Share

Tweet this

Dealing Desk Hotline

(603)-2181 8848

Trading and Investment Glossary

A

Actuals Actuals are physical commodities such as crude palm oil, soybean and gold. Also called cash commodity or physicals, the term actuals is mostly used in the US.
Approved Delivery Facility Also known as Delivery Points, Approved Delivery Facility is a facility authorized by futures exchange where the delivery of commodities takes place upon the expiration of a futures contract. Banks, storehouses, grain elevators and livestock exchanges are generally the approved delivery facilities.

In Malaysia, ports such as Port Kelang and Pasir Gudang are listed as the delivery points for Crude Palm Oil and Crude Palm Kernel Oil.

Arbitrage The simultaneous purchase and sale of similar commodities in different markets to take advantage of a price discrepancy.
At The Market A type of futures trading order. It is an order to buy or sell a futures contract at the best available price.

B

Bear Market (Bear/Bearish) A market in which prices are declining. A market participant who believes prices will move lower is called a "bear."A news item is considered bearish if it is expected to result in lower prices.
Beta The beta reflects the sensitivity of a share or portfolio relative to the overall market development.
Bid Indicated willingness to purchase at a specified price.
Blue Chips The shares of a company known to make profits in good and bad times. As there is a low risk of capital loss, the dividend and earnings yield are proportionately low.
Broker A regulated professional who charges a fee or commission for executing buy and sell orders submitted by an investor.
Brokerage Fee A fee charged by a broker for executing a transaction.
Bull Market (Bull/Bullish) A market in which prices are rising. A market participant who believes prices will move higher is called a “bull.”A news item is considered bullish if it is expected to result in higher prices.

C

Call Option An option that gives the buyer the right, but not the obligation, to purchase (go “long") the underlying futures contract at the strike price on or before the expiration date.
Capital Market Services Representatives (CMSR) A reference to licensed dealers within the industry who are involved in the solicitation and facilitation of trading. It is the proper name for dealers, dealing desk personnel or futures broker representative (FBR). In the US, a CMSR is known as Associated Person (AP).
Cash Commodity The actual physical commodity as distinguished from the futures contract based on the physical commodity. Also known as actuals or physicals.
Cash Market The underlying market of a futures product.
Cash Settlement A method of settling certain futures or options contracts whereby the market participants settle in cash (rather than 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.
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.
Closing Price The last price paid for a commodity on any trading day. The exchange clearinghouse determines a firm’s net gains or losses, margin requirements, and the next day’s price limits, based on each futures and options contract settlement price. If there is a closing range of prices, the settlement price is determined by averaging those prices. Also referred to as Settlement Price.
Commodity An article of commerce or a product that can be used for commerce. In a narrow sense, products traded on an authorized commodity exchange. The types of commodities include agricultural products, metals, petroleum, foreign currencies, financial instruments and indices, to name a few.
Contract A term reference describing a unit of trading for a financial futures Also, the actual bilateral agreement between the buyer and seller of a futures transaction as defined by an exchange.
Contract Month The month in which delivery is to be made in accordance with the terms of the futures contract also referred to as Delivery Month.
Contract Size Contract size specifies the amount of the underlying instrument you are trading. Contract sizes are determined by the futures exchanges where the futures contracts are traded on.
Convergence The tendency for prices of physical commodities and futures to approach one another, usually during the delivery month.

D

Daily Trading Limit The maximum price range set by the exchange cash day for a contract.
Day Order An order that if not executed expires automatically at the end of the trading session on the day it was entered.
Day Trader A speculator who will normally initiate and offset a position within a single trading session..
Day Trading Refers to establishing and liquidating the same position(s) within the same trading day.
Default The failure to perform on a futures contract as required by exchange rules, such as a failure to meet a margin call or to make or take delivery.
Delivery The transfer of the cash commodity from the seller of a futures contract to the buyer of a futures contract Each futures exchange has specific procedures for delivery of a cash commodity Some futures contracts, such as stock index contracts, are cash settled.
Delivery Month The calendar month in which physical delivery of a futures contract must be made.
Derivative A financial instrument, traded on or off the exchange, the price of which is directly dependent upon the value of one or more underlying securities, equity indices, debt instruments, or any agreed upon pricing index or arrangement.

E

Electronic Order An order placed electronically (without the use of a broker) either via the Internet or an electronic trading system.
Equity Derivatives Equity derivatives are a class of derivatives, which value is at least partly derived from one or more underlying equity securities.
Exchange (Derivatives) An institution that acts as a marketplace for trading derivatives contract. It is a place where derivatives trading (i.e. futures and options) are actually done, either by open-cry trading in a trading pit or by electronic trading platform.
Derivatives exchange also involves in regulations, benchmarking prices for crucial commodities, standardization of futures contracts, clearing and settlement. Some examples of derivatives exchanges around the world are Bursa Malaysia Derivatives in Malaysia, Dalian Commodity Exchange in China Chicago Mercantile Exchange in the United States.
Expiration Date Generally the last date on which an option may be exercised. It is not uncommon for an option to expire on a specified date during the month prior to the delivery month for the underlying futures contracts.

F

First Notice Day The first day on which notice of intent to deliver a commodity in fulfillment of an expiring futures contract can be given to the clearinghouse by a seller and assigned by the clearing.
Fundamental Analysis (Derivatives) Fundamental analysis is the study of supply and demand forces in the economy. It is a method or technique to predict the price movements by using economic data, research and news.
Futures Contract A legally binding agreement to buy or sell a commodity or financial instrument at a later date. Futures contracts are standardized according to the quality, quantity and delivery time and location for each commodity.

