Options strategy which involves the purchase of futures/ options of an underlying market expiring in some named month, and the simultaneous sale of other futures/options of the same underlying market and the same striking price in a different month.
Contract in which the buyer has the right
but not the obligation
to purchase a particular security for a given strike price, on (in the case of European call options) or before (in the case of American call options) the expiration date.
To delete a previous order before it has been executed.
Type of chart that uses shaded bars to indicate trading range (i.e. high and low price) as well as the opening and closing prices for consecutive time periods.
Maximum rate of interest that can be charged under a loan. Opposite of a floor.
Indicator of inflation released by the Federal Reserve Bank, which measures the percentage of available resources being utilized by factories, mines and utilities.
Financial assets, or the financial value of assets such as cash.
One of two primary components of the balance of payments, the other being the current account. It is the net result of public and private international investment flowing in and out of a country, and includes foreign direct investment, portfolio investment, and other investments.
Profit made when any asset is sold; used primarily for tax purposes.
A detailed trading schematic designed to profit from a carry trading strategy.
A trading strategy involving the sale of low-yielding currency (funding currency) in favor of a higher-yielding (carry currency) alternative, with the goal of earning a return on the spread/differential. [This differential is known as the "carry"].
Cash on Deposit
Total funds deposited in a trading account.
Spot market, as opposed to the futures market.
Same day settlement for a currency transaction. Also known as Value Today.
A governmental or quasi-governmental organization that conducts monetary policy and manages the exchange rate for a given economy and its currency. It may also be charged with printing money.
Central Bank Intervention
Refers to a central bank buying or selling its own currency on the spot market in order to bring about a desired exchange rate.
Certificate of Deposit (CD)
Time deposit offered by banks with a specific, fixed term (often three months, six months, or one to five years), and, usually, a fixed interest rate. It is intended that the CD be held until maturity, at which time the money may be withdrawn together with the accrued interest.
Uptrend, downtrend, or sideways trend whose boundaries can be marked clearly by two or more straight lines. A break above/below the channel signals a possible change of trend.
One who takes a technical approach to trading, relying on charts and graphs (and their associated indicators) to discern trends and predict future price movements.
Type of option where the holder can choose whether the option is a call or a put during the life of the option.
Exchange rate regime in which the rate is determined only by market forces, with no central bank intervention.
Settled funds that are freely available for trading.
Clearing House Automated Payment System (CHAPS)
Forex settlement system used in the UK.
Clearing House Interbank Payment System (CHIPS)
International wire transfer system used by major banks.
The result of closing a position, in which an equal/offsetting trade is made to eliminate one’s exposure to a given currency pair. For example a position of 100 GPB/USD can be closed by buying 100 USD/GPB.
Closing Market Rate
The market rate at the end of the day.
The process of settling a trade.
The world’s largest futures exchange, which includes the Chicago Mercantile Exchange (CME), Chicago Board of Trade (CBOT), and New York Mercantile Exchange (NYMEX).
A type of economic indicator that moves in line with the general business cycle. GDP is an example of a coincident indicator.
Denotes the total number of derivative contracts, like futures and options, that are currently active on a specific underlying security. Also known as Open Interest.
An option, where the underlying instrument is another option. A compound option then has two expiration dates and two strike prices.
The phenomenon whereby an economic crisis spreads from one region/economy/market to another.
Asset used to secure a loan.
Transaction fee charged by a broker.
Commodity Futures Trading Commission (CFTC)
Independent agency of the US government, charged with regulating commodity, currency, and financial futures and options.
Written correspondence that details the terms of a given trade, including date/time of execution, quantity, price, and commission.
Closely watched economic indicator released monthly by the U.S. Department of Commerce’ that benchmarks spending towards new construction.
The degree of optimism that consumers feel about the overall state of the economy and their respective personal financial situations. Consumer Confidence is indexed and gauged using surveys, the most famous of which is conducted by the University of Michigan.
