Glossary
A
ADR
American Depository Receipt
After hours dealing or trading
Securities trading after regular trading hours on organized exchanges
AEX
Amsterdam Stock Exchange
Analyst
Employee of a brokerage, bank or fund manager who studies companies and makes buy-and-sell recommendations
Arbitrage
The simultaneous buying and selling of a security at two different prices in two different markets, resulting in profits without risk
Ask
The quoted offer at which someone can buy; also called the offer price
ASE
Athens Stock Exchange
At Par
At a price equal to the face value of a security
Auction
Many auctions occur in the financial markets; however the most common is the post market auction on the FTSE 100. This occurs from 1630 to 1635 and then the official settlement is declared
Authority to deal
Authorising someone to spread bet on your behalf. For this Finspreads would require your written notification and we would perform an identity check. Same as Power of Attorney
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B
Back-to-back transaction
A pair of linked agreements or transactions in which all liabilities, obligations and rights of one agreement or transaction are mirrored in the second
Back to Base
Any realised profits or losses, adjustments, fees or charges – that are denominated in a currency not of your Base Currency – will be automatically converted back to your Base Currency
Backwardation
This occurs when the bid price exceeds the offer price for a stock. This is a market distortion usually when stock is suspended or under a share repurchase scheme
Base
A technical analysis tool. A chart pattern depicting the period when the supply and demand of a certain stock are in relative equilibrium, resulting in a narrow trading range. The merging of the support level and resistance level
Base Rate
The rate at which the Bank of England lends to the retail Banks
Basis Point
Basis point is a way of expressing variations in bond yields. One basis point is 0.01 percentage point. Basis points also are used for interest rates
Bear
Someone who believes that prices in the stock market are going to decline. Opposite of a bull
Beta
The measure of an asset's risk in relation to the market
Bet Per
Same as tick size. The minimum point movement in each market, for example the FTSE has moved 10 ticks this equates to a 10 index point move in the FTSE
Bid
The quoted price at which someone can sell
Bid-Ask Spread
The difference between what buyers are willing to pay and what sellers are asking for in terms of price
Black Friday
The original Black Friday occurred on September 24, 1869, when prospectors attempted to corner the gold market
Black Monday
Refers to October 19, 1987, when the Dow Jones Industrial Average fell 508 points on the heels of sharp drops the previous week. On Monday, October 27, 1997, the Dow dropped 554 points. While the point drop set a new record, the percentage decline was substantially less than in 1987
Black-Scholes option pricing model
A model for pricing call options based on arbitrage arguments. Uses the stock price, the exercise price, the risk-free interest rate, the time to expiration, and the expected standard deviation of the stock return
Blue-Chip Stock
Company renowned for the quality and wide acceptance of its products or services, and for its ability to make money and pay dividends
Bollinger Bands
Plus or minus two standard deviations where the standard deviations are calculated historically in a moving window estimation. Hence, the bands will widen if the most recent data is more volatile. If the prices break out of the band, this is considered a significant move
Bond
Bonds are debt and are issued for a certain period of time. The price of various bonds can be traded with Finspreads
BSE
Brussels Stock Exchange
Bull
Someone who believes that prices in the stock market are going to rise. Opposite of a bear
Buy
Same as taking a long position
Buy Order
An instruction to buy at a different price to where the market is currently trading
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C
Cable
Exchange rate between British pound sterling and the U.S. dollar
CAC 40 Index
A stock index of 40 of the 100 largest companies listed on the forward segment of the official list of the Paris Bourse
Call option
An option that gives the holder the right to buy the underlying asset. Opposite of a put. Option prices can be traded with Finspreads
Capital Gains Tax
Under current UK legislation, all profits made via financial spread betting are free of CGT
CBOT
Chicago Board of Trade
Central Counterparty Clearing
Central counterparty clearing (or "clearing") is a way of reducing a client’s credit exposure. For example, when a client enters into a trade with us in a centrally cleared market, we’ll enter into a back-to-back transaction with the clearing house
This mirrors the terms of our trade with the client and in line with this, we use part or all of the client’s margin requirement to post margin to the clearing house
Centrally Cleared Markets
This means that when you enter into a trade in respect of that market, that trade will be "cleared" through a clearing house
Centrally Cleared Trades
These are trades that are sent through to a clearing house, which acts as a central counterparty, and assumes the counterparty risk to trades which are registered with it. By doing this, it underpins many important financial markets
CFD
