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- A -

Abandon
The act of an option holder in electing not to exercise or offset an option.

ACCESS
The New York Mercantile Exchange's electronic trading platform. ACCESS futures contracts are available for trading only during U.S. evening hours.

A/C/E
Abbreviation for Alliance CBOT/EUREX, the electronic trading platform operated by both the Chicago Board of Trade and EUREX, the German/Swiss derivatives exchange. Some futures contracts are available for trading on A/C/E only during the U.S. evening hours, while others trade electronically nearly around-the-clock.

Actual
See Cash Commodity.

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.

Arbitrage
The simultaneous purchase and sale of similar commodities in different markets to take advantage of a price discrepancy.

Ask
The price at which a party is willing to sell. Also referred to as the "offer."

Assignment
When a trader sells short an option, he may be assigned in the event that the purchaser exercises the option. A trader with a short call position is assigned a short futures position. A trader with a short put position is assigned a long futures position.

At-the-Money Option
An option whose strike price is equal -- or approximately equal -- to the current market price of the underlying futures contract.

Auto-Liquidation
When a Friedberg Direct customer allows his account's liquidating value to reach such a critically low level that we are fearful the account will become an unsecured debit balance, some or all of the positions may be offset without notification. This process is referred to as an auto-liquidation.

Back Months
Those futures delivery months with expiration or delivery dates furthest into the future; in other words, futures delivery months other than the spot, or nearby, delivery month.

- B -

Backwardation
A futures market in which the relationship between two delivery months of the same commodity is abnormal. The opposite of Contango.
See also Inverted Market.

Base Currency
In general terms, the base currency is the currency in which an investor or issuer maintains its book of accounts. In the FX market, the U.S. Dollar is normally considered the "base" currency for quotes, meaning that quotes are expressed as a unit of $1 USD per the other currency quoted in the pair (ex., USD/JPY). The primary exceptions to this rule are the British Pound, the Euro, and the Australian Dollar (ex., EUR/USD).

Basis
The difference between the current cash price of a commodity and the futures price of the same commodity.

Bear Market (Bear/Bearish)
A market in which prices are declining. A market participant who believes prices will move lower is called a "bear." A news item is considered bearish if it is expected to result in lower prices.

Bid
An expression of willingness to buy a commodity at a given price; the opposite of Offer.

Break
A rapid and sharp price decline.

Bretton Woods Agreement of 1944
An agreement that established fixed foreign exchange rates for major currencies, provided for central bank intervention in the currency markets, and pegged the price of gold at U.S. $35 per ounce. The agreement lasted until 1971, when President Nixon overturned the Bretton Woods agreement and established a floating exchange rate for the major currencies.

Broker
A company or individual that executes futures and options orders on behalf of financial and commercial institutions and/or the general public.

Bull Market (Bull/Bullish)
A market in which prices are rising. A market participant who believes prices will move higher is called a "bull." A news item is considered bullish if it is expected to result in higher prices.

Bust
The undoing of a trade that had previously been reported in error. Trades may be busted for a variety of reasons.

- C -

Call Option
An option which gives the buyer the right, but not the obligation, to purchase ("go long") the underlying futures contract at the strike price on or before the expiration date.

Cancel Order
To abort a pending or working order. Occasionally, a trader may attempt to cancel an order that has already been executed but not yet reported as having been filled. In such a case, when the order is reported as filled, it will be "too late to cancel."

Cancel/Replace
To modify an existing pending or working order. Use the Cancel Replace Button on the order entery screen to modify an order.

Carrying Charge
The cost of storing a physical commodity, such as grain or metals, over a period of time. The carrying charge includes insurance, storage and interest on the invested funds as well as other incidental costs. In interest rate futures markets, it refers to the differential between the yield on a cash instrument and the cost of the funds necessary to buy the instrument. Also referred to as Cost of Carry.

Cash Commodity
The actual physical commodity as distinguished from the futures contract based on the physical commodity. Also referred to as Actuals.

Cash Market
A place where people buy and sell the actual commodities (i.e., grain elevator, bank, etc.).
See also Forward (Cash) Contract and Spot.

Cash Settlement
A method of settling certain futures or options contracts whereby the market participants settle in cash (rather than delivery of the commodity).

