- A -

- Abandon -
The act of an option holder in electing not to exercise or offset an option.

- Accrual -
The apportionment of premiums and discounts on forward exchange transactions that relate directly to deposit swap (Interest Arbitrage) deals, over the period of each deal.

- Accommodation Trading -
Noncompetitive trading entered into by a trader, usually to assist another with illegal trades.

- Actuals -
The physical or cash commodity, as distinguished from commodity futures contracts. Also see Cash and Spot Commodity.

- Adjustable Peg -
Term for an exchange rate regime where a country's exchange rate is "pegged" (i.e. fixed) in relation to another currency, often the dollar or French Franc, but where the rate may be changed from time to time. This was the basis of the Bretton Woods system. See peg, and crawling peg.

- Adjustment -
Official action normally by either change in the internal economic policies to correct a payment imbalance or in the official currency rate or.

- Agent Bank -
1. A bank acting for a foreign bank.
2. In the Euro market - the agent bank is the one appointed by the other banks in the syndicate to handle the administration of the loan.

- Aggregate Demand -
Total demand for goods and services in the economy. It includes private and public sector demand for goods and services within the country and the demand of consumers and and firms in other countries for good and services.

- Aggregation -
The principle under which all futures positions owned or controlled by one trader (or group of traders acting in concert) are combined to determine reporting status and speculative limit compliance.

- Aggregate Risk -
Size of exposure of a bank to a single customer for both spot and forward contracts.

- Aggregate Supply -
Total supply of goods and services in the economy from domestic sources (including imports) available to meet aggregate demand.

- Agio -
Difference in the value between currencies. Also used to describe percentage charges for conversion from paper money into cash, or from a weak into a strong currency.

- Appreciation -
Describes a currency strengthening in response to market demand rather than by official action.

- Allowances -
The discounts (premiums) allowed for grades or locations of a commodity lower (higher) than the par (or basis) grade or location specified in the futures contract. See Differentials.

- Approved Delivery Facility -
Any bank, stockyard, mill, store, house, plant, elevator or other depository that is authorized by an exchange for the delivery of commodities tendered on futures contracts.

- Arbitrage -
Simultaneous purchase of cash commodities or futures in one market against the sale of cash commodities or futures in the same or a different market to profit from a discrepancy in prices. Also includes some aspects of hedging. See Spread, Switch.

- Arbitrage Channel -
The range of prices within which there will be no possibility to arbitrage between the cash and futures market.

- Around -
Used in quoting forward "premium / discount". "Five-five around" would mean five point on either side of the present spot value.

- Asset Allocation -
Dividing instrument funds among markets to achieve diversification or maximum return.

- Ask -
The price at which the currency or instrument is offered.

- Asian Option -
An option whose payoff depends on the average price of the underlying asset during some portion of the life of the option.

- Assignable Contract -
One which allows the holder to convey his rights to a third party. Exchange-traded contracts are not assignable.

- Associated Person -
A person associated with any futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator or leverage transaction merchant as a partner, officer, employee, consultant, or agent. Also, any person occupying a similar status or performing similar functions, in any capacity that involves: (a) the solicitation or acceptance of customers orders, discretionary accounts, or participation in a commodity pool (other than in a clerical capacity); or (b) the supervision of any person or persons so engaged.

- Asset -
In the context of foreign exchange is the right to receive from a counterparty an amount of currency either in respect of a balance sheet asset (e.g. a loan) or at a specified future date in respect of an unmatched forward Forward or spot deal.

- At-the-Market -
An order to buy or sell a futures contract at whatever price is obtainable when the order reaches the trading floor. Also called a Market Order.

- At-the-Money -
When an option's exercise price is the same as the current trading price of the underlying commodity, the option is at-the-money.

- At Best -
An instruction given to a dealer to buy or sell at the best rate that can be obtained.

- At or Better -
An order to deal at a specific rate or better.

- Audit Trail -
The record of trading information identifying for example, the brokers participating in each transaction, the firms clearing the trade, the terms and time of the trade, and, ultimately and when applicable, the customers involved.

- Authorized Dealer -
A financial institution or bank authorized to deal in foreign exchange.

- B -

- Backpricing -
Fixing the price of a commodity for which the commitment to purchase has been made in advance. The buyer can fix the price relative to any monthly or periodic delivery using the futures markets.

- Balance of Trade -
Exports less imports.

- Basis -
The difference between the spot or cash price of a commodity and the price of the nearest futures contract for the same or a related commodity. Basis is usually computed in relation to the futures contract next to expire and may reflect different time periods, product forms, qualifies, or locations.

- Basis Grade -
The grade of a commodity used as the standard, or par grade of a futures contract.

- Basis Point -
The measurement of a change in the yield of a debt security. One basis point equals 1/100 of one percent.

- Basis Quote -
Offer or sale of a cash commodity in terms of the difference above or below a futures price (e.g., 10 cents over December corn).

- Basis Risk -
The risk associated with an unexpected widening or narrowing of basis between the time a hedging position is established and the time that it is lifted.

- Bear -
One who expects a decline in prices. The opposite of "bull." A news item is considered bearish if it is expected to bring lower prices.

- Bear Market -
A market in which prices are declining.