Contract For Difference. A leverage share trading product. Go to www.cityindex.co.uk for further information about CFDs
Chartist
Person who analyses markets with the use of charts
Clearing House
A clearing house is an organisation that takes on the counterparty risk to trades that are registered with it and therefore underpins many important financial markets
Client Money Pool
A general pool of client money held for all the firm’s clients for whom we receive or hold client money. (This is in accordance with CASS 7.1.1.A R)
Closing Price
The price at which a product was traded to close the open position. Also refers to the price of the last transaction in a days trading session
CME
Chicago Mercantile Exchange
COMEX
Commodity Exchange (part of NYMEX)
Commodity
A commodity is food, metal, or another fixed physical substance that traders buy or sell, usually via futures contracts. Commodity prices can be traded with Finspreads
Compliance department
Department in all organized stock exchanges to ensure that all companies, traders and brokerage firms comply with the Financial Services Authority
Contingent if done order
Instructions you give us to attach a stop loss and/or limit order to your opening order if it is triggered and filled
Contract Note
The confirmation of your trade describing the market, the unit of trading, the action (buy or sell), the price and the expiry date
Cost of Carry
The interest intrinsic in our share futures prices, excluding any dividends payable during the contract period
CPI
Consumer Price Index, used as a measure of inflation
Credit Account
Credit can be allocated to your account providing evidence of funds are submitted to support such an application
Cross Rates
Foreign exchange rate between two currencies other than the US dollar. Finspreads offers spread betting on foreign exchange
Currency future
A financial future contract for the delivery of a specified foreign currency
Custodian Bank
The Financial Services Authority custody rules require Finspreads to place all client funds into a Custodian Bank
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D
Daily Funded Trade (DFT)
A Daily Funded Trade (DFT) is typically a short term spread bet with some of the tightest spreads on offer. Daily Financing and dividends are not included in the calculation of Our Price but appear as separate charges or credits to your account. Each DFT has a long term settlement date. As with all spread bets, profits and losses are crystallised only when you close or partially close the trade.
Day Trading
Opening and closing of a position in the same contract in one day
Dealing (Trading) Desk
Call the dealing desk in order to trade
Delist
To remove a stock's listing on an exchange
Deliver
The sale of a futures contract may require the seller to deliver the commodity during the delivery month, if the short position is not offset prior to that time
Delivery Date
Date by which a seller must fulfil the obligations of a forward or futures contract
Delta
The ratio of the change in price of an option to the change in price of the underlying asset
Derivative
A financial contract whose value is based on or derived from, a traditional security (such as a stock or bond), an asset (such as a commodity) or a market index. Financial spread betting is a derivative product
Deutsche Borse
Germany's major securities market, including the Frankfurt Stock Exchange
Differential Market
Finspreads quote some differential prices such as the difference between Wall Street and the FTSE
Dividend
Portion of a company's earnings paid to stockholders. Clients who have buy positions in share contracts are not entitled to dividend payments
DJIA
Dow Jones Industrial Average. The index that reflects the performance of the top 30 US blue-chip stocks
Double Witching Day
The last trading day before expiry of options and futures on the same underlying asset
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E
ECB
European Central Bank
Economic Indicators
The key statistics of the economy that reveal the direction the economy is heading in
EDSP
Exchange Delivery Settlement Price. Used by many markets to arrive at the Expiry Price
EUREX
European derivatives exchange formed in 1998
EURONEXT
European securities and derivatives exchange
Euro
European Currency unit introduced on January 1 1999
Eurodollar
Exchange rate between EU member states whose currency in denominated in Euros and the U.S. dollar. Finspreads offers spread betting on currencies and foreign exchange
ETF
Exchange Traded Funds
Ex-Dividend
Without dividend, that is, the purchase of stock will not receive the most recent declared dividend. Shares paying a dividend generally tend to decline on their ex-dividend date
Expiry Date
Date at which a contract will be expired. Not to be confused with Last Day of Trading
Expiry Price
Price at which contracts are settled if they are left to expiry
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F
Fair Value
Price at which theoretical future contracts should be trading above or below the leading future contract. Fair values for stock indices are determined by differentials in interest rates and dividend payments
Fast Market
Excessively rapid trading in a specific security that causes a delay in its electronic updating
FIFO
First In, First Out. This is how multiple positions are arranged meaning that if more than one position is open in the same contract, the trade that was made second cannot be closed until all of the first one is
