Futures, future market dictionary, derivatives, future market, future terms.futures market defination

American-style option - an option contract that may be exercised at any time before it expires.

Arbitrage - a trading strategy based on the purchase of an asset in one market at one price while simultaneously selling it in another market at a more advantageous price, in order to obtain a risk-free profit on the price differential.

Ask - the quoted price at which a Client can buy an asset. Also referred to as the ‘offer,’ ‘ask price,’ or ‘ask rate.’

Central Bank - it is the main bank in the country responsible for the monetary policy. Its primary responsibility is to maintain the stability of the national currency and money supply, but more active duties include controlling subsidized loan interest rates, and acting as a "bailout" lender of last resort to the banking sector during times of financial crisis.

Bid - the quoted price at which a Client can sell an asset for. Also known as the ‘bid price’ or ‘bid rate.’

Broker - an individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission. A broker has no position in the market.

Bull - an investor who thinks market prices will rise and he has a long position in the asset.

Cable - trader jargon refers to the Sterling/US Dollar exchange rate.

Call - a call option gives the option buyer the right to purchase an asset on a specified date.

Strike price - the price at which the buyer of a call option has the right to purchase a specific asset or at which the buyer of a put has the right to sell a specific asset. Also known as the ‘exercise price.’

CFD (Contract For Difference) - financial instrument, with the underlying principle that both parties to the transaction do not have any claims to the underlying asset, basing solely on cash settlement. CFD are always traded on margin; typically the margin is low enough to allow a large exposure with small amounts of deposit. Nowadays, CFD can be based on a wide range of base assets, from shares and commodities to interest rate swaps. As margin requirements tend to be low, gains and losses incurred even by nominally low movements of the price of the underlying asset are magnified.
Day Trading - trading style used by day traders, where all long positions are sold (or short positions are covered) by the end of the trading day.

Dealer - person or a firm in the business of acting as a counterpart to foreign currency transactions. Typically, a dealer buys for his or her own account and sells to a customer from the dealer's inventory.

European-style option - an option contract that can be exercised only on its expiration date.
Expiration date/ maturity date - the last day on which an option may either be exercised or offset.

ECU - European Currency Unit.

EMS - European Monetary System.

Fed Fund Rate - the interest rate for overnight loans at the Federal Reserve.

Fed - the central bank of the United States and is the chief mechanism dictating monetary policy.

FOMC - a 12-member committee consisting of the seven members of the Federal Reserve Board and five of the 12 Federal Reserve Bank presidents. The committee sets objectives for growth of money and credit that are implemented through purchases and sales of U.S. Government securities in the open market. The FOMC also establishes policy relating to Federal Reserve System operations in the foreign exchange markets.

Foreign Exchange Market - the structure of entities trading foreign currencies, thus determining the exchange rates.

Forex - a cash market in foreign currencies made by large banks. Short for Foreign Exchange.

G7 - a group of seven of the leading industrialized countries which include Japan, Germany, France, United Kingdom, Canada and the U.S. that meet periodically to discuss international economic issues in order to forge international economic cooperation.

G10 - G7 plus Belgium, the Netherlands and Sweden.

IMF - International Monetary Fun.

Initial margin - the amount of money needed to open or maintain a position.

Interbank market - a loose network of financial institutions and other large companies trading foreign currencies.

Kiwi - slang name for the New Zealand currency.

Futures - an agreement to purchase or sell an underlying asset for delivery in the future: at a price that is determined at initiation of the contract; that obligates each party to the contract to fulfil the contract at the specified price; that is used to assume or shift price risk; and that may be satisfied by delivery or offset. Futures contracts are traded on stock exchanges.

Forward - a transaction in which a commercial buyer and seller agree upon delivery of a specified quality and quantity of goods at a specified future date. Terms may be more “personalized” than is the case with standardized futures contracts (i.e., delivery time and amount are as determined between seller and customer). A price may be agreed upon in advance, or there may be agreement that the price will be determined at the time of delivery. Forward contracts are traded on the OTC market.

