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Definition of Futures
A term used to designate all contracts covering the sale of financial instruments or physical
The most distant months of a futures contract. A bond that sells at a discount and does not
A firm or person engaged in soliciting or accepting and handling orders for
Agreement to buy or sell a set number of shares of a specific stock in a designated future
Exchange-traded promise to buy or sell an asset in the future at a prespecified price.
A contract in which the seller agrees to provide something to a buyer at a specified future date at an agreed price.
A constant, set by an exchange, which when multiplied by the futures price gives
A market in which contracts for future delivery of a commodity or a security are bought or sold.
An option on a futures contract. Related: options on physicals.
The price at which the parties to a futures contract agree to transact on the settlement date.
A London exchange where Eurodollar futures
London exchange where Eurodollar futures as well as futures-style options are traded.
When several futures contracts are considered, the contract settling last.
The futures industry self regulatory organization established in 1982.
When several futures contracts are considered, the contract with the closest
The contract settling immediately after the nearby futures contract.
Spot futures parity theorem
Describes the theoretically correct relationship between spot and futures prices.
Theoretical futures price
Also called the fair price, the equilibrium futures price.
The physical commodity underlying a futures contract. Cash commodity, physical.
A promise to sell an asset before the seller has lined up purchase of the asset. This
A market condition in which futures prices are lower in the distant delivery months than in
Regarding a futures contract, the difference between the cash price and the futures price observed in the
An option that gives the right to buy the underlying futures contract.
The actual physical commodity, as distinguished from a futures contract.
The provision of some futures contracts that requires not delivery of underlying assets but
Cash settlement contracts
futures contracts, such as stock index futures, that settle for cash, not involving
The Commodity futures Trading Commission is the federal agency created by Congress to regulate
Cheapest to deliver issue
The acceptable Treasury security with the highest implied repo rate; the rate that a
Chicago Mercantile Exchange (CME)
A not-for-profit corporation owned by its members. Its primary
Clearing house / Clearinghouse
An adjunct to a futures exchange through which transactions executed its floor are settled by a
A firm which buys and sells future contracts for customer accounts. Related: futures
A trader is said to have a commitment when he assumes the obligation to accept or make
Commodities Exchange Center (CEC)
The location of five New York futures exchanges: Commodity
A commodity is food, metal, or another physical substance that investors buy or sell, usually via
A market condition in which futures prices are higher in the distant delivery months.
The month in which futures contracts may be satisfied by making or accepting a delivery.
The movement of the price of a futures contract toward the price of the underlying cash
Rules set by the Chicago Board of Trade for determining the invoice price of each
The practice of hedging with a futures contract that is different from the underlying being
The tender and receipt of an actual commodity or financial instrument in settlement of a futures contract.
The written notice given by the seller of his intention to make delivery against an open, short
The options available to the seller of an interest rate futures contract, including the quality
Those points designated by futures exchanges at which the financial instrument or
The price fixed by the Clearing house at which deliveries on futures are in invoiced; also the
Contracts such as options and futures whose price is derived from the price of the
Represents ownership interest in a firm. Also the residual dollar value of a futures trading account,
The marketplace in which shares, options and futures on stocks, bonds, commodities and indices
The equilibrium price for futures contracts. Also called the theoretical futures price, which equals
First notice day
The first day, varying by contracts and exchanges, on which notices of intent to deliver
A strategy designed to reduce investment risk using call options, put options, short selling, or futures
Implied repo rate
The rate that a seller of a futures contract can earn by buying an issue and then delivering
A put option that has a strike price higher than the underlying futures price, or a call option
An investment/trading strategy that exploits divergences between actual and theoretical
Initial margin requirement
When buying securities on margin, the proportion of the total market value of
International Monetary Market (IMM)
A division of the CME established in 1972 for trading financial
A futures market in which the nearer months are selling at price premiums to the more
The price that the buyer of a futures contract must pay the seller when a Treasury Bond is delivered.
Last trading day
The final day under an exchange's rules during which trading may take place in a particular
The purchase of a futures contract(s) in anticipation of actual purchases in the cash market. Used
Maintenance margin requirement
A sum, usually smaller than -but part of the original margin, which must
An arrangement whereby the profits or losses on a futures contract are settled each day.
The nearest active trading month of a financial or commodity futures market. Related: deferred futures
Price quotations on futures for a period in which no actual trading took place.
Normal backwardation theory
Holds that the futures price will be bid down to a level below the expected
An account carried by one futures commission merchant with another futures commission
The method of trading used at futures exchanges, typically involving calling out the specific
Options on physicals
Interest rate options written on fixed-income securities, as opposed to those written on
A strategy of using futures for asset allocation by pension sponsors to avoid disrupting the
A specific area of the trading floor that is designed for the trading of commodities, individual futures, or
1) Amount paid for a bond above the par value.
An option granting the right to sell the underlying futures contract. Opposite of a call.
Also called the swap option, the seller's choice of deliverables in Treasury Bond and Treasury
A person registered with the CFTC who is employed by, and soliciting business
Entering the opposite side of a currently held futures position to close out the position.
Security deposit (initial)
Synonymous with the term margin. A cash amount of funds that must be deposited
A figure determined by the closing range which is used to calculate gains and losses in
The sale of a futures contract(s) to eliminate or lessen the possible decline in value ownership of
SIMEX (Singapore International Monetary Exchange)
A leading futures and options exchange in Singapore.
The nearest delivery month on a futures contract.
1) The gap between bid and ask prices of a stock or other security.
Stock replacement strategy
A strategy for enhancing a portfolio's return, employed when the futures
A strategy used in trading options or futures. It involves
A method for hedging price risk that utilizes debt-market instruments, such as interest rate
Liquidating an existing position and simultaneously reinstating a position in another futures
Refers to the buyer's actually assuming possession from the seller of the asset agreed upon
To offer for delivery against futures.
For a Treasury Bond or note futures contract, the seller's choice of when in the delivery month to deliver.
Trading of a stock, bond, option or futures contract can be halted by an exchange while news is
Triple witching hour
The four times a year that the S&P futures contract expires at the same time as the S&P
If the average maturity of a bank's liabilities is less than that of its assets, it is said to be
Wild card option
The right of the seller of a Treasury Bond futures contract to give notice of intent to deliver
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