Jargon Buster

AFO
Austrian Futures & Options Exchange.

Backwardation
When the price for immediate delivery of a commodity is higher than the price of delivery for a future date.

Base Rate
The official rate at which The European Central Bank will lend to the retail banks.

Bear
The term used to describe somebody who expects a market to decline, commonly referred to as being “bearish”.

Bear Market
A 'bear market' is the term used to describe a market that is either expected to decline or is already in the process of declining.

Bid Price
The lower price of a quoted spread. The level at which a client would sell or “go short” of a market.

Blue Chip Company
A term derived from the most valuable chip used in poker, it implies a large, long established and almost certainly profitable company considered to be conservatively managed.

Bull
The term used to describe somebody who expects a market to rise, commonly referred to as being “bullish”.

Bull Market
A 'bull market' is the term used to describe a market that is either expected to rise or is already in the process of rising.

Buy
To place an opening trade at the offer price of a spread in anticipation of the underlying market rising, commonly referred to as an “up trade”, “taking a long position” or “going long”. You can of course also buy at the offer price to close an existing short position.

Call Option
The right, but not the obligation, to buy at a fixed price on or before a predetermined date.

CBOT
Chicago Board of Trade.

Contango
When the price for immediate delivery of a commodity is lower than the price of delivery for a future date.

CME
Chicago Mercantile Exchange.

COMEX
Commodity Exchange Inc. ( New York).

Credit Allocation
A risk allocation figure granted to Credit account holders. This is not a limit to potential losses, is granted and can be withdrawn at the sole discretion of Ethical Spreads.

CSCE
Coffee, Sugar & Cocoa Exchange. ( New York).

Discount
When a derivative is trading below the current market price it is said to be trading at a discount. A futures market that is trading below the level of the spot market is said to be trading at a discount.

Dividend
A cash bonus paid by a company to its shareholders and applicable to every share that they hold in relation to that company. Spread trading in relation to individual equities do not qualify for Dividends.

Down trade
See “Sell”.

Equity
Also commonly referred to as holdings, securities, shares or stocks they are the right to a specified percentage stake of the company by whom they are issued.

EUREX
European Exchange, Frankfurt.

Expiry Date
The date on which a contract will expire, and after which can no longer be traded.

Expiry Price
The official price at which the trade expires on the expiry date, commonly referred to as the “Make-up” or “Settlement Price”.

Fair Value
The theoretical price at which a futures contract would be expected to trade.

Fill
Used to describe when a market order is executed, commonly expressed as having been “filled”.

FINEX
Financial Instrument Exchange, New York.

Float / Flotation
The first public offering of a company's shares on a regulated exchange.

FSA
The Financial Services Authority. The Government appointed body responsible for regulating Spread Trading within the U.K.

FTSE
Financial Times Stock Exchange.

Futures trade
Either buying or selling a contract at an agreed opening price for a set expiry date, and time, in the future.

Gap through
When a market opens or trades through the specified level of a market order without actually trading at the price of the market order.

Gearing
A term used in relation to a company’s debts when they are expressed as a percentage of its market capitalization . A company described as having a low gearing would signify a small amount of debt in relation to their market capitalization .

GFD
Applicable to market orders, it signifies that the order can only be filled on the day it is lodged and if not executed will expire at the close of the relevant underlying market on the day in question.

GTC
Applicable to market orders, it signifies that the order will be worked and carried forward indefinitely until it is either filled or cancelled by the client.

Grey Market
Quotes that are offered where there is no underlying market, for example an Initial Public Offering.

Guaranteed Order
An order that, for a small premium, is guaranteed to limit ones losses to the amount specified both during and outside of market hours.

Hedge / Hedging
The act of employing another related derivative in order to protect an existing open position.

Hostile Takeover
One company bidding to buy another against the wishes of the latter.

Initial Margin
By multiplying your proposed stake by the Initial Margin multiplier you can calculate the amount of Initial margin or Waived Initial Margin that is required before you can place the trade.

IPE
International Petroleum Exchange, London.

Insider dealing
Refers to any use, for the purposes of personal financial gain, of any price sensitive information that is not already public knowledge. Insider Dealing, if proven, is punishable by unlimited fines and a possible term of imprisonment.

Interim Dividends
When a company distributes profits to shareholders halfway through the financial year.

Interim Report
The requirement for each stock exchange quoted company to release an interim report after the first 6 months of their financial year.

Initial Public Offering (IPO)
The offering of a companies shares prior to its market debut.

Last Day of Dealing
The last day on which you can either open or close a trade in respect of a relevant contract and which can differ from the expiry date.

Leverage
Leverage or “gearing” is the ability to establish a large exposure from a relatively small outlay. Obviously there are inherent risks attached to such a practice.

Libor
London Inter Bank Offer rate.

LIFFE
London International Financial Futures Exchange.