Central Bank
A government or quasi-governmental organization that manages a country's monetary policy. For example, the U.S. central bank is the Federal Reserve, and the ECB (European Central Bank) manages monetary policy for the European Union.

CFTC
See Commodity Futures Trading Commission.

Charting
The use of graphs and charts in the technical analysis of futures markets to plot price movements, volume, open interest or other statistical indicators of price movement.
See also Technical Analysis.

Circuit Breaker
A system of trading halts and price limits on equities and derivatives markets designed to provide a cooling-off period during large, intraday market declines.

Clear
The process by which a clearinghouse maintains records of all trades and settles margin flow on a daily mark-to-market basis for its clearing members.

Cleared Funds
Bank wire transfer, certified checks, and cashier's checks represent cleared funds are available for trading immediately upon deposit into your Friedberg Direct account. Personal checks (or corporate checks for Corporate accounts only) drawn on banks, credit unions, and money market accounts incur a (7) calendar day delay before such funds become available for trading.

Clearinghouse
An agency or separate corporation of a futures exchange that is responsible for settling trading accounts, collecting and maintaining margin monies, regulating delivery and reporting trade data. The clearinghouse becomes the buyer to each seller (and the seller to each buyer) and assumes responsibility for protecting buyers and sellers from financial loss by assuring performance on each contract.

Clearing Member
A member of an exchange clearinghouse responsible for the financial commitments of its customers. All trades of a non-clearing member must be registered and eventually settled through a clearing member. Friedberg Direct's trades are cleared through clearing corespondent brokers.

Close
The end of a trading session. Trading resumes upon the opening the following business day.

Closing Price
See Settlement Price.

Closing Range
A range of prices at which futures transactions took place during the close of the market.

Commercial
An entity involved in the production, processing, or merchandising of a commodity.

Commission
A fee charged by a broker to a customer for executing a transaction.

Commission House
See Futures Commission Merchant.

Commodity
At Friedberg Direct, a general futures market, without reference to any particular delivery month. For example, Wheat, the Canadian Dollar, and the S&P 500 are referred to as commodities. A delivery month used in conjunction with a commodity indicates a specific contract, such as December Gold or March Sugar.

Commodity Exchange Act (CEA)
The federal act that provides for federal regulation of futures trading.

Commodity Futures Modernization Act of 2000 (CFMA)
The act of Congress that authorized the trading of single stock futures and narrow-based stock index futures. This legislation also made the CFTC responsible for the oversight and regulation of the foreign exchange market.

Commodity Futures Trading Commission (CFTC)
The federal regulatory agency established in 1974 that administers the Commodity Exchange Act. The CFTC monitors the futures and options on futures markets in the United States.

Commodity Pool
An enterprise in which funds contributed by a number of persons are combined for the purpose of trading futures or options contracts.

Commodity Pool Operator (CPO) A US Term
An individual or organization which operates or solicits funds for a commodity pool. A CPO is generally required to be registered with the CFTC.

Commodity Trading Advisor (CTA) A US Term
Commodity Trading Manager (CTM) Canadian Term
A person who, for compensation or profit, directly or indirectly advises others as to the advisability of buying or selling futures or commodity options. Providing advice includes exercising trading authority over a customer's account. A CTA in the US is generally required to be registered with the CFTC.

Confirmation Statement
A statement sent by a Futures Commission Merchant to a customer when a futures or options position has been initiated. The statement shows the price and the number of contracts bought or sold. Sometimes combined with a Purchase and Sale Statement.

Contango
A futures market in which prices in succeeding delivery months are progressively higher. The opposite of Backwardation.

Contract
At Friedberg Direct, a commodity with a delivery month specified. For example, December S&P 500 or May Wheat.

Contract Market
A board of trade designated by the CFTC to trade futures or options contracts on a particular commodity. Commonly used to mean any exchange on which futures are traded. Also referred to as an Exchange.

Contract Month
The month in which delivery is to be made in accordance with the terms of the futures contract. Also referred to as Delivery Month.

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."

Cost of Carry
See Carrying Charge.

Counterparty
One of the participants in a financial transaction. This term is typically used when speaking of FX transactions.

Covered Option
A short call or put option position which is covered by the sale or purchase of the underlying futures contract or physical commodity.