Basket - it is an economic term for a group of several currencies created for the purpose of management of the exchange rate of a specific currency.

Settlement price - the daily price at which the clearing organization clears all trades and settles all accounts between clearing members in each contract month.
Settlement prices are used to determine both margin calls and invoice prices for deliveries.

Limit order - an order to buy (or sell) an asset that specifies to pay no more than (or when selling to accept no less than) the specified amount.

Long position - a position that appreciates in value if market prices increase. When an asset is bought, the position is said to be long.

Lot - this is another name for a contract on the Forex market (usually 50 000 - 100 000 units of base currency).

Margin - initial margin.

Margin call - a request from a broker or dealer for additional funds or other collateral to guarantee performance on a position that has moved against the trader.

Market order - an order to buy or sell a stock or other security at the best available price at the time the order is sent on the market.

Bear - a person who believes the prices of stocks or the overall market will decline.

Premium - the price that an option buyer pays for the option.

Option - a contract which establishes that one party (the holder or buyer) has the right (but not the obligation) to exercise the contract (the option) at a specified future moment or period of time (the exercise date or expiration) and the other party (the writer or seller) has the obligation to honour the terms of the contract. Since the option gives the buyer a right and in the case of the writer - an obligation, the buyer pays the option premium to the writer. The buyer has a 'long' position, and the seller a 'short' position. The value of the contract is determined by an underlying asset, thus the instrument is classified as a derivative.

OTC Market (Over the Counter Market) - a market for currencies, commodities, shares, options, or other financial contracts via electronic connections between dealers. The OTC market has no physical locations or address, and differs from organized exchanges which have a physical location where trading takes place. Also referred to as:- Off Exchange.

Pip -the smallest unit of price change on the FOREX market.

Put- a put option gives the option buyer the right to sell a particular currency pair at a stated exchange rate.

Rollover -the process of extending the settlement date of an open position by prolonging to the next settlement date.

Bull market - any market in which prices are trending higher. Usually, used in context to describe a steadily rising stock market.

Bear market - a market distinguished by declining prices.

Short sale - sale of an asset that the trader does not own. Investors who sell short believe the price of the asset will fall. If the price drops, investor can buy the stock at the lower price and make a profit. If the price of the stock rises and investor buy it back later at the higher price, he/she will incur a loss.

Short position - an investment position that benefits from a decline in the market price. When the base currency in the pair is sold, the position is said to be short or when an asset is sold.

Spot market - a market of immediate delivery of and payment for the asset.

Spot transaction - spot transaction is a transaction requiring prompt delivery of and full payment for the currency or other asset. In the Interbank market, spot transactions are usually settled in two business days. This term may also be used to refer to transactions that the parties expect to offset or roll over within two business days, but these transactions are not true spot transactions and are governed by the federal Commodity Exchange Act.

Spread (Bid/Ask Spread) - the difference between the bid and ask (offer) price.

Sterling -another term for British currency, the pound.

Stop-Loss order - an order placed with a broker to sell an asset when it reaches a certain price in a case of long position. It is designed to limit an investor's loss on an asset position.

Swissy - slogan for Swiss Franc.

Take Profit - an order used by currency traders specifying the exact rate or number of pips from the current price point where to close out their current position for a profit.

Tick - a minimum change price rate.

Trailing stop - a stop-loss order set at a certain number of points below the market price - for a long position. The price is adjusted as the price fluctuates. Using a trailing stop allows one to let profits run while cutting losses at the same time.

Base Currency - or foreign exchange trafding, currencies are quoted in terms of a currency pair. The first currency in the pair is the base currency. For example, in a USD/JPY currency pair, the US dollar is the base currency. Also may be referred to as the primary currency.

Quote currency - the second currency in a currency pair is referred to as the quote currency. For example, in a USD/JPY currency pair, the Japanese yen is the quote currency. Also referred to as the secondary currency or the counter currency.

Exotic currency - a currency with little liquidity and limited trading activities.