The term "accommodation trading" refers to the futures trading activity of futures firms or any other persons, who, without following the rules of open competitive bidding or the method for making block trades prescribed by the futures exchange, directly or indirectly coordinate with each other for the trading.
FCM employee who is responsible for engaging client in the futures trading and the execution of client's futures trading.
A type of options contract that allows the holders to exercise at any time before expiry.
Anticipating to hold cash position in the future and therefore conduct hedges accordingly
The price (or value) of transaction rises.
A trading strategy of buying a commodity contract and selling another commodity contract to obtain the difference between the two contracts. The types of arbitrage include buy and sell different delivery months at the same time for the same goods, buy and sell the same delivery month of the same goods at different exchanges, or buy and sell the same goods simultaneously in the spot market and futures market.
The ending value is based on the average price of the underlying asset over a specified period of time.
8.Ask or Offer Price：
In the trading market, the price of the seller’s pending order.
9.At the Close Order：
An order directing to be traded at the market price near the closing period of the day, which is traded in a period of time before the market close, not at the closing price
10.At the Money：
When an option's strike price is the same as the current trading price of the underlying, it called that the option is at-the-money.
11.At the Opening Order：
At the Opening order is an order to buy or sell in the market at the Calculated Opening Price (COP) when the market opening.
An arbitrage behavior that buy the futures contract of long duration and sell spot futures contract or the futures contract of short duration.
Market situation in which futures prices are progressively lower in the distant delivery months. For instance, if the gold quotation for January is $360.00 per ounce and that for June is $355.00 per ounce, the backwardation for five months against January is $5.00 per ounce.
The difference between the price of underlying and the price of futures contract. Basis is usually computed in relation to the futures contract next to expire and may reflect different time periods, product forms, grades, or locations.
A basis narrowing is that the spread between the price of underlying and the price of futures contract becomes narrower as times going past.
Bid or offer price of the difference between the price of underlying and the price of futures contract.
The basis can change in two directions, either increase or decrease. An increasing basis means that the basis is becoming less negative or more positive. This is called a strengthening or narrowing basis.
A swap whose cash settlement price is calculated based on the basis between a futures contract and the price of underlying on a specified date.
The basis can change in two directions, either increase or decrease. A decreasing basis means that the basis is becoming more negative or less positive. This is called a weakening or widening basis.
The absolute value of basis increases as time goes on.
The price decline in the specific market.
Selling the nearby futures contract and simultaneously buying the deferred contract.
The difference between bid price and ask price.
The highest price that a prospective buyer is willing to pay.
Binary options are a form of financial trading that the buyer receives a fixed amount of pay-off or nothing, based on if the option expires in the money. The two main types of binary options are the cash-or-nothing binary option and the asset-or-nothing binary option.
Binomial model is best represented using binomial trees which are diagrams that show option payoff and value at different nodes in the option’s life.
Black Scholes model, also known as Black-Scholes-Merton (BSM) model, is a mathematical model for pricing an options contract. Since its introduction in 1973, the model has become the de-facto standard for estimating the price of European-style options.
28.Blended Rate Compression：
Blended Rate Compression is a form of compression that reduces notional amounts and line items for trades with varying fixed rates, notional amounts and direction but otherwise contain matching attributes. The net cash flows of the resulting positions will remain the same as the original portfolio.
29.Block Trading Facility：
Block trading facility is a wholesale trading facility that allows traders to buy or sell large numbers of orders bilaterally outside of the public market. Because trades conducted in block trading facility are typically between two parties, prices are set with certainty and execution is done without delay.
A board broker is a member of exchange who is entrusted with the responsibility of executing and matching orders. The board broker serves a role similar to the specialist on the trading floor.
31.Board of Governors：
The board of governors is a group of people that oversees or manages the running of Taifex.
The term "bucketing" referred to in the preceding Paragraph shall mean: off market offsetting; cross-trading; taking the other side of a customer's order; accommodation trading.
A bull market is the condition of a financial market of a group of securities in which prices are rising or are expected to rise.