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.

CUBS
CME Universal Broker Station, an electronic order management device used by many floor brokers in the trading pits at the Chicago Mercantile Exchange. Friedberg Direct client orders on the futures trading platform are sent to CUBS whenever possible, for faster order execution and fill reporting.

Customer Segregated Funds
See Segregated Account.

- D -

Day Order
An order that if not executed expires automatically at the end of the trading session on the day it was entered.

Daytrade
To initiate and offset a position within a single trading session.

Daytrader
A speculator who will normally initiate and offset a position within a single trading session.

Dealer
An individual or firm acting as a principal or counterparty to a transaction. Principals take one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party. In contrast, a broker is an individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission.

Debit Balance
An account with no positions and a negative adjusted total equity. A debit balance typically arises as a result of a trader losing more money in the marketplace than was available in his account. Per the Friedberg Direct Customer Agreement, this is a legally-binding obligation that must be satisfied in full without delay.

Deck
The collection of customer orders to purchase or sell futures and option contracts held by a floor broker in the trading pit.

Default
The failure to perform on a futures contract as required by exchange rules, such as a failure to meet a margin call or to make or take delivery.

Deferred Delivery Month
The distant delivery months in which futures trading is taking place, as distinguished from the nearby futures delivery month.

Delayed Quotes
Market quotations which are delayed by the various futures exchange's required time period, usually 10-20 minutes. Most futures brokers only provide delayed quotes to accountholders free-of-charge. At Friedberg Direct, however, every customer receives real-time snapshot quotes.

Delivery
The transfer of the cash commodity from the seller of a futures contract to the buyer of a futures contract. Each futures exchange has specific procedures for delivery of a cash commodity. Some futures contracts, such as stock index contracts, are cash settled.

Delivery Month
See Contract Month.

Delta
The sensitivity of an option's theoretical value to a change in the price of the underlying futures contract. Specifically, the expected change in an option's price given a one-unit change in the price of the underlying futures contract. An option's delta is always between 0 and 1.00 and changes as market conditions change. A futures contract always has a delta of 1.00.

Derivative
A financial instrument, traded on or off an exchange, the price of which is directly dependent upon the value of one or more underlying securities, equity indices, debt instruments, commodities, other derivative instruments, or any agreed upon pricing index or arrangement. Derivatives involve the trading of rights or obligations based on the underlying product but do not directly transfer property. They are used to hedge risk or to exchange a floating rate of return for a fixed rate of return.

Designated Self-Regulatory Organization (DSRO) A US Term
When a Futures Commission Merchant (FCM) is a member of more than one Self-Regulatory Organization (SRO), the SROs may decide among themselves which of them will be primarily responsible for enforcing minimum financial and sales practice requirements. The SRO will be appointed DSRO for that particular FCM. NFA is the DSRO for all non-exchange member FCMs. See also Self-Regulatory Organization.

Disclosure Document A US Term
The statement that must be provided by a Commodity Trading Advisor or Commodity Pool Operator to prospective customers that describes trading strategy, fees, performance, etc.

Discount
(1) The amount a price would be reduced to purchase a commodity of lesser grade; (2) sometimes used to refer to the price differences between futures of different delivery months, as in the phrase "July is trading at a discount to May," indicating that the price of the July future is lower than that of May; (3) applied to cash grain prices that are below the futures price.

- E -

Electronic Clerk
Also called EC, the electronic order management device used by many floor brokers in the trading pits at the Chicago Board of Trade. Friedberg Direct routes customer orders to EC whenever possible, for faster order execution and fill reporting.

Electronic Order
An order placed electronically (without the use of a broker) either via the Internet or an electronic trading system.

Electronic Trading Hours
The U.S. after-hours markets during the evenings. Futures contracts trading during ETH do so on electronic trade matching platforms such as Globex or A/C/E.

Electronic Trading Systems
Systems that allow participating exchanges to list their products for trading after the close of the exchange's open outcry trading hours (i.e., Chicago Board of Trade's A/C/E, Chicago Mercantile Exchange's GLOBEX and New York Mercantile Exchange's ACCESS.)

Equity
The value of a futures trading account if all open positions were offset at the current market price.