Limit Order
An instruction to either buy or sell at a level that is more favorable than the current price of the financial instrument in question.

Limit Up / Limit Down
When an exchange enforces a temporary price ceiling or floor, suspends, restricts or closes the stock index for a set period of time in order to maintain a fair and orderly market and reduce the risk of large and sudden price movements.

Liquid / Illiquid Market
Liquid markets have sufficient volume so as to avoid wide bid-offer spreads and volatile price movements. Illiquid markets however can be moved disproportionately by a small amount of business and often result in wide bid-offer spreads.

LME
London Metal Exchange.

Long/Go Long
Holding or opening a “buy” position in anticipation of the underlying market rising. See “Buy”.

Lot
A Lot is the minimum amount that can be traded in the underlying futures or options exchange. Commonly referred to as the “ Lot size” or “Contract size”.

LSE
London Stock Exchange.

Margin Call
When Variation Margin is immediately due and payable by you in order to return your account balance to a positive figure.

Market Capitalization
Calculated by multiplying the number of shares issued in respect of the company by the current share price.

Market Maker
Exchange registered companies that quote a two-way spread in relation to securities.

Market Quote
Commonly used to describe market orders that are based on the price of the underlying market actually trading at the market level as opposed to the level of the Ethical Spreads quote. Also commonly stated as being left basis “screen” or simply basis “market”

Merger
When two companies combine in order to form one entity in all respects.

MSE
Milan Stock Exchange.

Normal Market Size
As defined by the London Stock Exchange, the percentage of an individual company’s stock for which a market maker is obliged to provide a quote. NMS is normally 2.5% of the total volume of shares for the company in question and market makers are not obliged to provide a quote for any transaction of a size in excess of NMS.

NYCE
New York Cotton Exchange.

NYFE
New York Futures Exchange.

NYMEX
New York Mercantile Exchange.

Offer price
The higher price of a quoted spread. The level at which a client would buy or “go long” of a market.

OCO (One cancels the other)
A term applied to two orders that are left in respect of the same market and when either is executed it cancels the other.

OMLX
London Securities & Derivatives Exchange.

Open Positions
Any unexpired positions that you hold on your account.

OSE
Osaka Securities Exchange.

Our Quote
Commonly used to describe market orders that are based on Ethical Spreads quote as opposed to the level of the underlying market.

Premium
When a derivative is trading above the current market price it is said to be trading at a premium. A futures market that is trading above the level of the spot market is said to be trading at a premium.

Profits Warning
Normally an unexpected announcement of negative news in relation to a company’s balance sheet.

Put Option
The right, but not the obligation, to sell at a fixed price on or before a predetermined date.

Rights Issue
When a company invites existing shareholders to buy additional shares prior to their public offering. The invitation is normally in proportion to the existing shareholding and usually at a discounted price.

Rollover
Closing an existing position and opening the equivalent position in respect of the next contact period at reduced spreads.

SAF
South African Futures Exchange.

Securities
See Equity.

Sell
To place an opening trade at the bid price of a spread in anticipation of the underlying market falling, commonly referred to as a “down trade”, “taking a short position” or “going short”. You can of course also sell at the bid price to close an existing long position.

Settlement Price
See “Expiry Price”.

SETS (Stock Exchange Electronic Trading System)
The electronic order driven trading system employed to deal in the FTSE 100, ex FTSE 100 and reserve UK equities.

SFE
Sydney Futures Exchange.

SGX
Singapore Exchange.

Shares
See Equity.

Short / Go short
Holding or opening a “Sell” position in anticipation of the underlying Markey falling. See “Sell”.

SOFFEX
Swiss Options & Financial Futures Exchange.

Spot
The actual price of a financial instrument for immediate settlement or delivery.

Spread
The difference between the sell (bid) and buy (offer) prices.

Stake
The amount of money that you specify and which you wish to risk per Tick movement on your chosen financial market.

Stop Loss
The level below purchase price at which you want to automatically close your trade, even though you will be losing money.

Stop Order
An instruction to either buy or sell at a level that is less favorable than the current price of the financial instrument in question.

Tick
The minimum movement of the market in question, also commonly referred to as a “point”.

TSE
Tokyo Stock Exchange.

Up Trade
See “Buy”.

Valuation price
The price used for the revaluation of open positions.

Variation Margin
The amount of money that is immediately due from you in the event that when holding open positions your overall account position is a negative figure. The amount of variation Margin due is equal to the amount of the negative figure. Please refer to the Customer Agreement for a comprehensive explanation.

Volatility
The rapid change of price in respect of any market or financial instrument.

Waived Initial Margin
Applicable to Credit Accounts only, it is the amount of Initial Margin that Ethical Spreads has agreed to waive. The amount is normally the equivalent of the level of Credit Allocation but can be greater.