Bull Spread is a strategy that option traders use when they try to make profit from an expected rise in the price of the underlying asset.
A butterfly spread is an options strategy combining bull and bear spreads, with a fixed risk and capped profit.
Call options are financial contracts that give the option buyer the right, but not the obligation, to buy a stock, bond, commodity or other asset or instrument at a specified price within a specific time period.
Capital markets refer to markets for long-term financial products and services where governments and companies can raise financing.
The purpose of this type of hedge will be purely to cover the carrying cost.
An obligation or financial instrument, such as a futures or options contract, that is paid for in cash.
Churning is the practice of a broker overtrading in a client's account for the purpose of generating commissions.
A clearing house acts as an intermediary between a buyer and seller and seeks to ensure that the process from trade inception to settlement is smooth. In acting as the middleman, a clearing house provides the security and efficiency that is integral for financial market stability.
A member of an exchange clearinghouse. Clearing members are responsible for the financial commitments of customers that clear through their firm.
A combination is an option trading strategy that involves the purchase and/or sale of both call and put options on the same underlying asset.
Commodities futures are agreements to buy or sell a raw material at a specific date in the future at a particular price. The contract is for a set amount. The three main areas of commodities are food (meat, wheat, and sugar), energy (oil and gasoline), and metals (gold, silver, and copper).
A commodity pool is a private investment structure that combines investor contributions to trade futures and commodities markets. The commodity pool, or fund, is used as a single entity to gain leverage in trading, in the hopes of maximizing profit potential.
46.Commodity Pool Operator, CPO：
A Commodity pool operator is an individual or organization that solicits or receives funds to use in the operation of a commodity pool, syndicate, investment trust, or other similar fund, specifically for trading in commodity interests. Such interests include commodity futures, swaps, options and/or leverage transactions.
47.Commodity Trading Advisor, CTA：
A commodity trading advisor (CTA) provides individualized advice regarding the buying and selling of futures contracts, options on futures.
Compression reduces the number of trades in clearing members’ portfolios. It simplifies the management of their positions and frees up valuable capital that would otherwise be held unnecessarily against offsetting positions that can be compressed.
Condor spread involves multiple options, with identical expiration dates, purchased and/or sold at the same time.
The futures price of a commodity is higher than the spot price.
The delivery month is the month in which the seller must deliver, and the buyer must accept and pay for, the underlying.
The exchange approved by regulator offer futures and options.
A convenience yield is the benefit or premium associated with holding an underlying product or physical good, rather than the associated derivative security or contract.
Convergence is the movement of the price of a futures contract toward the spot price of the underlying cash commodity as the delivery date approaches.
Buy a put option and sell a call option with identical strike price at the same time.
The conversion factor is used to equalize coupon and accrued interest differences of all delivery bonds. The accrued interest is the interest that's accumulated and yet to be paid.
57.Cost- of –Carry Theory：
The cost of carry is cost of storing a physical commodity. The cost of carry model is the futures price as a function of the spot price and the cost of carry.
A counterparty is the other party that participates in a financial transaction
By entering an equivalent but opposite transaction that eliminates the original opening position
60.Covered Call Strategy：
A covered call refers to transaction in the financial market in which the investor selling call options owns the equivalent amount of the underlying security.
Crack spread refers to the overall pricing difference between a barrel of crude oil and the petroleum products refined from it.
62.Credit Default Swap, CDS：
A credit default swap (CDS) is a financial derivative or contract that allows an investor to "swap" or offset his or her credit risk with that of another investor.
A cross hedge is used to manage risk by investing in two positively correlated securities that have similar price movements. The investor takes opposing positions in each investment in an attempt to reduce the risk of holding just one of the securities.
The term "cross-trading" refers to the trading activities of a futures commission merchant which, intending to make a specific futures customer the counterparty to the futures trading of another futures customer, fails to follow the rules of open competitive bidding, but directly or indirectly privately brokers the futures trading.
A cross rate is the currency exchange rate between two currencies when neither are the official currencies of the country in which the exchange rate quote is given.