Fill
Execution of an opening or closing order
Flat
Indicating neither growth nor decline. Term is often used when a particular market in trading in a tight range
FTSE
Financial Times Stock Exchange
Foreign Exchange (FX or Forex)
Currency of another country. Finspreads offers spread betting on foreign exchange
Fundamental Analysis
Examination of a company's financials, assets, management, market niche, and products to determine value
Futures Contract
Trading contract that specifies a future date for delivery of an object
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G
Gamma
The ratio of a change in the option delta to a small change in the price of the asset on which the option is written
Gap
Where the market trades through a level specified by the client in an order. Market gaps are common during times of volatility. Guaranteed orders protect against gapping
Gearing
The use of debt to increase exposure to high risk/reward. Gearing is also known as leverage. Financial spread betting is a leveraged product because you do not have to fund your total exposure when opening a position, only part of it, which is referred to as trading on margin
Grey Market
Term for a group of markets that we offer that are not listed on any exchange, for example IPOs and political bets
Guaranteed Order
For a small fee you can protect an order against the risk of any market gaps
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H
Hedge
A transaction that reduces risk
HKFE
Hong Kong Futures Exchange
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I
IMM
International Monetary Market
Index Futures
A futures contract on an index in the futures market
Indicators
Indices, either positive or negative, which indicate the strength and significant trends in our nation's economy. Inflation, interest rates and employment figures are examples
Individual Segregated Clearing Account ("ISCA")
This is a client account into which we only book trades for that client. If the client elects to use an ISCA, we will open a separate ISCA at the clearing house for trades of that client
Inflation
The rate at which the general level of prices for goods and services is rising
Initial Margin Requirement
Amount needed as available trading resources in your account in order to open a position. This may be reduced by placing a stop loss on a market, where Orders Aware is available and this amount may increase depending on the size of your spread bet or CFD trade. See Step Margin.
IPO
Initial Public Offering. Private company's first offer of stock to the public
Inside Information
Material information about a company that has not yet been made public. It is illegal for holders of this information to make trades based on it
Interest Rate
Cost for the use of capital expressed as a percentage of the sum of money borrowed. Finspreads offers spread betting on interest rates
Interim Report
Financial statement that reflects only a limited period of a company's financial statement, not the entire fiscal year
In-the-money Option
A put option that has a strike price higher than the underlying future price, or a call option with a strike price lower than the underlying futures price. Option prices can be traded with Finspreads
IPE
International Petroleum Exchange
Intrinsic Value
The value of an option if it were to expire immediately with the underlying stock at its current price
Issued Share Capital
Total amount of shares that have been issued
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L
Lagging Indicators
Economic indicators that follow rather than precede a country's overall pace of economic activity
Last Day of Trading
The last day on which you can open or close a trade in a particular market. Not to be confused with Expiry Date
LCH.Clearnet
A clearing house that is majority owned by the London Stock Exchange Group. It was formed by a merger between The London Clearing House Limited and Clearnet
Leading Indicators
Economic indicators that change before the economy changes
Level Two
Live pricing system that provides market depth
Leverage
Leverage is the realisation that a large return can be obtained from a relatively small outlay with risks attached. Leverage is also known as gearing
Liability
Debt, financial obligation, or potential loss
LIBOR
London Interbank Offered Rate
LIFFE
London International Financial Futures and Options Exchange
Limit Order
Minimum selling or maximum buying price as instructed by the client. A limit order is an order to buy or sell a better price to where the market is currently trading
Limit up, limit down
Price change, up or down, a product is allowed to make during one day of trading
Liquidity
A market characterized by the ability to buy and sell with relative ease
LME
London Mercantile Exchange
Long
Opening a buy position in expectation that the market price it will rise
LSE
London Stock Exchange
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M
Margin
The deposit or available credit needed on your account in order to have your positions open. Learn more about Finspreads margins
Margin Call
A call from the credit department for further funds to be deposited in the account to support additional exposure from running losses
Market Capitalisation
The number of shares of a company in issue, multiplied by its share price
Market Maker
Dealer who maintains firm bid and offer prices in a market
