GLOSSARY
Take Profit Order: A customer's instructions to buy or sell a currency pair which, when executed, will result in the reduction in the size of the existing position and show a profit on said position.
Taker: The buyer of an option contract.
T-Bond: See Treasury Bond.
Technical Analysis: An approach to forecasting commodity or futures prices which examines patterns of price change, rates of change, and changes in volume of trading and open interest, without regard to underlying fundamental market factors. Someone who follow technical rules (called a technician) believes that futures market prices will anticipate any changes in fundamentals.
Technical Correction: An adjustment to price not based on market sentiment but technical factors such as volume and charting.
Technical Rally: A price movement attributed to conditions developing
from withing the futures market itself. These conditions include changes
in open interest, volume and extent of recent price movement.
Ted Spread: The difference between the price of the three-month U.S. Treasury bill futures contract and the price of the three-month Eurodollar time deposit futures contract with the same expiration month.
Tender: To give notice to the clearinghouse of the intention to initiate delivery of the physical commodity in satisfaction of the futures contract. Also see Retender.
Tenderable Grades: See Contract Grades.
Terminal Elevator: An elevator located at a point of greatest accumulation in the movement of agricultural products which stores the commodity or moves it to processors.
Terminal Market: Usually synonymous with commodity exchange or futures market, specifically in the United Kingdom.
Theta: The derivative of the option price equation with respect to the remaining time to expiration of the option. A measure of the sensitivity of the value of the option to the passage of time.
Thin market: A market in which trading volume is low and in which consequently bid and ask quotes are wide and the liquidity of the instrument traded is low.
Thursday/Friday Dollars: A US foreign exchange technicality. If a foreign bank buys dollars on Tuesday for Thursday delivery. If the bank leaves the funds overnight and transfers them on Friday by means of a clearing house cheque then clearance is not until Monday, the next working day. Higher interest rates for this period are thus available.
Tick: Refers to a minimum change in price up or down. See Point.
Time Limit Order: A customer order that designates the time during which it can be executed.
Time-of-Day Order: This is an order which is to be executed at a given minute in the session. For example, "Sell 10 March corn at 12:30 p.m."
Time Spread: The selling of a nearby option and buying of a more deferred option with the same strike price.
Time-Stamped: Part of the order-routing process in which the time of day is stamped on an order. An order is time-stamped when it is (1) received on the trading floor, and (2) completed.
Time Value: That portion of an option's premium that exceeds the intrinsic value. The time value of an option reflects the probability that the option will move into-the-money. Therefore, the longer the time remaining until expiration of the option, the greater its time value. Also called Extrinsic Value.
To-Arrive Contract: A transaction providing for subsequent delivery within a stipulated time limit of a specific grade of a commodity.
Today/Tomorrow: Simultaneous buying of a currency for delivery the following day and selling for the spot day, or vice versa. Also referred to as overnight.
Tomorrow Next (Tom/Next), (T/N), T/N Roll: The process of moving the settlement value date on an open position forward from one business day after the trade date (tomorrow), to the next valid value date (next), the spot value date.
Tradeable amount: Smallest transaction size acceptable.
Trade Balance: The difference between a nation's imports and exports of
merchandise.
Trade Option: A commodity option transaction in which the taker is reasonably believed by the writer to be engaged in business involving use of that commodity or a related commodity.
Trader: (1) A merchant involved in cash commodities; (2) a professional speculator who trades for his own account.
Trailing Stop: A stop-loss order that follows the prevailing price trend.
Transaction: The entry or liquidation of a trade.
Transaction Cost: The cost of buying or selling a financial instrument.
Transaction Date: The date on which a trade occurs.
Transfer Trades: Entries made upon the books of futures commission merchants for the purpose of: (1) transferring existing trades from one account to another within the same office where no change in ownership is involved; (2) transferring existing trades from the books of one commission merchant to the books of another commission merchant where no change in ownership is involved. Also called Ex-Pit Transactions.
Transferable Option (or Contract): A contract which permits a position in the option market to be offset by a transaction on the opposite side of the market in the same contract.
Transfer Notice: A term used on some exchanges to describe a notice of delivery. See Retender.
Treasury Bills: Short-term U.S. government obligations, generally issued with 13, 26 or 52-week maturities. T-Bills are a fixed income asset and issued at discount.
Treasury Bonds (or T-Bond): Long-term obligations of the U.S. government with maturities of more than 7 years, which pay interest semiannually until they mature or are called, at which time the principal and the final interest payment is paid to the investor.
Treasury Notes: Same as Treasury Bonds except that Treasury Notes are medium-term and not callable.
Trend: The general direction, either upward or downward, in which prices have been moving.
Trendline: In charting, a line drawn across the bottom or top of a price chart indicating the direction or trend of price movement. If up, the trendline is called bullish; if down, it is called bearish.
Turnover: The total volume of all executed transactions in a given time period.
Two Tier Market: A dual exchange rate system where normally only one rate is open to market pressure, e.g. South Africa.
Two-Way Price: A quote in the foreign exchange market that indicates a bid and an offer.
Two-Way Quotation: When a dealer quotes both buying and selling rates for foreign exchange transactions.
Uncovered: Another term for an open position.
Underlying (Underlying Commodity): The commodity, instrument, or futures contract on which a futures option is based, and which must be accepted or delivered if the option is exercised. Also, the cash commodity or financial instrument underlying a futures contract.
