- F -

- Federal Reserve Board -
A board of Directors comprised of seven members which directs the federal banking system, is appointed by the President of the United States and confirmed by the Senate. The functions of the board include formulating and executing monetary policy, overseeing the Federal Reserve Banks, and regulating and supervising member banks. Monetary policy is implemented through the purchase or sale of securities, and by raising or lowering the discount rate—the interest rate at which banks borrow from the Federal Reserve.

- Fill or Kill order (FOK) -
Also known as a quick order, is a limit order which, if not filled immediately, is canceled.

- Financial futures -
Include interest rate futures, currency futures, and index futures. The financial futures market currently is the fastest growing of all the futures markets.

- First notice day -
Notice of intention to deliver a commodity in fulfillment of an expiring futures contract can be given to the clearinghouse by a seller (and assigned by the clearinghouse to a buyer) no earlier than the first notice day. First notice days differ depending on the commodity.

- Floor broker -
A person who executes orders on the trading floor of an exchange on behalf of other people. They are also known as pit brokers because the trading area has steps down into a "pit" where the brokers stand to execute their trades.

- Floor trader -
Floor trader: Exchange members present on the exchange floor to make trades on their own behalf. They may be referred to as scalpers or locals.

- Forward contract -
A contract entered into by two parties who agree to the future purchase or sale of a specified commodity. This differs from a futures contract in that the participants in a forward contract are contracting directly with each other, rather than through a clearing corporation. The terms of a forward contract are negotiated between the buyer and seller, while exchanges set the terms of futures contracts..

- Forward pricing -
The practice of locking in a price in the future, either by entering into a cash forward contract or a futures contract. In a cash forward contract, the parties usually intend to tender and accept the commodity, while futures contracts are generally offset, with a cash transaction occurring after offset.

- Free market -
A market place where individuals can act in their own best interest, free from outside forces (freedom means freedom from government) restricting their choices, or regulating or subsidizing product prices. Free market also refers to the political system where the means of production are owned by free, non-regulated individuals.

- Full carry -
When the difference between futures contract month prices equals the full cost of carrying (storing) the commodity from one delivery period to the next. Carrying charges include insurance, interest, and storage.

- Fundamental analysis -
The study of specific factors, such as weather, wars, discoveries, and changes in government policy, which influence supply and demand and, consequently, prices in the market place.

- Futures Commission Merchant (FCM) -
An individual or organization accepting orders to buy or sell futures contracts or futures options, and accepting payment for his services. FCMs must be registered with the CFTC and the NFA, and maintain a minimum capitalization of $300,000.

- Futures Industry Association (FIA) -
The futures industrys national trade association. They lobbied in favor of establishing a second layer of bureaucracy for the futures industry (NFA).

- G -

- Gambler -
One who seeks profit by taking noncalculated or man-made risks. If one flips a coin to determine his course of action, he is gambling as to the outcome. If one bets on the horses, the outcome of a sports event, or some other man-made event, he is gambling. A gambler is distinguished from a speculator in that a speculator could profit from price change if he knew enough about the supply and demand factors used to determine price. He also trades economic goods, thus benefitting mankind.

- Gap -
A term used by technicians to describe a jump or drop in prices; i.e., prices skipped a trading range. Gaps are usually filled at a later date.

- Geometric index -
An index in which a 1% change in the price of any two stocks comprising the index impacts on it equally. The Value Line Average index is composed of 1,700 stocks and is a geometric index.

- Give-up -
A customer "give-up" is a trade executed by one broker for the client of another broker and then "given-up" to the regular broker; e.g., a floor broker with discretion must have another broker execute the trade.

- Good till Cancelled (GTC) -
A qualifier for any kind of order extending its life indefinitely; i.e., until filled or canceled.

- Grantor -
Someone who assumes the obligation, not the right, to buy (for a put) or sell (for a call) the underlying futures contract or commodity at the strike price. See also Writer.

- Guarantee fund -
One of two funds established for the protection of customers' monies; the clearing members contribute a percentage of their gross revenues to the guarantee fund. See also Surplus fund.

- Guided account -
An account that has a planned trading strategy and is directed by either a CTA or a FCM. The customer is advised on specific trading positions, which he must approve before an order may be entered. These accounts often require a minimum initial investment, and may use only a predetermined portion of the investment at any particular time. Not to be confused with a discretionary account.

- H -

- Hedge ratio -
The relationship between the number of contracts required for a direct hedge and the number of contracts required to hedge in a specific situation. The concept of hedging is to match the size of a positive cash flow from a gaining futures position with the expected negative cash flow created by unfavorable cash market price movements. If the expected cash flow from a $1 million face-value T-Bill futures contract is one-half as large as the expected cash market loss on a $1 million face-value instrument being hedged (for whatever reason), then two futures contracts are needed to hedge each $1 million of face value. The hedge ratio is 2:1. Hedge ratios are used frequently when hedging with futures options, interest rate futures, and stock index futures, to aid in matching expected cash flows. Generally, the hedge ratio between the number of futures options required and the number of futures contracts is 1: 1. For interest rate and stock index futures, the ratios may vary depending on the correlation between price movement of the assets being hedged and the futures contracts or options used to hedge them. Most agricultural hedge ratios are 1: 1.

- Hedger -
One who hedges; one who attempts to transfer the risk of price change by taking an opposite and equal position in the futures or futures option market from that position held in the cash market.

- Hedging -
Transferring the risk of loss due to adverse price movement through the purchase or sale of contracts in the futures markets. The position in the futures market is a substitute for the future purchase or sale of the physical commodity in the cash market. If the commodity will be bought, the futures contract is purchased (long hedge); if the commodity will be sold, the futures contract is sold (short hedge).

- High -
The top price paid for a commodity or its option in a given time period, usually a day or the life of a contract.