A crush spread is an options trading strategy used in the soybean futures market. The general term for this is a gross processing margin. A soybean crush spread is often used by traders to manage risk by combining separate soybean, soybean oil and soybean meal futures positions into a single position.
A currency swap, sometimes referred to as a cross-currency swap, involves the exchange of interest – and sometimes of principal – in one currency for the same in another currency.
A day order is a direction to a broker to execute a trade at a specific price that expires at the end of the trading day if it is not completed.
Buying and selling within the same trading day, such that all positions are closed before the market closes for the trading day.
A notice written by the holder of the short position in a futures contract informing the clearinghouse of the intent and details of delivering a commodity for settlement.
The decline in an asset's value due to market conditions
An options strategy established by simultaneously entering into a long and short position in two options of the same type (two call options or two put options) but with different strike prices and different expiration dates.
The underlying price is lower than the futures price.
An investment account that allows an authorized broker to buy and sell securities without the client's consent.
A broker places trades for both their client's and their own accounts at the same time
A portfolio insurance technique that creates an option-like return by increasing or reducing the position in the underlying security or futures, options, or forward contract.
One of an options contract that limits execution to its expiration date.
The value in a margin trading account that exceeds Maintenance Margin.
79.Exchange For Physical (EFP)：
A private agreement between two parties to trade a futures position for the equivalent position in the cash market.
The price at which the underlying asset may be bought or sold in an option contract.
81.Fill or Kill (FOK):
FOK orders are canceled if not immediately filled for the total quantity.
An instrument whose price depends on, or is derived from, the price of another asset.
Financial engineering is the application of mathematical techniques to solve problems in finance.
A futures contract on a financial product. Examples of financial futures include trading on currencies, stock indices, and Treasury securities.
85.First Notice Day：
The first date that users will get notified that they have been assigned a delivery.
Floating Loss is the loss that a trader has when they hold an open position.
A person who executes orders at an exchange for clients
A floor trader is an exchange member who executes transactions from the floor of the exchange, exclusively for their own account. They fulfill an important role in commodity and stock market by risking their own capital to trade futures, options or stocks, thereby providing liquidity and narrowing bid-ask spreads.
FOREX/Foreign Exchange is the trading of one currency for another.
A forward contract is a customized contract between two parties to buy or sell an asset at a specified price on a future date. Forward contracts do not trade on a centralized exchange and are therefore regarded as over-the-counter (OTC) instruments.
An organization composed of futures commission merchants serves as a bridge between the competent authorities and futures commission merchants.
92.Futures Commission Merchant/FCM：
An FCM is an individual or organization that solicits and/or accepts orders to buy or sell futures contracts, options on futures contracts, retail foreign exchange contracts or swaps and accepts money or other assets from customers to support such orders. An FCM also has the responsibility of collecting margin from customers.
A futures contract is a legal agreement to buy or sell a particular commodity or asset at a predetermined price at a specified time in the future.
A futures exchange is a diverse marketplace where commodities futures, index futures, and options on futures contracts are bought and sold.
95.Futures Proprietary Merchant：
Futures Proprietary Merchant invests for direct market gain rather than earning commission dollars by trading on behalf of clients. Futures Proprietary Merchants are mainly divided into FCMs with exclusive futures trading and securities firms with concurrent operations in futures brokerage business.
Good ’til canceled (GTC) describes an order an investor may place to buy or sell a security that remains active until either the order is filled or the investor cancels it.
A writer (grantor, seller) is the seller of an option who opens a position to collect a premium payment from the buyer, giving the buyer the right to buy or sell the underlying at an agreed price within an agreed period of time.
Hedging is the practice of taking a position in one market to offset and balance against the risk adopted by assuming a position in a contrary or opposing market or investment.
An investor that pays a premium to the writer.
A horizontal spread (calendar spread) is an options or futures strategy created with simultaneous long and short positions in the derivative on the same underlying asset and the same strike price, but with different expiration months.
101.Immediate or Cancel，IOC：
An immediate or cancel order (IOC) is an order to buy or sell futures that executes all or part immediately and cancels any unfilled portion of the order.