Under-valuation: An exchange rate is normally considered to be undervalued when it is below its purchasing power parity.
Unrealized Gain/Loss: The theoretical gain or loss on Open Positions valued at current market rates, as determined by the broker in its sole discretion. Unrealized Gains' Losses become Profits/Losses when position is closed.
Underlying Instrument: The contract or commodity that a call option purchaser has the right to buy, or put option purchaser has the right to sell.
Uptick: A new price quote at a price higher than the preceding quote.
Uptick Rule: In the U.S., a regulation whereby a security may not be sold short unless the last trade prior to the short sale was at a price lower than the price at which the short sale is executed.
US Prime Rate: The interest rate at which US banks will lend to their prime corporate customers.
U.S. Treasury: The United States Department of the Treasury is the government department responsible for issuing all Treasury bonds, notes, and bills.
Value Date: The maturity date of the currency for settlement, usually two business days (one day for Canada) after the trade has occurred.
Value Spot: Normally settlement for two working days from today. See value date.
Variable Limit (Variable Price Limit): A price limit schedule, determined by an exchange, that permits variations above or below the normally allowable price movement for any one trading day. Most exchanges set limits on the maximum daily price movement of some of the futures contracts trade at their exchange. They also retain the right to expand these limits if the price moves up or down the limit in one direction for two or there trading days in a row. If the limits automatically change after repeated limit moves, they are known as variable limits.
Variation Margin: Payment made on a daily or intraday basis by a clearing member to the clearing organization based on adverse price movement in positions carried by the clearing member, calculated separately for customer and proprietary positions.
Variation Margin Call: A margin call from the clearinghouse to a clearing member. These margin calls are issued when the clearing member’s margin has been reduced substantially by unfavorable price movements. The variation margin call must be met within one hour.
Vault Receipt: A document indicating ownership of a commodity stored in a bank or other depository and frequently used as a delivery instrument in precious metal futures contracts.
Versus Cash: See Exchange of Futures for Cash .
Vertical Spread: Buying and selling puts or calls of the same expiration month but different strike prices.
Visible Supply: Usually refers to supplies of a commodity in licensed warehouses. Often includes afloats and all other supplies "in sight" in producing areas.
Volatile: A market which is often subject to wide price fluctuations is said to be volatile. This volatility is often due to a lack of liquidity. Lack of liquidity is caused by too few market participants, too little volume, or both.
Volatility Quote Trading: Refers to the quoting of bids and offers on option contracts in terms of their implied volatilities rather than as prices.
Volume of Trade: The number of contracts traded during a specified period of time. It may be quoted as the number of contracts traded or in the total of physical units, such as bales or bushels, pounds or dozens.
Vostro Account: A local currency account maintained with a bank by another bank. The term is normally applied to the counterparty's account from which funds may be paid into or withdrawn, as a result of a transaction.
Warehouse Receipt: A document certifying possession of a commodity in a licensed warehouse that is recognized for delivery purposes by a commodity futures exchange.
Warrant: An issuer-based product that gives the buyer the right, but not the obligation, to buy (in the case of a call) or to sell (in the case of a put) a stock or a commodity at a set price during a specified period.
Warrant or Warehouse Receipt for Metals: Certificate of physical deposit, which gives title to physical metal in an exchange approved warehouse.
Wash Sale: Transactions that give the appearance of purchases and sales but which are initiated without the intent to make a bona fide transaction and which generally do not result in any actual change in ownership. Such sales are prohibited by the Commodity Exchange Act.
Wash Trading: Entering into, or purporting to enter into, transactions to give the appearance that purchases and sales have been made, without resulting in a change in the trader's market position.
Weak Hands: When used in connection with delivery of commodities on futures contracts, the terms usually means that the party probably does not intend to retain ownership of the commodity; when used in connection with futures positions, the term usually means positions held by small speculators.
Whipsaw: Slang for a condition of a highly volatile market where a sharp price movement is quickly followed by a sharp reversal.
Wild Card Option: Refers to a provision of any physical delivery Treasury Bond or Note futures contract which permits shorts to wait until as late as 8:00 p.m. on any notice day to announce their intention to deliver at invoice prices that are fixed at 2:00 p.m., the close of futures trading, on that day.
Winter Wheat: Wheat that is planted in the fall, lies dormant during the winter, and is harvested beginning about May of the next year.
Wire House: See Futures Commission Merchant (FCM).
Withholding Tax: Income tax withheld from employees' wages and paid directly to the government by the employer.
Working day: A day on which the banks in a currency's principal financial centre are open for business. For FX transactions, a working day only occurs if the bank in both financial centre's are open for business (all relevant currency centers in the case of a cross are open).
Writer: The issuer, grantor, or maker of an option contract.
X: A Nasdaq stock symbol specifying that it is a mutual fund.
Yard: A slang word used in the currency industry meaning 'billion'.
Yield: (1) The production of a piece of land; e.g., his land yielded 100 bushels per acre. (2) The return provided by an investment.
Yield Curve: A graphic representation of market yield for a fixed income security plotted against the maturity of the security.
Yield to Maturity: The rate of return an investor receives if a fixedincome
security is held to maturity.
Z-Score: A statistical measure that quantifies the distance (measured in standard deviations) a data point is from the mean of a data set.
In a more financial sense, Z-score is the output from a credit-strength test that gauges the likelihood of bankruptcy.
