain of 9%. The huge increase in share price has also increase valuation metrics such as P/E ratio and EV/EBITDA—possibly making the company overvalued.
  • Installment Receipt
    An installment receipt is similar to a company’s issuance of either debt or equity. However, with an installment receipt, instead of paying the full amount for the security, the purchaser only pays an initial fraction of the security’s cost. The purchaser will pay the remaining cost in installments later on. The “shareholder” will still maintain dividend and voting rights, even before he finishes his installments. An example would be company XYZ offering 100,000 shares to the public. However, each trader is only required to make an initial deposit of 10%. The traders will having voting rights and dividend rights, but will be required to make payments of the security in the near future.
  • Impact Day
    An impact day is the day when a company offers a secondary or seasonal offer of its shares. Unfortunately for current shareholders, the share price will drop during this day because more outstanding shareholders will dilute each share’s value.
  • Junior Capital Pool
    Junior Capital Pools are another way of trying to raise capital for a company. They are actually used before an actual company comes to existence. These types of issues are extremely risky, but they can become extremely profitable, especially if an actual corporation is able to form from the capital provided. An example would be Farmer A, B, and C raising capital from the public with no specific company name or business yet.
  • Mega Cap
    A mega cap company is a company’s whose market value is $200 billion or higher.
  • Non-operating asset
    Assets that occasionally generate income, but are not needed for daily operations.
  • Operating Netback
    Sales figure used in gas and oil industries to compare performance between competitors.
  • Open End Investment Company
    Mutual funds that offer and redeem their shares daily. They can be load or no load funds.
  • Puttable Common Stock
    An option for equity investors to sell back their shares at a predetermined price.
  • Recurring Revenue
    Stable revenue that shareholders can usually depend on for a company.
  • Registration Right
    Right to investors holding restricted stock to demand the stock to become unrestricted and able to trade with the public.
  • Renounceable Right
    When a company offers its current shareholders to purchase more, but discounted, shares.
  • Revlon Rule
    Rule that when a company is to be acquired, management needs to take the highest bid (in support of shareholders)
  • Seasoned Issue
    When a company issues more shares at a later date than its IPO.
  • Share Turnover
    Dividing the total number of shares traded versus the total number of outstanding shares to come up with a liquidity ratio. The higher the ratio, the more liquid the security.
  • Tunneling
    An illegal practice where a majority shareholder uses company assets for personal gains.
  • Unbundling
    Buying a company with many business segments, only to sell some of the business segments but retaining the core business.
  • Vest Fleece
    When company’s management wants to increase employee option vesting for that company.
  • Whitemail
    Companies that issue cheap shares to the public in order to avoid an undesired takeover attempt.
  • Working Ratio
    Measure to see if a company’s revenue has the ability to cover its operating costs.
  • Zombies
    Companies that continue to operate regardless of their near bankruptcy status.