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  • 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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