Implied volatility is the parameter component of an option pricing model, such as the Black-Scholes model, which gives the market price of an option.
103.Individual Segregated Account：
Under individual segregated account type, the transactions and assets that relate to them are segregated from the Clearing Members House Transactions and to the CCP Transactions and assets that relate to any other Client.
The amount an investor must pay in cash for futures before the broker will lend money to that investor to buy more futures.
105.interest Rate Swaps：
An interest rate swap is a forward contract in which one stream of future interest payments is exchanged for another based on a specified principal amount. Interest rate swaps usually involve the exchange of a fixed interest rate for a floating rate, or vice versa.
106.In the Money：
A term used to describe an option contract that has a positive value if exercise.
The amount by which the current price for the underlying commodity or futures contract is above the strike price of a call option or below the strike price of a put option for the commodity or futures contract.
A person (other than a person registered as an associated person of a futures commission merchant) who is engaged in soliciting or in accepting orders for the purchase or sale of any commodity for future delivery on an exchange who does not accept any money, securities, or property to margin, guarantee, or secure any trades or contracts that result therefrom
A futures market in which the nearer months are selling at prices higher than the more distant months
Bank account in the name of two or more individuals (account owners) who jointly (equally) share its concomitant rights and liabilities.
111.Last Notice day：
The final day on which notices of intent to deliver on futures contracts may be issued.
112.Last Trading Day：
The final day during which trading may take place in a particular option contract or futures contract, after which it must be settled by delivery of the underlying commodity or security, or by agreement for settlement with cash.
A contract made pursuant to the agreement of the parties involved, wherein one party pays a specific percentage of a price or obtains a specific credit line limit granted by the other party, and the parties offset the obligations and rights under the contract by settlement of the difference in price or delivery of the underlying interest within a specified future time period and by an agreed method.
An order in which the customer specifies a minimum sale price or maximum purchase price, as contrasted with a market order, which implies that the order should be filled as soon as possible at the market price
The closing out of a long position. The term is sometimes used to denote closing out a short position, but this is more often referred to as covering.
Financial asset, security or commodity cannot be traded quickly enough with reasonable market price and suffering extra losses.
Hedging transaction in which futures contracts are bought to protect position.
An option strategy consisting of the purchase of put and call options having the same expiration date, but different strike prices.
Maintenance margin is an amount that must be maintained on deposit at all times. If the equity in a customer's account drops to or below the level of maintenance margin, the broker must issue a margin call to restore the customer's equity to the initial level.
A request from a brokerage firm to a customer to bring margin deposits up to initial levels.
121.Mark to Market：
Clearing company will calculate daily profit and losses based on settlement price for each client account. Transfer the amount of profit into client account or Deduct losses from client account.
The market for short-term debt instruments. A shot-term capital demander can get liquidity from capital supplier by money market.
123.Market if Touched Order：
When market price touch assigned price, the order becomes a market order.
A professional securities dealer or person who has an obligation to response quotation request, to buy when there is an excess of sell orders and to sell when there is an excess of buy orders. Their major characters are offering sufficient market liquidity, price continuity and stability.
The transaction price was not specified, but was quickly sold at the current market price.
The risk of loss due to the impact of price changes on interest rates, exchange rates, marketable securities, and commodities on the market price of financial market instruments.
The option site that exists separately has no target asset hedging position. To sell such an option, a deposit must be paid.
128.Near the Money：
The market price of the subject matter is close to the strike price.
A non-deliverable forward (NDF) is a cash-settled forward contract. Two parties agree to take opposite sides of a transaction for a set notional amount of money at a contracted rate. The profit or loss is calculated on the notional amount of the agreement by taking the difference between the agreed-upon rate and the spot rate at the time of settlement.
The unique risks of individual securities or companies can be reduced or eliminated by diversifying investments.
The futures price trend of the futures price will gradually increase during the listing period due to the safe-selling of the short-selling parts.
The spot price is lower than the futures price, or the far futures contract price is higher than the near futures contract price, and the basis is negative.