Consumer Price Index (CPI)
One of the most closely watched national economic statistics, CPI measures a price change for a constant market basket of goods and services from one period to the next within the same area.
Refers to a an upward-sloping curve for forwards prices. For example, contango is said to occur when the future price of a commodity is higher than the current/spot price.
Extension of the existing trend.
Continuous Linked Settlement (CLS)
System for settling foreign exchange transactions between major banks that purports to to eliminate settlement risk.
Trading unit. A standard lot in the forex market is $100,000. A mini lot is $10,000.
Contract for difference (CFD)
Agreement between a client and a provider to exchange the difference between the opening and the closing value of the contract.
Another term for exchange rate.
Any currency that can be exchanged for another without special permission. Almost all of the world’s major currencies are fully convertible, with the notable exception of the Chinese Yuan.
Secondary account holder.
Slang term for the Danish Krone.
Partial reversal in the existing trend, or a pullback after a sudden, large move to compensate for an overreaction.
Measure of the degree to which changes in two variables/assets are related. The standard measure of correlation is the correlation coefficient, a number between -1 and one that indicates the strength and direction of a linear relationship between two variables. A correlation coefficient of -1 indicates that they are perfectly negatively correlated. A correlation coefficient of one means that they are perfectly correlated.
Foreign bank that performs services for another bank that has no branch in the foreign location.
Currency listed second in a Currency Pair. For example, in USD/GPB, Pound Sterling is the counter currency. Also known as Quote Currency.
One of the participants in a financial transaction.
Value of the counter currency in a forex trade. For example, in a trade involving the purchase of a currency against the US Dollar, the countervalue is the total USD amount of the transaction.
Refers to the likelihood that changes in the business environment adversely affect operating profits or the value of assets in a specific country. These changes could be the result of financial or political factors.
A measure of how two random variables behave in relation to each other. It differs from correlation in that it incorporates measurements of the magnitude of the variations, as opposed to the correlation coefficient which is dimensionless.
Cover on Approach
Recommendation to close a trade based on a predicted approach off an important support level.
Cover on a Bounce
Recommendation to close a trade based on a predicted "bounce" off an important resistance level.
An options strategy in which the seller of call options owns the corresponding amount of the underlying instrument, such as shares of a stock or other securities.
A type of exchange rate regime in which the rate is fixed/pegged, but adjusted periodically.
Credit Default Swap
Financial contract in which the seller of risk pays a periodic fee on the notional amount of a reference obligation, in return for a payment in the event of default.
Risk that a borrower will not repay a loan on time. Often referred to as "Default Risk."
Interest margin over the relevant benchmark representing the additional interest paid by the issuer to account for the incremental risk of the issuer over the risk-free rate.
Exchange rate derived by "triangulating" two separate exchange rates, used when two currencies cannot exchanged directly, but only through a third-party currency, such as the US Dollar. Also refers to any exchange rate/pair that does not include one’s home currency.
Cup with Handle
Technical pattern used to predict the beginning of an upward trend. A pattern that begins to curve upward and reaches the "cup line" is believed to indicate bullishness.
Refers to a weighted group of currencies purchased together, usually by a Central Bank for the purpose of fixing an exchanging rate.
Three-Letter code used to abbreviate/designate a currency.
Two currencies used to create an exchange rate.
Possibility that currency depreciation will negatively affect the value of one’s assets, especially those denominated in foreign currency.
Agreement between two parties to exchange principal and fixed rate interest payments on a loan in one currency for principal and fixed rate interest payments on an equal loan in another currency.
One of the two primary components of the balance of payments, the other being the capital account. It is the sum of the balance of trade (exports minus imports of goods and services), net factor income (such as interest and dividends) and net transfer payments (such as foreign aid).
Bank, individual, or other organization responsible for safeguarding an individual’s financial assets or specific account.
Stocks/Securities that move with the economy, gaining if the economy booms and losing if the economy weakens.