Glossary of Terms  
                   
  A.............................................................................................................................................................................................................  
 

Account Executive (AE)
The person who is in charge of your brokerage account.

Advance-Decline Line
Each day’s number of declining issues is subtracted from the number of advancing issues. The net difference is added to a running sum
if the difference is positive or subtracted from the running sum if the difference is negative.

Arbitrage
The simultaneous purchase and sale of two different, but closely related items to take advantage of a disparity in their prices.

Associated Person (AP)
An individual who solicits orders, customers or customer funds (or who supervises persons so engaged) on behalf of an FCM, IB, CTA, or CPO.

At –the –Money
An option whose strike price is nearest the current price of the underlying deliverable.

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Basis
The difference between the pair of futures and the spot price.

Basis Point
Term used to describe amount of change in yield. One hundred basis points equal 1 percent.

Bear Market
A sustained period of falling stock prices usually preceding or accompanied by a period of poor economic performance known as a recession.
The opposite f a bull market.

Beta
Term used to describe the price volatility of securities. Standard & Poor’s 500 Index is assigned a beta of one. Anything with a beta above one
is considered to be more volatile than the index; anything below one has less volatility than the S&P Index.

Bid
An offer to purchase something at a specified price

Break
A very fast drop in price.

Breakaway Gap
The Movement of price into a new range that leaves an area on a chart at which no trading occurred.

Breakout
The point where the market price moves out of the trend channel.

Broker
One who executes order of a customer for commission.

Bull Market
A stock market that is characterized by rising prices over a long period of time. The time span is not precise, but it represents a period of
investor optimism, lower interest rates, and economic growth. The opposite of a bear market.

C.............................................................................................................................................................................................................
Call
Market pre-opening consensus as to what the opening prices may be.

Call Option
A contract that gives the buyer of the option the right, but not the obligation, to take delivery of the underlying security at a specific price within
a certain time.

Call Price
The price of a call option.

Cancel (or Straight Cancel)
An instruction to disregard an order which you previously entered, but no longer want.

Cancel/Replace
Instructs the broker to cancel an existing order and place instead a new order which has adjustments made in the price, action, quantity,
and/or duration. You may not change the month or commodity in a cancel/replace.

Candlestick Charts
A charting method, originally from Japan, in which the high and low are plotted as a single line and are referred to as shadows. The price
range between the open and the close is plitted as a narrow rectangle and is referred to as the body. If the close is above the open, the body
is white. If the close is below the open, the body is black.

C.F.T.C
Commodity Futures Trading Commission

Clearing House
An adjunct to a futures exchange, through which transactions executed on the floor of exchanges are settled, using a process of matching
purchases and sales.

Clearing Member
A member of the Clearing House. Each Clearing Member must also be a member of the Exchanges. Each member of the exchange, however,
need not be a member of the clearing association.

Commodity Pool Operator (CPO)
An individual or organization which operates or solicits funds for a commodity pool.

Commodity Trading Advisor (CTA)
An individual or organization who, for compensation or profit, directly or indirectly advises others as to the value of, or the advisability of
buying or selling options.

Convergence
The coming together of prices and/or indicators.

Correction
Any price reaction within the market leading to an adjustment by as 1/3 to 2/3 of the previous gain.

Cover
Purchasing back a contract which was sold earlier.

D.............................................................................................................................................................................................................
Day Order
An order which is to be executed, if possible, during one day only. If the order cannot be filled during the day specified, it is automatically
cancelled at the close.

Day Trading
Establishing and liquidating positions within one day’s trading.

Discretionary Account
An account for which buying and selling orders can be placed at the discretion of the broker or other designated person, without the prior
consent of the account owner. The account owner signs a prior agreement granting the designated person or broker the power of attorney
to place such trades.

Disregard Tape (DRT)
A DRT order is a marked order which gives the floor broker the discretion to delay the execution of a market order if he believes he can
execute the order at a better price by so doing. DRT orders are accepted on a “not held” basis only.

Divergence
The parting or deviation of prices and/or indicators. In technical analysis, often used to mean that technical indicators fall to corroborate or
confirm one another.

E.............................................................................................................................................................................................................
Exercise Price
Amount for which shares can be bought or sold under the option.

Expiration
The last day on which an option can be exercised.

F.............................................................................................................................................................................................................
Fade
Selling a rising price or buying a falling price. For example, a trader fading an up opening would be short.

Fair Value
The theoretical price generated by an option pricing model such as Black-Scholes.

Fill or Kill (FOK)
A Fill or Kill order instructs the broker to bid (buy) or offer (to sell) at your specified price (which should be at or near the current market)
and to immediately cancel the order if it is unable to be filled.

Floor Broker (FB)
An individual who executes any orders for the purchase or sale of any commodity futures or options contract on any contract market for any
other person.

Floor Trader (FT)
An individual who executes trades for the purchase or sale of any commodity futures or options contract on any contract market for such
individual’s own account. Also known as a local.

Front Month
The closest month.

Fundamental Analysis
The analytical method by which only the sales, earnings and the value of a given tradable’s assets may be considered.

Fundamentals
The theory that holds that stock market activity may be predicted by looking at the relative data and statistics of a stock as well as the
management of the company in question and its earnings.

Futures Commission Merchant (FCM)
An individual or organization which does both of the following: (1) solicits or accepts orders to buy or sell futures contracts or commodity
options and (2) accepts money or other assets from customers to support such orders.

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Gap
A time period in which the range is completely above or below the previous time period’s range.