- Bear Spread -
The simultaneous purchase and sale of two futures contracts in the same or related commodities with the intention of profiting from a decline in prices but at the same time limiting the potential loss if this expectation is wrong. In the agricultural products, this is accomplished by selling a nearby delivery and buying a deferred delivery.

- Bear Vertical Spread -
A strategy employed when an investor expects a decline in a commodity price but at the same time seeks to limit the potential loss if this expectation is wrong. This Spread requires the simultaneous purchase and sale of options of the same class and expiration date but different strike prices. For example, if call options are spread, the purchased option must have a higher exercise price than the sold option.

- Beta (Beta Coefficient) -
A measure of the variability of rate of return or value of a stock or portfolio compared to that of the overall market.

- Appreciation -
Describes a currency strengthening in response to market demand rather than by official action.

- Bid -
An offer to buy a specific quantity of a commodity at a stated price.

- Blackboard Trading -
The practice of selling commodities from a blackboard on a wall of a commodity exchange.

- Black-Scholes Model -
An option pricing formula initially derived by F. Black and M. Scholes for securities options and later refined by Black for options on futures.

- Board Broker System -
A system of trading in which an individual member of an exchange (or a nominee of the member) is designated as a Board Broker for a particular commodity with the responsibility of executing orders left with him by other members on the floor, providing price quotations, and maintaining orderliness in the trading crowd. A Board Broker may not trade for his own account or the account of an affiliated organization. Also see Free Crowd System and Specialist System.

- Board of Trade -
Any exchange or association, whether incorporated or unincorporated, 6f persons who are engaged in the business of buying or selling any commodity or receiving the same for sale on consignment.

- Board Order -
See Market-if -Touched Order.

- Boiler Room -
An enterprise which often is operated out of inexpensive, low-rent quarters (hence the term "boiler room") that uses high-pressure sales tactics (generally over the telephone) and possibly false or misleading information to solicit generally unsophisticated investors.

- Book Transfer -
A series of accounting or bookkeeping entries used to settle a series of cash market transactions.

- Booking the Basis -
A forward pricing sales arrangement in which the cash price is determined either by the buyer or seller within a specified time. At that time, the previously agreed basis is applied to the then-current futures quotation.

- Box Transaction -
An option position in which the holder has established a long call and a short put at one strike price and a short call and a long put at another strike price, all of which are in the same contract month in the same commodity.

- Break -
A rapid and sharp price decline.

- Broker -
A person paid a fee or commission for executing buy or sell orders of a customer. In commodity futures trading, the term may refer to: (1) Floor Broker, a person who actually executes orders on the trading floor of an exchange; (2) Account Executive, Associated Person, Registered Commodity Representative or Customer 's Man - the person who deals with customers in the offices of futures commission merchants; and (3)the Futures Commission Merchant.

- Broker Association -
Two or more exchange members who (1) share responsibility for executing customer orders, (2) have access to each others unfilled customer order's as a result of common employment or other types of relationships, or (3) share profits or losses associated with their brokerage or trading activity.

- Bucket Shop -
A brokerage enterprise which "hooks"(i.e. takes the opposite side of) a customer"s order without actually having it executed on an exchange.

- Bucketing -
Directly or indirectly taking the opposite side of a customer's order into the broker's own account or into an account in which the broker has an interest without open and competitive execution of the order on an exchange.

- Bulge -
A rapid advance in prices .

- Bull -
One who expects a rise in prices. The opposite of "bear". A news item is considered bullish if it portends higher prices.

- Bull Market -
A market in which prices are rising.

- Bull Spread -
The simultaneous purchase and sale of two futures contracts in the same or related commodities with the intention of profiting from a rise in prices but at the same time limiting the potential loss if this expectation is 'wrong. In the agricultural commodities, this is accomplished by buying the nearby delivery and selling the deferred.

- Bull Vertical Spread -
A strategy used when an investor expects that the price of a commodity will go up but at the same time seeks to limit the potential loss should this judgment be in error. This strategy involves the simultaneous purchase and sale of options of the same class and expiration date but different strike prices. For example, if call options are spread, the purchased option must have a lower exercise price than the sold option.

- Bullion -
Bars or ingots of precious metals, usually cast in standardized sizes.

- Buoyant -
A market in which prices have a tendency to rise easily with a considerable show of strength.

- Butterfly Spread -
A three-legged spread in futures or options. In the options spread, the options have the same expiration date but differ in strike prices. For example, a butterfly spread in soybean call options might consist of two short calls at a $6.00 strike price, one long call at a $6.50 strike price, and one long call at a $5.50 strike price.

- Buy (or Sell) On Close -
To buy (or sell) at the end of the trading session within the closing price range.

- Buy (or Sell) On Opening -
To buy (or sell) at the beginning of a trading session within the opening price range.

- Buyer -
A market participant who takes a long future position or buys an option. An option buyer is also called a taker, holder, or owner.

- Buyer's Call -
See Call.

- Buyer's Market -
A condition of the market in which there is an abundance of goods available and hence buyers can afford to be selective and may be able to buy at less than the price that had previously prevailed. See Seller Market.

- Buying Hedge (or Long Hedge) -
A condition of the market in which there is an abundance of goods available and hence buyers can afford to be selective and may be able to buy at less than the price that had previously prevailed. See Seller's Market.