133.Notice of Intention Day：
The date on which the exchange assigns the buyer to deliver.
Novation is the act of replacing one participating member of a contract with another. In clearing the original bilateral trade is novated to two separate trades where each counterparty now faces the central counterparty (CCP) as opposed to facing each other, as was the case in the original trade.
For futures dealers who are qualified (not meeting the financial standards of the company), in order to settle the transaction, the customer's account (two or more) will be integrated to open a futures merchant qualified (according to the company's financial standards). Trading account, this trading account is called a comprehensive account.
136.Omnibus Segregated Account：
Under omnibus segregated account type, the transactions and assets that relate to them in the CCP’s accounts are segregated from the Clearing Members House Transactions and to the CCP Transactions and assets that relate to any other Client. However, the CCP Transactions and assets that relate to an OSA Client will be commingled with the CCP Transactions and assets relating to any of the other OSA clients that are recorded in the same Omnibus Client Account.
The total number of futures contracts long or short in a delivery month or market that has been entered into and not yet liquidated by an offsetting transaction or fulfilled by delivery. Also called open contracts or open commitments.
A method of public auction, common to most U.S. commodity exchanges during the 20th century, where trading occurs on a trading floor and traders may bid and offer simultaneously either for their own accounts or for the accounts of customers. Transactions may take place simultaneously at different places in the trading pit or ring. At most exchanges open outcry has been replaced or largely replaced by electronic trading platforms.
A contract that gives the buyer the right, but not the obligation, to buy or sell a specified quantity of a commodity or other instrument at a specific price within a specified period of time, regardless of the market price of that instrument.
140.Options on Futures：
An option on a futures contract gives the holder the right, but not the obligation, to buy or sell a specific futures contract at a strike price on or before the option's expiration date. These work similarly to stock options, but differ in that the underlying security is a futures contract.
(1) The payment an option buyer makes to the option writer for granting an option contract; (2) the amount a price would be increased to purchase a better quality commodity; (3) refers to a futures delivery month selling at a higher price than another, as 'July is at a premium over May' Price Banding: A CME Group and ICE-instituted mechanism to ensure a fair and orderly market on an electronic trading platform. This mechanism subjects all incoming orders to price verification and rejects all orders with clearly erroneous prices. Price bands are monitored throughout the day and adjusted if necessary.
142.Out of the Money：
A term used to describe an option that has no intrinsic value. For example, a call with a strike price of $400 on gold trading at $390 is out-of-the-money 10 dollars.
The trading of commodities, contracts, or other instruments not listed on any exchange. OTC transactions can occur electronically or over the telephone.
144.Overnight Indexed Swap, OIS：
An overnight indexed swap (OIS) is an interest rate swap where the periodic floating payment is generally based on a return calculated from a daily compound interest investment.
The profit or loss that would be realized if open contracts were liquidated as of a certain time or at a certain price.
146.Per Trade Compression：
Per Trade Compression is conducted daily upon IRS Clearing Participant’s request. Multiple cleared trades satisfying certain matching conditions are unwound through Per Trade Compression and claims and obligations for a new trade with a netted Notional Amount are cleared as necessary, achieving compression of notional balance and trade counts.
A perfect hedge is a position undertaken by an investor that would eliminate the risk of an existing position, or a position that eliminates all market risk from a portfolio. In order to be a perfect hedge, a position would need to have a 100% inverse correlation to the initial position. As such, the perfect hedge is rarely found.
a market where the sellers of a product or service are free to compete fairly, and sellers and buyers have complete information:
A provision in a futures contract or other derivative for delivery of the actual commodity to satisfy the contract. In the context of a financial derivative, that means delivering the actual underlying asset (often bonds). Compare to cash settlement.
150.Pit or Ring：
A specially constructed area on the trading floor of some exchanges where trading in a futures contract or option is conducted. On certain other exchanges, the term ring designates the trading area for commodity contract.
A trading strategy that uses stock index futures and/or stock index options to protect stock portfolios against market declines.
