| Call
or Call Option: |
An
option which gives the buyer the right, but not the obligation, to purchase
("go long") the underlying contract at the strike price on
or before the expiration date. |
| Candlestick Chart: | A
price chart that uses rectangles that range from the opening price
to the closing price of each trading session. The rectangle is dark
(usually black) if the closing price is lower than the opening price
(a down day), or light (usually white) if the close is higher than
the open (an up day). Candlestick charts, which originated in Japan,
are very similar to bar charts, although they pre-date them by a number
of years. The high and low price extremes extend as vertical lines above or below these rectangles, forming "wicks" to the bodies of the candles represented by the rectangles. Of course, if the high and low of the day are identical to the open and close, no wicks will exist; conversely, if the open and close are the same price, no rectangle (body) will exist. Like bar charts, candlestick charts can be constructed on any time frame. |
| Carrying
Broker: |
A member of an exchange, usually a clearinghouse member, through which another firm, broker, or customer chooses to clear all or some trades. |
| With regards to Futures, the cost of storing a physical commodity, such as grain or metals, over a period of time. The carrying charge includes insurance, storage and interest on the invested funds as well as other incidental costs. In interest rate futures markets, it refers to the differential between the yield on a cash instrument and the cost of the funds necessary to buy the instrument. Also referred to as Cost of Carry. | |
| Cash
Commodity: |
The
actual physical commodity as distinguished from the futures contract
based on the physical commodity. Also referred to as Actuals. |
| Cash
Market: |
A place where people buy and sell the actual commodities (i.e. grain elevator, bank, etc.) See also Forward (Cash) Contract and Spot. |
| Cash Settlement: | A method of settling certain futures or options contracts whereby the market participants settle in cash (rather than the delivery of the commodity). |
| Charting: |
The use of graphs and charts in the technical analysis of futures markets to plot price movements, volume, open interest or other statistical indicators of price movement. See also Technical Analysis. |
| Churning: |
Excessive trading that results in the broker deriving a profit from commissions while disregarding the best interests of the customers. |
| Circuit
Breaker: |
A system of trading halts and price limits on equities and derivatives markets designed to provide a cooling-off period during large, intraday market declines. |
| Clear: |
The process by which a clearinghouse maintains records of all trades and settles margin flow on a daily mark-to-market basis for its clearing members. |
| Clearinghouse: | An agency or separate corporation of an exchange that is responsible for settling trading accounts, collecting and maintaining margin monies, regulating delivery and reporting trade data. The clearinghouse becomes the buyer to each seller (and the seller to each buyer) and assumes responsibility for protecting buyers and sellers from financial loss by assuring performance on each contract. |
| Clearing Member : | A member of an exchange clearinghouse responsible for the financial commitments of its customers. All trades of a non-clearing member must be registered and eventually settled through a clearing member. |
| Close
(or Closing
Price): |
The final trade price of the day (or other time period). In futures markets, the close is a representative price of the last minute of trading. In stocks, the close is the last recorded trade price. |
| Closing Range: | A range of prices at which transactions took place during the close of the market. |
| Closing
Transaction: |
To
sell a previously purchased option or to buy back a previously written
option, effectively canceling out the position. |
| Collateral: | This
is the legally required amount of cash of securities deposited with
a brokerage to insure that an investor can meet all potential obligations. Collateral is required on investments with open-ended loss
potential, such as writing naked Calls or Puts. |
| Commission: |
This
is the charge paid to a broker for transacting the purchase of the sale
of stock, options, or any other security. |
| Commission
House: |
See Futures Commission Merchant. |
| Commodity
Exchange Act (CEA): |
The federal act that provides for federal regulation of futures trading. |
| Commodity Futures Trading Commission (CFTC): | The federal regulatory agency established in 1974 that administers the Commodity Exchange Act. The CFTC monitors the futures and options on futures markets in the United States. |
| Commodity Pool: | An enterprise in which funds contributed by a number of persons are combined for the purpose of trading futures or options contracts. The concept is similar to a mutual fund in the securities industry. Also referred to as a Pool. |
| Commodity Pool Operator: | An individual or organization which operates or solicits funds for a commodity pool. A CPO is generally required to be registered with the CFTC. |
| Commodity Trading Advisor (CTA): | A person who, for compensation or profit, directly or indirectly advises others as to the advisability of buying or selling futures or commodity options. Providing advice includes exercising trading authority over a customer's account. A CTA is generally required to be registered with the CFTC. |
| Condor: |
A
type of butterfly where instead of selling two options of the same series,
two adjacent option series are sold.
See Butterfly Spread. |
| Confirmation
Statement: |
A statement sent by a Commission Merchant to a customer when a position has been initiated. The statement shows the price and the number of contracts bought or sold. Sometimes combined with a Purchase and Sale Statement. |
| Congestion: |
Congestion
refers to a period of non-trending or sideways price movement, often
in a narrow range (or an increasingly narrow range, as in the case of
triangles and pennants). See also Trading Range. |
| Contango: |
A futures market in which prices in succeeding delivery months are progressively higher. The opposite of Backwardation. |
| Continuation
Pattern: |
A
continuation pattern is price action that interrupts a trend and implies
a continuation of the trend (rather than a trend reversal) when the
pattern is complete. Triangles, pennants, and flags are examples of
continuation patterns. |
| Contract
Market: |
A board of trade designated by the CFTC to trade futures or options contracts on a particular commodity. Commonly used to mean any exchange on which futures are traded. Also referred to as an Exchange. |
| Contract
Size: |
The
number of units of an underlying asset bought by exercising a call option
or sold by exercising a put option.
In the case of stock options the contract size is 100 shares
of the underlying asset. In
the case of options on futures contracts the contract size is one underlying
futures contract. In the case of index options the contract size underlying asset
is an amount of cash equal to parity times the multiplier.
In the case of currency options it varies. |
| Contract
Month: |
The month in which delivery is to be made in accordance with the terms of the contract. Also referred to as Delivery Month. |
| Convergence: |
The tendency for prices of physical commodities and futures to approach one another, usually during the delivery month. |
| Correction: |
A
correction is a shorter-term countertrend move. See also Pullback.
|
| Cost
of Carry |
The
interest cost of holding an asset for a period of time.
This is either the cost of borrowing funds to finance the purchase,
in which case it is called the real cost, or it is the loss of income
because funds are diverted from one investment to another, in which
case it is called the opportunity cost. |
| Covered: |
A short option is considered covered if there is a corresponding offsetting position in the underlying security or another option where no margin requirement results from the short option. |
| Cross-Hedging: | For example, hedging a cash commodity using a different but related futures contract when there is no futures contract for the cash commodity being hedged and the cash and futures market follow similar price trends (e.g. using soybean meal futures to hedge fish meal). |
| Cox-Ross-Rubenstein: |
John
Cox, Stephen Ross and Mark Rubenstein: the inventors of the binomial
option pricing model. |
| Cup-and-Handle Pattern: | A cup-and-handle is a reversal pattern formed when a market makes a rounded bottom (the "cup"), begins to rally, pulls back (the "handle"), and resumes the uptrend. See also Running Cup-and-Handle. |
| Customer
Segregated Funds: |
See
Segregated Account. |
|
|
|
||
|