Market Gap
A term used when the price of a stock rockets or dives in a direction away from its last price range
Market On Open Order
A specific order to open or close a position at the price that a market opens, but is not guaranteed
Market On Close Order
A specific order to open or close a position at the price that a market closes, but is not guaranteed
Market Order
An order to have a position opened or closed when the underlying market trades at the specified price. Market orders are then filled at our quote at the time
MATIF
March Terme International de France (Paris futures market)
MSI
Milan Stock Exchange
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N
NASDAQ
National Association of Securities Dealers Automated Quotations
Nikkei
Refers to the price-weighted average of 225 stocks of the first section of the Tokyo Stock Exchange
Normal Market Size (NMS)
A system that categorizes the size of transactions that are normal for a particular security and forces market makers to deal within these sizes
NYBOT
New York Board of Trade
NYMEX
New York Mercantile Exchange
NYSE
New York Stock Exchange
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O
Offer
The price offered at which someone can buy; also called the ask
Omnibus Segregated Clearing Account ("OSCA")
This is a client account into which we will book trades for multiple clients. We may open more than one OSCA, but we will not open a separate OSCA for each client
One Cancels the Other (OCO)
OCO orders you can leave two separate opening orders in the same market so that if one of them is triggered and filled, the other is cancelled. This leaves you with just the one open position
Open Position
A long or short position whose value will change with a change in prices
Option
A financial derivative instrument that gives the right to purchase (call) or sell (put) a fixed amount of stock at a specified price and within a certain time limit. Option prices can be traded with Finspreads
Option Writer
Also called the option seller; the party who grants a right to trade a security at a given price in the future
Order
Buy or sell instruction given by a client to a dealer
Order Book
A term used for the SETS system employed in London. Orders to buy and sell are allowed to collect on an order book where they can match and execute against one another
Our Quote
The Finspreads dealing quote. Orders can be left based on our quote, meaning they will not be triggered or filled until the Finspreads buy or sell price hits the specific level. These orders can be filled outside normal market hours. Some orders may be filled outside normal market hours if we offer this facility. Please refer to the Market Information Sheets for information on our trading hours.
Out-of-the-money Option
A call option is out of the money if the strike price is greater than the market price of the underlying security. That is, you have the right to purchase a security at a price higher than the market price, which is not valuable. A put option is out of the money if the strike price is lower than the market price of the underlying security. Option prices can be traded with Finspreads
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P
Partial Fill
Where the client has specified that they wish only part of their stake filled on a closing order
Par Value
Face value of a security
Portfolio
A collection of investments, real and/or financial
Power of Attorney
Authorising someone to spread bet on your behalf. For this Finspreads would require your written notification and we would perform an identity check. Same as Authority to deal
Price Tolerance
Price Tolerance is the amount of slippage you are prepared to accept in order for your trade to be executed, even if at the time of execution, the price has moved away from that selected by you. This is commonly referred to as Slippage, though the benefit of Price Tolerance is that you can control the amount of slippage you are prepared to accept
Pull an Order
Cancel an order
Put Option
A financial derivative instrument used in options trading. A put would give an investor the right, but not the obligation, to sell shares at a fixed price up to a predetermined date. The opposite of a put is a call. Option prices can be traded with Finspreads
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Q
Quote
A Finspreads quote will incorporate our spread which is the difference between the buying and selling price. Also see Our Quote
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R
Real Time
A real-time stock or bond quote is one that states a security's most recent price as opposed to a delayed quote. Finspreads dealing prices update in real-time
Recession
Downturn in a country's economy, as measure by a decline in GDP
Resistance Level
A price level above which it is supposedly difficult for a security or market to rise
Retail Investor
Small individual investors who commit capital for their personal account rather than on behalf of another
Reuters
International news and quotation service based in London
Rights Issue
A privilege allowing existing shareholders to buy shares shortly before they are offered to the public at a specified and usually discounted price and usually in proportion to the number of shares already owned. Such corporate actions mean that Finspreads will adjust any position accordingly
Risk Averse
Someone who seeks the least risky products
Risk Lover