ETH
See Electronic Trading Hours.

European Central Bank (ECB)
The Central Bank for the European Union.

European Union (EU)
The principal goal of the EU has been to establish a single European currency called the Euro, to officially replace the national currencies of the member EU countries. On Janaury1, 1999, the transitional phase to introduce the Euro began, and as of July 1, 2002, only Euros will be legal tender for EU participants, and the national currencies of the member countries will cease to exist. The current members of the EU are Germany, France, Belgium, Luxembourg, Austria, Finland, Ireland, the Netherlands, Italy, Spain, and Portugal.

Exchange
See Contract Market.

Exchange for Physicals (EFP)
A transaction generally used by two hedgers who want to exchange futures for cash positions. Also referred to as Against Actuals or Versus Cash.

Exercise
An option can be exercised only by the buyer (holder) of the option at any time up to the expiration date. If and when a call is exercised, the option buyer will acquire a long position in the underlying futures contract at the option exercise price. The writer of the call to whom the notice of exercise is assigned will acquire a short position in the underlying futures contract at the option exercise price. If and when a put is exercised, the option buyer will acquire a short position in the underlying futures contract at the option exercise price. The writer of the put to whom the notice of exercise is assigned will acquire a long position in the underlying futures contract at the option exercise price.

Exercise Price
See Strike Price.

Expiration Date
Generally the last date on which an option may be exercised. It is not uncommon for an option to expire on a specified date during the month prior to the delivery month for the underlying futures contracts.

Extrinsic Value
See Time Value.

- F -

Face Value
The dollar value of a U.S. Treasury Bill at maturity. T-Bills are issued at a discount to face value and gradually increase in value until reaching the full face value on the maturity date.

Fast Market
A market which has been designated by the pit committee as experiencing unusual volume or volatility. During such conditions, floor brokers handling customer orders are excused from many of the normal standards with respect to executing orders and reporting fills.

FCM
See Futures Commission Merchant.

Fill
To execute an order. Also, an executed order.

Fill or Kill
An order which must be filled immediately and in its entirety. Failing this, the order will automatically be cancelled.

First Notice Day
The first day on which notice of intent to deliver a commodity in fulfillment of an expiring futures contract can be given to the clearinghouse by a seller and assigned by the clearinghouse to a buyer. Varies from contract to contract.

Floor Broker
An individual who executes orders on the trading floor of an exchange for any other person. Floor brokers are not always employees of Friedberg but can be independent members acting on our behalf.

Floor Trader
An individual who is a member of an exchange and trades for his own account on the floor of the exchange.

Foreign Exchange
The foreign exchange market. This is the cash market for foreign currencies. Trade does not occur on centralized contract markets but rather, over-the-counter in an international network of dealers.

Forex
See Foreign Exchange.

Forward (Cash) Contract
A contract which requires a seller to agree to deliver a specified cash commodity to a buyer sometime in the future. All terms of the contract are customized, in contrast to futures contracts whose terms are standardized. Forward contracts are not traded on exchanges.

Fundamental Analysis
A method of anticipating future price movement using supply and demand information.

Funds not Cleared
The total amount of any personal checks (or corporate checks for Corporate accounts only) drawn on banks, credit unions, and money market accounts which are being held (7) calendar day delay prior to becoming available for trading. By contrast, bank wire transfer, certified cheques, and cashier's cheques represent cleared funds are available for trading immediately upon deposit into your Friedberg Direct account.

Futures Commission Merchant (FCM) In Canada
An individual or organization which solicits or accepts orders to buy or sell futures contracts or commodity options and accepts money or other assets from customers in connection with such orders. An FCM, in Canada, must be registered with the IDA, Investment Dealers Association, and the relevant Provincial regulatory body.

Futures Contract
A legally binding agreement to buy or sell a commodity or financial instrument at a later date. Futures contracts are standardized according to the quality, quantity and delivery time and location for each commodity. The only variable is price.

Futures Industry Association (FIA) A US Term
The national trade association for Futures Commission Merchants.

FX
See Foreign Exchange.

- G -

Globex
The Chicago Mercantile Exchange's electronic trading platform. Some futures contracts are available for trading on Globex only during the U.S. evening hours, while others -- such as the very popular E-mini contracts -- trade electronically nearly around-the-clock.

