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GlossaryThe Striker Online Glossary is a list of terms and concepts used in
futures trading. This glossary continues to grow and we encourage
you to visit if there are new terms or concepts you are unfamiliar
with. In addition, you may contact one of our experienced brokers
at 800-920-5808 for questions on trading terms,
concepts or information.
The overbought/oversold sentiment indicator as described by George Angell. This is a daily indicator of the overbought/oversold nature of the market used to determine if a trader should be a buyer or seller during the session.
Daily range outside the prior day’s range.
An indication of willingness to sell at a given price, also referred to as an ask, or asking price. The opposite of bid.
The liquidation of a purchase of futures, forward or other financial instrument through the sale of an equal number of the same delivery months, or the covering of a short sale of futures forward, or other financial instrument through the purchase of an equal number of the same delivery month. Either action transfers the obligation to make or take delivery of the actual financial instrument to someone else.
An account carried by one futures commission merchant or financial institution with another where the transactions of two or more persons are combined, rather than designated separately, and the identity of the individual accounts is not disclosed.
The period at the beginning of a trading session during which all transactions are considered made “at the open”.
The total number of futures contracts or market position of a given commodity which have not yet been offset or fulfilled by delivery of the actual; the total number of open transactions where each transaction has a buyer and a seller.
Method of public auction for making bids and offers in the trading pits or rings of commodity exchanges.
Open Trade Equity
The unrealized gain or loss on open positions.
The range of closely related prices at which transactions took place at the opening of the market; buying and selling orders at the opening might be filled at any point within such a range.
An agreement that represents the right to buy or sell a specified amount of an underlying security, a stock, bond, futures contract, etc. at a specified price within a specified time. The purchaser acquires a right, and the seller assumes an obligation. Stock options are traded on several exchanges, including the Chicago Board of Options Exchange, the American Stock Exchange, the Philadelphia Stock Exchange, the Pacific Stock Exchange and the New York Stock Exchange; futures options are traded on all U.S. futures exchanges; over-the-counter options are traded with a wide variety of financial institutions.
The party who pays a premium to obtain the rights under an option.
The right, but not the obligation, to buy or sell a specific quantity of an underlying instrument on or before a specific date in the future. The seller of the option has the obligation to sell the underlying instrument (in the case of a put option) or buy it from the option buyer (in the case of a call option) at the exercise price if the option is exercised.
The period between the option start date and the expiry date of an option contract.
The money, securities, or property the buyer pays to the writer (grantor) for granting an option contract, thus conveying the rights of the option to the buyer.
The party who is obligated to perform if an option is exercised by the option buyer.
The handling of a customer order by a broker, including receiving the order verbally or in writing from the customer, transmitting it to the trading floor of the exchange where the transaction takes place, and returning confirmation (fill price) of the completed order to the customer.
Order to buy
An instruction sent by a client, or his authorized representative, to buy a given quantity of an identified financial instrument under specified conditions.
Order to sell
An instruction sent by a client, or his authorized representative, to sell a given quantity of an identified financial instrument under specified conditions.
See Limit Order, Market Order, Stop Order.
Original Margin (Initial Margin)
The term applied to the initial deposit of margin money required of clearing member firms by clearinghouse rules.
Out of the Money
A call option with a strike price higher, or a put option with a strike price lower than the current market value of the underlying asset. A put option is out of the money when the price of the underlying is above the option's exercise price. An option contract is out-of-the-money when there is no benefit to be derived from exercising the option immediately.
RISK DISCLOSURE STATEMENT -
The risk of loss in trading commodity futures contracts can be substantial. You should, therefore,
carefully consider whether such trading is suitable for you in light of your circumstances and financial
resources. You should be aware of the following points:
(1) You may sustain a total loss of the funds that you deposit with your broker to establish or
maintain a position in the commodity futures market, and you may incur losses beyond these amounts. If
the market moves against your position, you may be called upon by your broker to deposit a substantial
amount of additional margin funds, on short notice, in order to maintain your position. If you do not
provide the required funds within the time required by your broker, your position may be liquidated at a
loss, and you will be liable for any resulting deficit in your account.
(2) The funds you deposit with a futures commission merchant for trading futures positions are not
protected by insurance in the event of the bankruptcy or insolvency of the futures commission merchant,
or in the event your funds are misappropriated.
