Glossary terms beginning with A

Abandon

Failure to exercise or offset an option before its expiration.

Absolute rate

A quote made which is given as an absolute rate rather than in reference to a funding base such as LIBOR, US treasury rates, etc. For example rather than T-Bill rate + 0.25% the bid is expressed as 5.75%, (If T-Bill = 5.50%).

Account

The bookkeeping record of a customer’s transaction and credit (or debit) balances. This record usually includes confirmation of transactions, listing of holdings and/or open positions, cash and/or cash equivalents, beginning and ending liquidating value.

Account balance

The amount of money or debt in an account.

Account blocking

Occurs when a certain amount of an account is reserved for a specified period. During the blockage, the blocked amount of the account cannot be touched by the account holder. An account can be totally or partially blocked.

Alpha-Capture

Alpha refers to that part of a stock's risk and return that is attributable to the stock individually, as apposed to the overall market. Alpha-capture is a spread trade between a stock future and a stock index future. You may see alpha-capture also referred to as "company-specific trading."

A/D (Advance/Decline)

A technical analysis tool representing the total of differences between advances and declines of security prices. The advance/decline line is the market movement as a whole, stock indexes such as the DJIA only tell us the strength of 30 stocks whereas the A/D line provides much more insight.

Adjusted Strike Price

The change in the strike price of an option contract that results from a corresponding change in the underlying. In the case of a stock option, when a stock does a 2-for-1 split, the option strike prices will change to reflect the revised stock price. The resulting strike prices, in this case, will not fall in the standard $5 increments. For example, if you own 100 shares of a $100 stock and it does a 2-for-1 split, you will then own 200 shares of the same stock now valued at $50 per share. Likewise, if you owned one 55 call before the stock split, you would own two 22 1/2 calls afterwards. In either case, the value of the position remains unchanged.

Aggregation

The policy under which all futures positions owned or controlled by one trader or a group of traders are combined to determine reportable positions and speculative limits.

All Could

The term used to refer to an order that has been only partially executed. Oftentimes, this term applies to a limit order which was unable to be totally filled due to a lack of other parties in the trading pit willing to buy or sell at that price.

All-or-None Order (AON)

An All-or-None order allows a trader to buy or sell a specified number of contracts at a single price. The number of contracts must meet or exceed a predetermined threshold level, and these orders must be executed during pit trading sessions. All Or None orders are routed to the primary exchange where they are manually held and executed when eligible. Furthermore, these orders are not reflected in the bid / ask quotes. Generally, AON is not recommended on orders of less than 20 contracts since order execution may be affected.

Annual Percentage Rate (APR)

Cost of a loan which includes interest, fees and other charges. Expressed as a yearly interest rate.

Annual Percentage Yield (APY)

Annual rate of return on an investment that takes into account compounding.

Ask Size

The number of futures or options contracts offered at a certain price.

Assignment

The process through which an option seller is notified by the Option Clearing Corporation (OCC) that the person who bought an option contract has decided to exercise the right to buy or sell shares at the strike price. Upon notification, the option seller is obligated to deliver or receive shares according to the terms of the contract. Since not all contracts are exercised, the OCC processes assignments on a random basis.

Account deactivation

Action of preventing any movement or action in an account.

Account executive

The broker or clerk that is assigned to work with a customer and his/her account on behalf of a financial institution.

Account identification

(1) A series of characters (alpha and/or numeric) used to identify a customer account or relationship. (2) The remitting financial institution's account serviced by the receiving bank. (3) The identification assigned by a financial institution often called the account number.

Account information

Refers to all data that can be recorded in a database about an account, e.g., address, financial information, etc.

Account number

See Account identification.

Account position

The balance and current holdings of an account.

Account reactivation

Action of reinstating an account to its normal condition, after a blocking or deactivation operation.

Account status

The status of an account often affects what and how many transactions can be performed on that account. For example an account that is under-margined (insufficient funds) will not be allowed to add positions to the account.

Actuals

The physical (cash) commodity or financial instrument rather than a futures or derivative contract for that commodity or financial instrument.

ADX

A technical indicator that quantifies the strength of the markets trend. 10-15 flat market, 16-25 trading range, 26-40 trending, 41+ hyper trend.

All-in cost

The total cost of a financial transaction including interest cost, periodic charges and all front-end compensation expressed as a per cent per annum figure.

American Stock Exchange (AMEX)

A stock exchange, a private, not-for-profit corporation, located in New York City. The third most-active market in the U.S. The exchange was founded in 1842. Also called Amex, and the curb exchange.

American-style option

An option that may be exercised at any time prior to expiration.

Arbitrage Pricing Theory

A theory that if an investor earns a higher-than-normal return, then that is because he/she is accepting a higher-than-normal risk.

Arbitrage

A classic trading strategy to profit from different prices for the same security, commodity or financial instrument in different markets. Market forces will normally ensure that these arbitrage differences are short lived. The simultaneous purchase of one commodity against the sale of another in order to profit from distortions from usual price relationships.

Arbitration

Dispute resolution technique in which both parties agree to submit their cases to a private individual or body for resolution. A forum for the fair and impartial settlement of disputes. NFA’s arbitration program provides a forum for resolving futures related disputes.

Ask

An indication by a trader or a dealer of a willingness to sell a security, a futures, or other financial instrument. The price at which an investor can buy. Syn. offer. See also bid; quotation.

Asked Price

The price at which sellers offer securities, futures or other financial instrument to buyers. Also called offer price.

Asked

The price that someone is willing to accept for a security, futures or other financial instrument. The ask portion of a quote is the lowest price anyone is willing to accept at that time.

Associated Person (AP)

An individual who solicits orders, customers, or customer funds on behalf of a Futures Commission Merchant, an Introducing Broker, a Commodity Trading Advisor, or a Commodity Pool Operator and who is registered with the Commodity Futures Trading Commission (CFTC) via the National Futures Association (NFA).

At or better

(1) In a buy order for securities, futures or other financial instruments it is purchasing at the specified price or under it (2) For a sell order, it is selling at the specified price or above it. See limit order

At the market

See Market Order.

At-the-money

An option with a strike price equal to the current price of the instrument, such as a stock, upon which the option was granted.

At-the-opening order

An order that specifies it is to be executed at the opening of the market or of trading or else it is to be canceled. The order does not have to be executed at the opening price, but within the opening range of prices.