Grantor
A person who sells an option and assumes the obligation to sell (in the case of a call) or buy (in the case of a put) the underlying futures contract at the exercise price. Also referred to as an Option Seller or Writer.

GTC
Good Till Cancelled order. This order works until executed or cancelled, unlike a Day order, which, if not filled, expires automatically at the end of the trading session on the day it was entered.

GTD
Good Thru Date order. This order works until executed or cancelled, or until the end of the trading session on the date specified by the trader.

- H -

Hedging
The practice of offsetting the price risk inherent in any cash market position by taking an equal but opposite position in the futures market. A long hedge involves buying futures contracts to protect against possible increasing prices of commodities. A short hedge involves selling futures contracts to protect against possible declining prices of commodities.

High
The highest price of the day for a particular futures contract.

Holder
The purchaser of either a call or put option. Option buyers receive the right, but not the obligation, to assume a futures position. The opposite of a Grantor. Also referred to as the Option Buyer.

- I -

IB
See Introducing Broker.

In-the-Money Option
An option that has intrinsic value. A call option is in-the-money if its strike price is below the current price of the underlying futures contract. A put option is in-the-money if its strike price is above the current price of the underlying futures contract.

Initial Margin
The amount a futures market participant must deposit into a margin account at the time an order is placed to buy or sell a futures contract. See also Margin.

Interbank Rates
The foreign exchange rates at which large international banks quote other large international banks. Because of the size of such transactions and creditworthiness of the counterparties, such bid/ask spreads are typically very tight.

Intrinsic Value
The amount by which an option is in-the-money.

Introducing Broker A US Term
A firm or individual that solicits and accepts futures orders from customers but does not accept money, securities, or property from the customer. An IB must be registered with the Commodity Futures Trading Commission and must carry all of its accounts through a Futures Commission Merchant on a fully-disclosed basis.

Inverted Market
See Backwardation.

- L -

Last
The most recent price at which a particular futures contract traded in the marketplace.

Last Trading Day
The last day on which trading may occur in a given futures or option contract.

Leverage
The ability to control large dollar amounts of a commodity with a comparatively small amount of capital.

Limit
See Limit Order, Position Limit, Price Limit, Variable Limit.

Limit Order
An order to buy or sell a futures or options contract only at a specified price (the limit price) or better. A limit buy order is placed at or below the current market price, while a limit sell order is placed at or above the current price.

Liquidate
To take a second futures or options position opposite to the initial or opening position. To sell (or purchase) futures contracts of the same delivery month purchased (or sold) during an earlier transaction or make (or take) delivery of the cash commodity represented by the futures market. Also referred to as Offset.

Liquidating Value
A money balance figure calculated by beginning with adjusted total equity, subtracting short option value, and adding long option value. This figure provides a critical snapshot of the financial health of a trading account.

Liquidity (Liquid Market)
A characteristic of a security or commodity market with enough units outstanding to allow large transactions without a substantial change in price.

Limit (Up or Down)
The maximum price advance or decline from the previous day's settlement price permitted during one trading session, as fixed by the rules of an exchange.

Limit Move
A price that has advanced or declined the permissible limit during one trading session, as fixed by the rules of an exchange.

Local
A member of an exchange who trades for his own account or fills orders for customers.

Long
One who has bought futures contracts or owns a cash commodity.

Long Option Value (LOV)
The current market value of all long options in a trading account. This amount of cash would flow into the account (less any commissions and fees) in the event that the options were offset (sold) at the prices used to compute long option value.

Lot
A unit of trading. In the futures market, one lot refers to one futures or options contract. In the forex market, one lot is equivalent to 100,000 units of a particular foreign currency.

Low
The lowest price of the day for a particular futures contract.

- M -

Maintenance Margin (MM)
A set minimum margin (per outstanding futures contract) that a customer must maintain in his margin account to retain the futures position. See also Margin.

Managed Account
See Discretionary Account.

Margin
An amount of money deposited by both buyers and sellers of futures contracts and by sellers of options contracts to ensure performance of the terms of the contract (the making or taking delivery of the commodity or the cancellation of the position by a subsequent offsetting trade). Margin in commodities is not a down payment, as in securities, but rather a performance bond.
See also Initial Margin, Maintenance Margin and Variation Margin.