Someone who seeks the most risky products, in the hope of higher returns
ROCE
Return On Capital Employed
Road Show
Finspreads often do free trading seminars in major cities around the UK and Europe
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S
S&P 500
The Standard and Poors index of the top 500 US companies
SEAQ
Stock Exchange Automated Quotations
SEC
Securities and Exchange Commission
Sector
Used to characterize a group of securities that are similar with respect to type and industry
Sell
Same as taking a short position
Settlement Price
A figure determined by the closing price
Short
Opening a sell position in expectation that the market price it will fall
Slippage
See Gap or Market Gap
Speculate
A estimation made following research
Spike
Sharp up or down movement in the value of something
Spot Market
Market in which commodities are bought and sold for cash and immediate delivery
Spread
The difference between the buy and sell price
Step Margin
Step Margin is the process by which the amount of initial margin charged per trade may increase depending on the size of your spread bet. The amount of initial margin charged for any additional trades [within the same market], occur at specified step margin levels
Stop Loss Order
An order to close a position at a particular level when the price moves against you
Stop Order
An opening or closing order to buy or sell at a worse price to where the market is currently trading
Straddle
Purchase or sale of an equal number of puts and calls with the same terms at the same time
Strangle
Buying or selling an out-of-the-money put option and call option on the same underlying instrument, with the same expiration. Profits are made only if there is a drastic change in the underlying instrument's price
Strategy
Plan of action for achieving a goal
Strike Price
The stated price per share for which underlying stock may be purchased or sold by the option holder upon exercise of the option contract. Option prices can be traded with Finspreads
Supply and Demand
Economic theory that simply states price is a function of the market, supply and demand
Support Level
A price level below which it is supposedly difficult for a security or market to fall. That is, the price level at which a market tends to stop falling because there is more demand than supply; can be identified on a technical basis by seeing where the stock has bottomed out in the past
Suspended Trading
Temporary halt in trading in a particular security, in advance of a major news announcement or to correct an imbalance of orders to buy and sell
Swing Trading
Refers to a type of short term (one day to a couple of weeks) trading, triggered by technical analysis, for example, momentum
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T
Takeover
Acquiring control of a corporation by stock purchase or exchange
Taking a View
Forming an opinion as to where market prices are headed and acting on it
Target Price
Maximum retail price for a product under development. In the context of takeovers, the price at which an acquirer aims to buy a target firm. In the context of options, the price of the underlying security at which an option will become in the money. In the context of stocks, the price that someone hopes a stock will reach in a certain time period
Tax
Under current UK legislation, any capital gains made through financial spread betting in tax free
Technical Analysis
Analysis of a financial market by charting its performance, using historical patterns, and focusing on trends
Tick Size
The minimum point movement in each market, for example the FTSE has moved 10 ticks this equates to a 10 index point move in the FTSE
Time to Maturity
The time remaining until a financial contract expires
Time Value
Portion of an option price that is in excess of the intrinsic value, due to the amount of volatility in the stock; sometime referred to as premium. Time value is positively related to the length of time remaining until expiration
Trade Balance
Overall difference between a countrys imports and exports
Trading Range
Range between the highest and lowest prices at which a stock is traded
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U
Underlying Asset
The security or market that Finspreads prices are based on (derived from)
Unencumbered Funds
Funds that trading margin is not using i.e. available trading resources
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V
Variation Margin
Same as open P + L e.g. any running profit from an open position can be used as additional margin. Conversely, any running loss will need to be funded, especially if there is no stop loss in place
Volatile
Situation that changes rapidly or suffers from extreme fluctuations
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W
Wall Street
Referring to the index of the top 30 US traded stocks
Warrant
A derivative product that is a certificate that authorising the holder to buy securities at a certain price. Warrants are like call options, but with much longer time spans-sometimes years
Watch List
A list of markets selected for surveillance. Watch lists can be created in your account online
Working Order
An order remains working until it is filled or deleted
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Y
Year End
End of accounting period when the books are closed out. Also, refers to Finspreads Year End bets tradable on our major indices
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