G

Good-till-Canceled (GTC) Good –till-canceled is an order to buy or sell futures contracts at a fixed price that will be maintained until it is cancelled or the trade is executed. An order with no good-till-canceled order will expire at the end of the trading day it was placed.
Good-till-Date (GTD) Good-till-date is an order to buy or sell futures contracts at a fixed price that will be maintained until a specified date or the trade is executed. The order will be cancelled when the specified date has passed.

H

Hedge The purchase or sale of a futures contract as a temporary substitute for a transaction to be made at a later date, usually it involves opposite positions in the cash market and the futures market at the same time.

I

Initial Margin The amount a futures market participant must deposit into a margin account at the time an order is placed to buy or sell a futures contract.

L

Last Trading Day The last day on which trading may occur in a given futures or option.
Leverage The ability to control large amounts of a commodity with a comparatively small amount of capital.
Limit Order Limit order is an order to buy or sell futures contracts at a specified price. A limit to buy is placed below the current market price, while a limit to sell is placed above the current market price.
Liquidation A transaction that offsets or takes the opposite side and closes out a long or short position.
Long One who has bought futures contracts or owns a cash commodity.
Long Hedge The purchase of a futures contract(s) in anticipation of actual purchases in the underlying market at a future date. Used as protection against an increase in the cash price.

M

Managed Accounts A managed account is a portfolio of securities that are chosen and traded by a professional asset manager on the client's behalf.
Margin An amount of money deposited by both buyers and sellers of futures contracts and by sellers of options contracts to ensure performance of the terms of the contract (the making or taking delivery of the commodity or the cancellation of the position by a subsequent offsetting trade). Margin in commodities is not a down payment, as in securities, but rather a performance bond.
Margin Call A call from a clearinghouse to a clearing member, or from a broker or firm to a customer, to bring margin deposits up to a required minimum level.
Maintenance Margin A set minimum margin (per outstanding futures contract) that a customer must maintain in his margin account to retain the futures position.
Margin Requirement A collateral that the holder of a financial instrument has to deposit to cover some or all of the credit risk of his counterparty (most often his broker or an exchange).
Market Capitalization The total value of a listed company's shares based on current market price.
Mark-to-Market Daily evaluation of open futures contract(s) that an investor holds to reflect profit / losses. All futures positions are marked-to-market using the settlement price.
Market Order An order to buy or sell a futures or options contract at whatever price is obtainable when the order reaches the trading floor.
Money Laundering The practice of engaging in financial transactions to conceal the identity, source, or destination of illegally gained money.

N

Notice Day Any day on which a clearinghouse issues notices of intent to deliver on futures contracts.

O

Offer An indication of willingness to sell a futures contract at a given price; the opposite of Bid.
Offsetting Liquidation of a futures contract by purchasing or selling an identical contract. Also known as close-out.
Open The period at the beginning of the trading session officially designated by the exchange during which all transactions are considered made "at the open".
Open Interest The total number of futures or options contracts of a given commodity that have not yet been offset by an opposite futures or option transaction nor fulfilled by delivery of the commodity or option exercise. Each open transaction has a buyer and a seller, but for calculation of open interest, only one side of the contract is counted.
Options A contract between a buyer and a seller that gives the buyer of the option the right, but not the obligation, to buy or to sell a specified asset (underlying) on or before the option's expiration time, at an agreed price, the strike price.

P

Paid-Up Capital The amount of a company's authorised capital which has been subscribed by shareholders.
Physical Delivery The tender and receipt of an actual commodity, financial instrument, cash or any other instrument or product for the purpose of settlement of a futures contract.
Physical Settlement A method of settling certain futures or options contracts that involves the delivery of the underlying commodity.
Position A commitment, either long or short, in the market.
Position Limit The maximum number of speculative futures contracts one can hold as determined by the CFTC and/or the exchange where the contract is traded.
Price Limit The maximum price fluctuation allowed on a contract during a trading session according to the rules of the Exchange.

Q

Quotation The actual price or the bid or ask price of either cash commodities or futures or options contracts at a particular time.

R

Reportable Positions The number of open contracts specified by the CFTC when a firm or individual must begin reporting total positions by delivery month to the authorized exchange and/or the CFTC.

S

Settlement Price The last price paid for a futures contract on any trading day Settlement prices are used to determine open trade equity, margin calls and invoice prices for deliveries.
Short One who has sold a futures contract(s) to establish a market position.
Speculator A market participant who tries to profit from buying and selling futures and options contracts by anticipating future price movements Speculators assume market price risk and add liquidity and capital to the futures markets.
Spot Usually refers to a cash market price for a physical commodity that is available for immediate delivery.
Spot Month Refers to the nearest delivery month of a futures contract.
Spreading The simultaneous buying and selling of two related markets or commodities in the expectation that a profit will be made when the position is offset.
Stop Order An order that becomes a market order when the futures contract reaches a particular price level A sell stop is placed below the market, a buy stop is placed above the market.

T

Technical Analysis A security analysis discipline for forecasting the direction of prices through the study of past market data, primarily price and volume.
Tick The smallest allowable increment of price movement for a contract. Also referred to as Minimum Price Fluctuation.
Trade Account To trade in the futures market the client has to register and open an account with the broking organization known as trading account.

V

Volatility A measurement of the change in price over a given time period.
Volume The number of transactions in a futures contract transacted during a specified period of time.

 

SiteLock