Margin Call
A call from a broker or firm to a customer, to bring margin deposits up to a required minimum level. A margin call essentially means that a customer's account equity is no longer sufficient to carry the positions which currently are held in the account. Immediate action to restore the account to a fully-margined status is required. Exchange rules state that margin calls must be satisfied by bringing your account equity back to the Initial Margin level. Failure to meet a margin call immediately may result in some or all of the trader's positions being liquidated by the firm without prior notification.

Mark-to-Market
To debit or credit on a continuous basis a trading account based on current market prices. All of the money balances you'll see in your Friedberg Direct account are marked-to-the-market in real-time, so that you always know exactly where your account stands and can make informed trading decisions.

Market Maker
A dealer who regularly quotes both bid and ask prices and is ready to make a two-sided market for any financial instrument.

Market Order
An order to buy or sell a futures or options contract at whatever price is obtainable when the order reaches the trading floor. No price is specified by the trader when the order is entered.

Market-on-Close (MOC) Order
An order to buy or sell a futures or options contract at the prevailing market price during the closing range (usually, the last 30-60 seconds of trading). Similar to a market order in that no price is specified during order entry. This order is ideal for a trader who wishes to offset an existing position by the close but doesn't wish to wait to the last minute to enter a market order.

Maturity
U.S. Treasury Bills reach their face value on the maturity date. T-Bills are issued at a discount to face value and gradually increase in value until reaching the full face value on the maturity date.

Maximum Price Fluctuation
See Price Limit.

Minimum Price Fluctuation
See Tick.

- N -

Naked Option
See Uncovered Option.

Narrow-Based Stock Index
Broad-based stock indices, such as the S&P 500, are defined as a basket of securities where the weight of any single constituent cannot be greater than 30% and the weight of the five largest components cannot exceed 60% of the index. All other indices are said to be narrow-based and are regulated identically to single stock futures.

National Futures Association (NFA)
Authorized by Congress in 1974 and designated by the CFTC in 1982 as a "registered futures association," NFA is the industrywide self-regulatory organization of the futures industry.

Nearby Delivery Month
The futures contract month closest to expiration. Also referred to as the Spot Month.

Net Asset Value
The value of each unit of participation in a commodity pool. Basically a calculation of assets minus liabilities plus or minus the value of open positions when marked to the market, divided by the total number of outstanding units.

Net Liquidating Value (NLV)
See Liquidating Value.

Net Option Value (NOV)
The difference between Long Option Value and Short Option Value.

Not Held
An order submitted to a brokerage firm with the understanding that it will use its best efforts to execute the order according to the customer's instructions, but the broker may not be held responsible or liable for any lost profits, trading losses, or damages resulting from the manner in which the order is handled.

- O -

Offer
An indication of willingness to sell a futures contract at a given price; the opposite of Bid.

Offset
See Liquidate.

Open
The period at the beginning of the trading session officially designated by the exchange during which all transactions are considered made "at the open."

Open Interest
The total number of futures or options contracts of a given commodity that have not yet been offset by an opposite futures or option transaction nor fulfilled by delivery of the commodity or option exercise. Each open transaction has a buyer and a seller, but for calculation of open interest, only one side of the contract is counted.

Open Outcry
A method of public auction for making bids and offers in the trading pits of futures exchanges.

Open Trade Equity (OTE)
The gain or loss on open futures positions.

Opening Range
The range of prices at which buy and sell transactions took place during the opening of the market.

Option Buyer
See Holder.

Option Contract
A contract which gives the buyer the right, but not the obligation, to buy or sell a specified quantity of a commodity or a futures contract at a specific price within a specified period of time. The seller of the option has the obligation to sell the commodity or futures contract or buy it from the option buyer at the exercise price if the option is exercised. See also Call Option and Put Option.

Option Premium
The price a buyer pays (and a seller receives) for an option. Premiums are arrived at through open outcry. There are two components in determining this price -- extrinsic (or time) value and intrinsic value.

Option Seller
See Grantor.

Order Check
If a fill has not been received on an order you feel should already be filled, an order check can be requested. Customers may send their own order check inquiries to electronictradingsupport@Friedberg.com.