H.............................................................................................................................................................................................................
Head & Shoulders
A chart pattern often interpreted to mean a trend reversal may be imminent. A head and shoulder pattern is often associated with the topping
of a market and an inverted head and shoulders is associated with the bottoming of a market. The neckline is the resistance or support area in
the formation. The pattern can also be used to project prices by measuring the distance between the neckline and the head and adding that
distance to the direction of the breakout if one occurs.

I.............................................................................................................................................................................................................
In-The-Money
A call option whose strike price is lower than the stock or futures price, or a put option whose strike price is higher than the underlying stock
or future’s price.

Intrinsic Value
The portion of an option’s premium that is represented when the cash market price is greater than the exercise price.

Introducing Broker (IB)
An individual or organization that solicits or accepts money orders to buy or sell futures contracts or commodity options but does not accept
money or other assets from customers to support such orders.

L.............................................................................................................................................................................................................
Limit
A limit order stipulates a price which the filing broker must equal or better in the execution of your order.

Limit Order
An order to buy or sell when a trade in the market occurs at a pre-determined price.

Limit Up, Limit Down
Exchange restrictions on the maximum upward or downward movement permitted in the price for a commodity during any trading session.

Local
Also called a floor trader, a member of an exchange who generally trades only for his own account, or for an account controlled by him.

Locked Limit
A market that, if not restricted, would seek price equilibrium outside the limit, but instead moves to the limit and ceases to trade.

M.............................................................................................................................................................................................................
Management Fee
The amount paid to the administrator and/or management company (who may also serve as an investment advisor) for services rendered
to the fund and included to the expense ratio.

Margin
In stock trading, an account in which purchase of stock may be financed with borrowed money; in futures trading, the deposit placed with
the clearing house to assure fulfillment of the contract. This amount varies with market volatility and is settled in cash.

Margin Call
A demand by the lender of a margin loan that the borrower repays all or a portion of the loan.

Market If Touched (MIT)
An MIT becomes a market order if and when the market hits a price specified by you. Like limit orders buy MIT’s are entered at or below
the current market and sell MIT’s are entered at or above the current price. Unlike limit orders, there are no limitations placed on the floor
broker as in fill price – he will execute your order at the best available price, the same as any market order.

Market On Close (MOC)
An MOC order is market order which must be executed within the official opening range of prices.

Market on Open Only (OO)
An open only order is a market order which must be executed within the official opening range of prices.

Momentum
A time series representing change of today’s price from some fixed number of days back in history.

Moving Average
A mathematical transform which is the sum of the current value plus (n-1) the previous values divided by n. The result smoothes fluctuations
in the raw data.

O.............................................................................................................................................................................................................
Order Cancels Order (OCO)
Also called One Cancels The Other, this order consists of two separate buy or sell instructions to the filling broker who will execute whichever
portion of the order he is first able to and then automatically cancel the alternate instruction.

Out of the money
The condition of a call option or warrant when the price of the underlying investment is lower than the striking price. The condition of a put
option when the striking price is lower than the price of the underlying investment.

Overbought/Oversold Indicator
An indicator that attempts to define when prices have moved too far and too fast in either direction and thus are vulnerable to a reaction

Overfitting
The parameters of a trading system are selected to return the highest profit and over the historical date

Over-The-Counter
The nationwide network of brokers/dealers who buy and sell securities that, for the most part, are not listed on an exchange.

P.............................................................................................................................................................................................................
Premium
The price a buyer pays to an option writer for granting an option contract

Program Trading
Trades based on signals from computer programs, usually entered directly from the trader’s computer to the market’s computer system.

Put Option
The right, but not the obligation, to sell shares at the exercise price on or before the expiration date.

Put Price
Price of a “put” option.

R.............................................................................................................................................................................................................
Resistance
A price level at which rising prices have stopped rising and either moved sideways or reversed direction; usually seen as a price chart pattern.

Reversal Stop
A stop that, when hit, is a signal to reverse the current trading position. Also known as stop and reverse.

S.............................................................................................................................................................................................................
Spike
A sharp rise in price in a single bar or two.

Spread orders
An instruction to simultaneously buy and sell the same or related commodities in an attempt to take advantage of the price differential.

Standard Deviation
The positive square root of the expected value of the square of the difference between a random variable and its mean. The dispersion of
observations from the mean observation. This measure is often expressed as a percentage on an annualized basis.

Stops
Buy stops are orders that are placed at a predetermined price over the current price of the market. Sell stops are orders that are placed
below the current price of the market.

Stop Close Only (SCO)
A stop order which can be triggered and executed only during the market’s closing range.

Stop Limit
A variation on the simple stop, the stop limit instructs the filling broker to fill your order at your price or better, if possible once your stop
is triggered. This gives the trader more control over his fill price. If, however, the market runs the stipulated price before the broker is
able to execute it, the order becomes a regular limit order. Then, if the market does not return to the specified level before the order
expires, the order will not be executed.

Stop Loss
The risk management technique in which the trade is liquidated to halt any further decline in value.

Stop with limit
Similar to the stop limit except that the trader must stipulated two prices with the limit price being farther away from the current market
than is the stop price.

Strike Price
Also known as exercise price.

Support
A historical price level at which falling prices have stopped falling and either moved sideways or reversed direction; usually seen as a
price chart pattern.

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Technical Analysis
A form of market analysis that studies supply and demand for securities and commodities based on trading price and volume studies.
Using charts and modeling techniques, technicians attempt to identify the price trends in a market.

Tick
The minimum fluctuation of a tradable. For example, bonds trade in 32nd’s, most stocks trade in eighths, S&P 500 index trades in 5
cent increments.

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Volatility
A measure of the degree of stability of the price of a stock, index, commodity, etc. A highly volatile stock, one that experiences wide
price swings, is considered to be more speculative than one with a low volatility.

 
     

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