Glossary terms beginning with C

Cross-Margining

A procedure for margining related securities, options, and futures contracts jointly when different clearing houses clear each side of the position.

Compressed

A narrower range than prior periods.

Cup and Handle

A pattern on bar charts. The pattern can be as short as seven weeks and as long as 65 weeks. The cup is in the shape of a U. And the handle has a slight downward drift. The right hand side of the pattern has low trading volume. As the stock comes up to test the old highs. The stock will incur selling pressure by the people who bought at or near the old high. This selling pressure will make the stock price trade sideways with a tendency towards a downtrend for 4 days to 4 weeks, then it takes off.

Calendar Spread

Also known as a time or horizontal spread. This spread consists of buying and selling options with different expirations but the same strike price.

Cash Settlement

Typically associated with index options, this is the process through which option holders receive the intrinsic value of the options in cash at expiration. In this case, option sellers are responsible for cash payment. This contrasts with equity options in which stock is exchanged at expiration rather than cash.

Certificate Of Deposit (CD)

A time deposit held in a bank which pays a certain amount of interest to the depositor.

Circuit Breaker

A system of coordinated trading halts on equities and equity derivative markets designed to provide a cooling off period during large intraday price movements. The halts are triggered by a specified decline in a broad-based stock index such as the Dow Jones Industrial Average or the S&P 500.

Closed-end Funds

A fund that does not issue new shares or accept new money after the initial public offering. Closed-end securities can be purchased in the open market, just like a stock.

Collar

This strategy involves the purchase of stock and the sale of a call against that stock (covered call), while purchasing a put option on the same stock (protective put). Also known as a "fence" or "cylinder". Use primarily to protect an existing stock position.

Collateral

Any marginable securities (e.g., stock, cash) used a basis for borrowing money. If the value of the securities (against which the loan was made) dips significantly, the investor may be forced to provide additional collateral or liquidate part of the position to repay the loan.

Combination Spread

A broad term used to describe positions consisting of an equal number of long calls and short puts or long puts and short calls. Combinations often have different strike prices and/or expirations.

Commercial Paper

Is an unsecured debt issued by corporations to finance its short-term needs. Maturity ranges from 2 to 270 days.

Compound Interest

Interest earned on both an original investment and interest already accrued.

Contango

A condition characterized by the futures price is above the expected future spot price. Consequently, the price will decline to the spot price before the delivery date.

Contingent Time

The hours that a contingent order will be in effect. To use this feature by itself, set the contingent price to greater than $1.

Contingent Trailing Stop

A "trailing stop" order will be placed only if/when the market price for the security (stock) specified meets the criteria (greater than or less than a price entered). This means that you can trigger a "trailing stop" order, a stop order that moves along with a favorable movement in a security, when a stock or index reaches a desired price level based on the security's last trade price.

Convergence

The tendency for prices of physical commodities and futures to approach one another, usually during the delivery month. Also called a “narrowing of the basis.”

Convertible Bond

A debt security feature that allows the holder to convert to another issue.

Corporate Bonds

Debt obligations that are issued by corporations.

Coupon Rate

The percentage rate of interest in fixed income securities.

Coupon Yield

Is a bond's coupon payment divided by the par value.

Covered Option

An option against which the seller has enough collateral (either in cash or stock) to fulfill the contract in the event of assignment.

Covered Call

A call option is considered covered when the writer (seller) of the option already owns the shares and doesn't have to make an open market purchase should an assignment occur.

Covered Put

A put option is considered covered when the seller has enough cash in the account to purchase the shares at the strike price if the holder of the option exercises the right to sell the stock at that price.

Covered Strangle

A short call and a short put with the same expiration but different strike prices combined with a long stock position. Technically, to describe this as "covered" is a bit of a misnomer because only the short call is covered by the long stock. For the short put to be covered as well, there would have to be enough cash in the account to cover the purchase of the stock at the put strike price in the event of an assignment.

Credit

An increase in the cash balance of an account resulting from a sale or deposit.

Credit Spread (also Limit/Credit)

The difference in value between two options, where the value of the short position exceeds the value of the long position. Bear call spreads and bull put spreads are examples of credit spreads.

Cross-Hedging

Hedging a cash commodity using a different but related futures contract when there is no futures contract for the cash commodity being hedged and the cash and futures market follow similar price trends (e.g., using soybean meal futures to hedge fish meal).