The day on which the seller of a commodity must inform the buyer of the delivery date of the commodity. This especially applies if the delivery date is different from the first permissible day.
The maximum position, either net long or net short, in one commodity future (or option) or in all futures (or options) of one commodity combined that may be held or controlled by one person (other than a person eligible for a hedge exemption) as prescribed by an exchange and/or by the Administration.
A commodity trader who either buys or sells contracts and holds them for an extended period of time, as distinguished from a day trader, who will normally initiate and offset a futures position within a single trading session.
In futures trading, the difference between the futures price and the spot price. The basis will narrow as a contract moves closer to settlement. Premium Basis means the basis is above zero.
156.Price Alignment Interest
Price Alignment Interest is the overnight cost of funding collateral. It is debited from the receiver and transferred to the payer to cover the loss of interest on posted collateral.
The process of determining the price level for a commodity through the interaction of buyers and sellers and based on supply and demand conditions.
158.Protective Put Strategy：
A put option owned in conjunction with the corresponding stock. A protective put guarantees the holder will receive at minimum proceeds that equal the exercise price of the put.
A strategy involving the simultaneous purchase and sale of identical or equivalent commodity futures contracts or other instruments across two or more markets without physicals and capital in order to benefit from a discrepancy in their price relationship.
160.Purchase & Sale Statement：
A statement sent by a futures commission merchant to a customer when any part of a futures position is offset, showing the number of contracts involved, the prices at which the contracts were bought or sold, the gross profit or loss, the commission charges, the net profit or loss on the transactions, and the balance.
An option contract that gives the holder the right but not the obligation to sell a specified quantity of a particular commodity, security, or other asset or to enter into a short futures position at a given price (the strike price) prior to or on or prior to a specified expiration date.
A strategy involving the simultaneous purchase and sale of identical or equivalent commodity futures contracts or other instruments across two or more markets with physicals and capital in order to benefit from a discrepancy in their price relationship.
163.Rest of Day，ROD：
An order to execute a trade at a specific price that expires at the end of the trading day if it is not completed.
A position created by buying a call option, selling a put option, and selling the underlying instrument.
165.Reverse Crush Spread：
The sale of soybean futures and the simultaneous purchase of soybean oil and meal futures.
166. Risk Disclosure Statement：
A document disclosing potential risks associated with options and futures trading.
A strategy for reducing exposure to investment risk. An investor can hedge the risk of one investment by taking an offsetting position in another investment. The values of the offsetting investments should be inversely correlated.
A risk management and control strategy that involves the contractual shifting of a pure risk from one party to another.
Messengers or clerks on a trading floor who deliver orders received by phone clerks to brokers for execution in the pit.
Traditionally, a speculator, often with exchange trading privileges (a local), who buys and sells rapidly, with small profits or losses, holding his positions for only a short time during a trading session. Typically, a scalper will stand ready to buy at a fraction below the last transaction price and to sell at a fraction above, e.g., to buy at the bid and sell at the offer or ask price, with the intent of capturing the spread between the two, thus creating market liquidity.
The daily price at which the clearing organization clears all trades and settles all accounts between clearing members of each contract month. Settlement prices are used to determine both margin calls and invoice prices for deliveries.
Purchasing futures to offset a short position.
Selling futures contracts to protect against possible decreased prices of commodities. See Hedging.
A neutral strategy in options trading that involve the simultaneous selling of a slightly out-of-the-money put and a slightly out-of-the-money call of the same underlying stock and expiration date.
In commodity futures, a trader who does not hedge, but who trades with the objective of achieving profits through the successful anticipation of price movements.
A public financial market in which financial instruments or commodities are traded for immediate delivery. In a spot market, settlement normally happens in T+1 or T+2 working days.
The purchase of one futures delivery month against the sale of another futures delivery month of the same commodity; the purchase of one delivery month of one commodity against the sale of that same delivery month of a different commodity; or the purchase of one commodity in one market against the sale of the commodity in another market, to take advantage of a profit from a change in price relationships. The term spread is also used to refer to the difference between the price of a futures month and the price of another month of the same commodity. A spread can also apply to options.