(3) The funds you deposit with a futures commission merchant for trading futures positions are not
protected by the Securities Investor Protection Corporation even if the futures commission merchant is
registered with the Securities and Exchange Commission as a broker or dealer.
(4) The funds you deposit with a futures commission merchant are generally not guaranteed or
insured by a derivatives clearing organization in the event of the bankruptcy or insolvency of the futures
commission merchant, or if the futures commission merchant is otherwise unable to refund your funds.
Certain derivatives clearing organizations, however, may have programs that provide limited insurance to
customers. You should inquire of your futures commission merchant whether your funds will be insured
by a derivatives clearing organization and you should understand the benefits and limitations of such
(5) The funds you deposit with a futures commission merchant are not held by the futures
commission merchant in a separate account for your individual benefit. Futures commission merchants
commingle the funds received from customers in one or more accounts and you may be exposed to
losses incurred by other customers if the futures commission merchant does not have sufficient capital to
cover such other customers' trading losses.
(6) The funds you deposit with a futures commission merchant may be invested by the futures
commission merchant in certain types of financial instruments that have been approved by the
Commission for the purpose of such investments. Permitted investments are listed in Commission
Regulation 1.25 and include: U.S. government securities; municipal securities; money market mutual
funds; and certain corporate notes and bonds. The futures commission merchant may retain the interest
and other earnings realized from its investment of customer funds. You should be familiar with the types
of financial instruments that a futures commission merchant may invest customer funds in.
(7) Futures commission merchants are permitted to deposit customer funds with affiliated entities,
such as affiliated banks, securities brokers or dealers, or foreign brokers. You should inquire as to
whether your futures commission merchant deposits funds with affiliates and assess whether such
deposits by the futures commission merchant with its affiliates increases the risks to your funds.
(8) You should consult your futures commission merchant concerning the nature of the protections
available to safeguard funds or property deposited for your account.
(9) Under certain market conditions, you may find it difficult or impossible to liquidate a position. This
can occur, for example, when the market reaches a daily price fluctuation limit ("limit move").
(10) All futures positions involve risk, and a "spread" position may not be less risky than an outright
(11) The high degree of leverage (gearing) that is often obtainable in futures trading because of the
small margin requirements can work against you as well as for you. Leverage (gearing) can lead to large
(12) In addition to the risks noted in the paragraphs enumerated above, you should be familiar with
the futures commission merchant you select to entrust your funds for trading futures positions. Beginning
July 12, 2014, the Commodity Futures Trading Commission will require each futures commission
merchant to make publicly available on its Web site firm specific disclosures and financial information to
assist you with your assessment and selection of a futures commission merchant.
ALL OF THE POINTS NOTED ABOVE APPLY TO ALL FUTURES TRADING WHETHER FOREIGN
OR DOMESTIC. IN ADDITION, IF YOU ARE CONTEMPLATING TRADING FOREIGN FUTURES OR
OPTIONS CONTRACTS, YOU SHOULD BE AWARE OF THE FOLLOWING ADDITIONAL RISKS:
(13) Foreign futures transactions involve executing and clearing trades on a foreign exchange. This
is the case even if the foreign exchange is formally "linked" to a domestic exchange, whereby a trade
executed on one exchange liquidates or establishes a position on the other exchange. No domestic
organization regulates the activities of a foreign exchange, including the execution, delivery, and clearing
of transactions on such an exchange, and no domestic regulator has the power to compel enforcement
of the rules of the foreign exchange or the laws of the foreign country. Moreover, such laws or regulations
will vary depending on the foreign country in which the transaction occurs. For these reasons, customers
who trade on foreign exchanges may not be afforded certain of the protections which apply to domestic
transactions, including the right to use domestic alternative dispute resolution procedures. In particular,
funds received from customers to margin foreign futures transactions may not be provided the same
protections as funds received to margin futures transactions on domestic exchanges. Before you trade,
you should familiarize yourself with the foreign rules which will apply to your particular transaction.
(14) Finally, you should be aware that the price of any foreign futures or option contract and,
therefore, the potential profit and loss resulting therefrom, may be affected by any fluctuation in the
foreign exchange rate between the time the order is placed and the foreign futures contract is liquidated
or the foreign option contract is liquidated or exercised.
THIS BRIEF STATEMENT CANNOT, OF COURSE, DISCLOSE ALL THE RISKS AND OTHER
ASPECTS OF THE COMMODITY MARKETS.