Cross Rate

The exchange rate between any two currencies that are considered non-standard in the country where the currency pair is quoted. For example, in the United States, a GBP/JPY quote would be considered a cross rate, whereas in both the United Kingdom or Japan, it would be one of the primary currency pairs traded.

Current Position Value

The sum of the current market value of marginable stocks, bonds and mutual funds using real-time data. A short position is subtracted from this sum, thus a negative amount equals more short value than long value.

Current Yield

Coupon rate divided by the market price of the bond.

CUSIP

A CUSIP is a unique identifier assigned to a bond at the time it is issued.

Custodial Account

An account created for the benefit of a minor which is managed by an adult as the custodian.

Custodial IRA Account

An account created for the benefit of a minor that is managed by an adult as the custodian and restricted by the rules associated with corresponding IRA account. See also Traditional IRA and Roth IRA.

Call option position delta's

The sum of the delta amounts of call options bought and written for each currency.

Call option

Publicly traded contract granting the owner the right, but not the obligation, to buy a specific amount of foreign currency or other financial instrument at a specified price at a stated future date. The buyer of a call option acquires the right but not the obligation to purchase a particular market at a stated price on or before a particular date.

Call

See call option.

Carrying Broker

A member of a commodity exchange, usually a clearinghouse member, through whom other brokers or customers, clear all or some trades.

Carrying Charge (Cost To Carry)

For physical commodities such as grains and metals, the cost of storage space, insurance, and finance charges incurred by holding a physical commodity. In interest rate futures markets, it refers to the differential between the yield on a cash instrument and the cost necessary to buy the instrument. (See Basis)

Cash commodity

The actual commodity or financial instrument as opposed to a futures contract based upon the commodity or instrument. See also Actuals.

Cash market

The underlying commodity, security, currency or money market in which transactions for the purchase and sale of cash instruments which futures and derivative contracts relate to, are carried out.

Cash price

The price of the actual underlying commodity that a futures contracts is based upon. In the case of SSF, the price of the underlying stock.

CBOE

The Chicago Board Options Exchange. The CBOE has markets in Equities, Options and Over-the-counter securities.

CBOT

The Chicago Board of Trade.

CFTC

The Commodities Futures Trading Commission

Change

The difference between the current price and the previous day's close or settlement price.

Chicago Board of Trade (CBOT or CBT)

The oldest futures exchange in the United States; established in 1848. The exchange lists agricultural commodity futures such as corn, oats and soybeans, in addition to financial instruments, e.g., Treasury Bond, Treasury Notes.

Chicago Board Options Exchange

An exchange by the Chicago Board of Trade to trade stock options.

Churning

Excessive trading of the customer’s account by a broker, who has control over the trading decisions for the account, to make more commissions while disregarding the best interest of the customer. This violates the NASD, CFTC, and NFA rules.

Clear

The formal completion of a trade.

Clearing member

A member of a clearinghouse or an association. All trades of a non-clearing member must be registered and eventually settled through a clearing member.

Clearing organization

An organization with which securities may be deposited for safe- keeping and through which the purchase and sale transactions may be realized. The two main systems in the Eurobond market are Cedel and Euroclear.

Clearing price

See Settlement Price.

Clearing

The procedure through which trades are checked for accuracy. Once the trades are validated, the clearinghouse or association becomes the buyer to each seller and the seller to each buyer.

Clearinghouse

An agency connected with exchanges through which all transactions are made, offset, or fulfilled through delivery of the actual cash market and through which financial settlement is made; often, is a fully chartered separate corporation rather than a division of the exchange proper.

Close

The period at the end of a trading session during which all transactions are considered to be made at the close.

Closing balance

The balance of entries posted to the account at the close of the statement period.

Closing price

The price at which transactions are made just before the close on a given day. A number of transactions are often made at this time and they will be included over a range of prices. See also closing range.

Closing Range

A range of closely related prices at which transactions took place at the closing of the market; buy and sell orders at the closing might have been filled at any point within such a range.

CME

An acronym for Chicago Mercantile Exchange. Also operates the International Monetary Market (IMM), the Index and Options Market (IOM) and the Growth and Emerging Markets (GEM)..

Commission broker

A member of an exchange who executes orders for the sale or purchase of financial futures contracts.