This type of hedging involves purchasing futures contracts for a nearby delivery date and on that date rolling the position forward by purchasing a fewer number of contracts. This process then continues for futures delivery dates until each position maturity exposure is hedged. It normally happens when there is no adequate liquidity for the long term futures contract traded in the market.
179.Standard Portfolio Analysis of Risk, SPAN：
The Standard Portfolio Analysis of Risk (SPAN) is based on a sophisticated set of algorithms that determine margin requirements according to a global (total portfolio) assessment of the one-day risk for a trader's account.
A static hedge is one that does not need to be re-balanced as the price of other characteristics (such as volatility) of the securities it hedges change. This contrasts with a dynamic hedge that requires constant re-balancing.
A stock option gives an investor the right, but not the obligation, to buy or sell a stock at an agreed upon price and date. There are two types of options: puts, which is a bet that a stock will fall, or calls, which is a bet that a stock will rise.
182.Stop Limit Order：
A stop limit order is an order that goes into force as soon as there is a trade at the specified price. The order, however, can only be filled at the stop limit price or better. Compare to Stop Order.
This is an order that becomes a market order when a particular price level is reached. A sell stop is placed below the market; a buy stop is placed above the market. Sometimes referred to as stop loss order. Compare to market-if-touched order.
A strap, or a long strap, is an options strategy using one put and two calls with the same strike and expiration. Traders use it when they believe a large move in the underlying asset is likely although the direction is still uncertain. All options in a strap are at the money. A strap is similar to a straddle but because there are two calls for every put, the strategy does lean bullish. A short strap would sell one put and two calls but this strategy profit when the underlying does not move.
185.Strike Price (Exercise Price) ：
The price, specified in the option contract, at which the underlying futures contract, security, or commodity will move from seller to buyer.
A sequence of futures contract months (e.g., the June, July, and August natural gas futures contracts) that can be executed as a single transaction.
A strip hedge happens when futures contracts over many maturities ranges are purchased to hedge the underlying cash positions. In other words strips of futures contracts are used. This normally happens when there is high liquidity for futures contracts over longer time horizons. There is no basis risk due to the strip hedge as the basis becomes locked and changes cannot affect the risk.
An option to enter into an interest rate swap or some other type of swap.
A synthetic bond is a synthetic position made up of a mixture of investments designed to mimic the cash flow and risk profile of a corporate bond.
190.Synthetic Long Futures Position：
The synthetic long futures is an options strategy used to simulate the payoff of a long futures position.
191.Synthetic Short Futures Position：
The synthetic short futures is an options strategy used to simulate the payoff of a short futures position.
Systematic risk refers to the risk inherent to the entire market or market segment. Systematic risk, also known as “undiversifiable risk,” “volatility” or “market risk,” affects the overall market, not just a particular stock or industry.
The TED spread is the difference between the three-month Treasury bill and the three-month LIBOR based in US dollars. To put it another way, the TED spread is the difference between the interest rate on short-term US government debt and the interest rate on interbank loans.
A tick is a measure of the minimum upward or downward movement in the price of a security.
195.Time Decay Factor：
Time decay is a measure of the rate of decline in the value of an options contract due to the passage of time. Time decay accelerates as an option's time to expiration draws closer since there's less time to realize a profit from the trade.
Time option means there is not a single date, but a range of possible settlement dates from which the counterparty can choose to settle on.
The total premium of an option is equal to the intrinsic value plus the option's time value. As an equation, time value is expressed as Option Premium - Intrinsic Value = Time Value.
198.Value at Risk, VaR：
A measure of the risk of loss for investments. It estimates how much a set of investments might lose with a given probability, given normal market conditions, in a set time period such as a day.
Also known as Mark To Market Margin, is additional amount of cash you are required to deposit to your futures trading account after your futures position have taken sufficient losses to bring it below the "Maintenance Margin".
A vertical spread involves the simultaneous buying and selling of options of the same type (puts or calls) and expiry, but at different strike prices.