Commission Merchant (Futures Commission Merchant)

One who makes a trade, either for another member of the exchange or for a non-member client, in his or her own name and becomes liable as principal to the other party to the transaction.

Commission

(1) A fee charged by a broker to a customer for performance of a specific duty, such as the buying or selling of futures contracts. Banks charge commissions for issuing letters of credit, accepting drafts drawn under letters of credit, entering foreign exchange transactions for their customers, custodial services, acting as fiscal agent, etc. Fees are paid by banks to others for various services and include fees to foreign exchange brokers for arranging foreign exchange transactions. A commission must be fair and reasonable, considering all the relevant factors of the transaction. (2) Sometimes used to refer to the Commodity Futures Trading Commission (CFTC).

Commodity Exchange Act (CEA)

The federal act that provides for federal regulation of futures trading. CEA is administered by the Commodity Future Trading Commission.

Commodity Exchange of New York (CMX)

A division of the New York Mercantile Exchange.

Commodity Futures Trading Commission (CFTC)

The federal agency established by the Commodity Futures Trading Commission Act of 1974 to ensure the open and efficient operation of the futures markets. The five futures markets commissioners are appointed by the President (subject to Senate approval).

Commodity Pool Operator (CPO)

An individual or organization which operates or solicits funds for a commodity pool. Generally required to be registered with the Commodity Futures Trading Commission.

Commodity Pool

An enterprise in which funds contributed by a number of persons are combined for the purpose of trading futures contracts and/or options on futures. Not the same as a joint account.

Commodity Trading Advisor (CTA)

Individuals or firms that, for a fee, issue analysis or reports concerning commodities, provide advice to others trading commodity futures, options, or leverage contracts.

Commodity

An entity of trade or commerce, services, or rights in which contracts for future delivery may be traded. Some of the contracts currently traded are wheat, corn, cotton, livestock, copper, gold, silver, oil, propane, plywood, currencies, Treasury Bills, Treasury Bonds, and Stock Indexes.

Compliance Department

The department within a brokerage firm that oversees the trading and market-making activities of the firm. It ensures that the employees and officers of the firm are abiding by the rules and regulations of the SEC, CFTC, NASD, and NFA exchanges and Designated Supervisory Regulatory Organizations (SROs).

Confirmation Statement

A statement sent by a commission house to a customer when a transaction is made. The statement confirms the number of contracts bought or sold and the prices at which the contracts were bought or sold.

Consolidation

A technical analysis term. A pause in trading activity in which price moves sideways, setting the stage for the next move. Traders are said to evaluate their positions during periods of consolidation.

Consumer Price Index (CPI)

A measure of price changes in consumer goods and services used to identify periods of inflation or deflation. The index is based on a list of specific goods and services purchased in urban areas. It is released monthly by the Labor Department.

Contract Grades

Standards or grades of commodities listed in the rules of the exchanges which must be met when delivering cash commodities against futures contracts. Grades are often accompanied by a schedule of discounts and premiums allowable for delivery of commodities of lesser or greater quality than the contract grade.

Contract Market

A board of trade designated by the Commodity Futures Trading Commission to trade futures or option contracts on a particular commodity. Commonly used to mean any exchange on which futures are traded. See also Board of Trade and Exchange.

Contract Month

The month in which deliveries to be made in accordance with a futures contract.

Contract

(1) An agreement between at least two parties to buy or sell on certain conditions, a certain product, as a result of which a legal status concerning rights and duties of the parties exists. (2) A term of reference describing a unit of trading for a commodity.

Cover

The action of offsetting a futures securities or other financial instrument transaction with an equal and opposite transaction. Short covering - is a purchase to offset an earlier sale of an equal number of the same delivery month. Liquidation - is the sale to offset the obligation to take delivery.

Cross hedging

The hedging of a cash instrument on a different, but related, futures or other derivatives market.

CTA

Commodity Trading Advisor.

Currency future

Publicly traded contract involving the sale or purchase of a standardized amount of foreign currency at a price with delivery at a stated future date.

Currency option

Publicly traded contract giving the owner the right, but not the obligation, to sell or buy a standardized amount of foreign currency at a price at a stated future date (see also call option; put option)

Current Delivery (Month)

The futures contracts which will come to maturity and become deliverable during the current month; also called “spot month”.