Out-of-the-Money Option
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, (i.e., an option that does not have any intrinsic value).

Out Trade
A trade which cannot be cleared by a clearinghouse because the data submitted by the two clearing members involved in the trade differs in some respect. Mistakes are a fact of life in the futures markets, where human beings manually process hundreds or even thousands of customer orders per day by interacting with others in often tumultuous and chaotic open outcry, auction-style trading pits. Under such conditions, errors and miscommunications are from time to time inevitable, notwithstanding efforts to minimize such occurrences to the extent possible. Early each morning at exchanges around the U.S., miscommunications between and among floor brokers, local traders in the pits, and the brokerage companies clearing trades and carrying customer accounts on their books are reconciled by the parties or their representatives.

Over-the-Counter Market (OTC)
A market where products such as foreign currencies are bought and sold by telephone and other electronic means of communication rather than on a designated futures exchange.

Overbought
A technical opinion that the market price has risen too steeply and too fast in relation to underlying fundamental factors.

Oversold
A technical opinion that the market price has declined too steeply and too fast in relation to underlying fundamental factors.

- P -

Par
The face value of a security, such as a Treasury Bill.

Parity
An option is said to be trading at parity if the premium at which it is currently trading in the market is exactly equal to its intrinsic value. Time value, in other words, is zero.

Parked Order
An order which has been totally completed by the trader but queued for future use rather than submitted for execution now. This Friedberg Direct feature allows customers to set up and save order templates for repeated use in the future.

Pips
Slang forex reference to digits added to or subtracted from the fourth decimal place in a quoted currency rate, i.e. 0.0001. See also Points.

Pit
The area on the trading floor where trading in futures or options contracts is conducted by open outcry.

Points
Predominately a forex term used to describe digits added to or subtracted from the fourth decimal place in a quoted currency rate, i.e. 0.0001.

Pool
See Commodity Pool.

Position
A commitment, either long or short, in the market.

Position Limit
The maximum number of speculative futures contracts one can hold as determined by the CFTC and/or the exchange where the contract is traded.

Position Trader
A trader who either buys or sells contracts and holds them for an extended period of time, as distinguished from a day trader.

Premium
Refers to (1) the amount a price would be increased to purchase a better quality commodity; (2) a futures delivery month selling at a higher price than another; (3) cash prices that are above the futures price; (4) the price paid by the buyer of an option; or (5) the price received by the seller of an option.

Price Change
A revision to a previously reported fill, usually due to the resolution of an out trade.

Price Discovery
The process of determining the price of a commodity by trading conducted in open outcry at an exchange.

Price Limit
The maximum advance or decline, from the previous day's settlement price, permitted for a futures contract in one trading session. Also referred to as Maximum Price Fluctuation.

Purchase and Sale Statement (P&S)
A statement sent by a Futures Commission Merchant or broker to a customer when a futures or options position has been liquidated or offset. The statement shows the number of contracts bought or sold, the prices at which the contracts were bought or sold, the gross profit or loss, the commission charges and the net profit or loss on the transaction. Sometimes combined with a Confirmation Statement.

Put Option
An option which gives the buyer the right, but not the obligation, to sell the underlying futures contract at a particular price (strike or exercise price) on or before a particular date.

Pyramiding
The use of profits on exiting positions as margin to increase the size of the position, normally in successively smaller increments.

Purchasing Power
A Friedberg Direct customer's margin excess, which determines what orders may be placed. Purchasing Power is calculated as the difference between adjusted total equity and the current Initial margin requirement. This is a measure of the equity in the account that has not already been pledged as collateral, or margin, on existing open positions.

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Quotation
The actual price or the bid or ask price of either cash commodities or futures or options contracts at a particular time.

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Range
The difference between the high and low price of a commodity during a given trading session, week, month, year, etc.

Rate
A forex term used to describe the price of one currency in terms of another, typically used for dealing purposes.

Real-Time Quotes
Market quotations which are not delayed. Most futures brokers only provide delayed quotes to accountholders free-of-charge. At Friedberg Direct, however, every customer receives real-time snapshot quotes.

Regular Trading Hours
The standard, morning/afternoon trading sessions at the U.S. markets.

Replace Order
To modify an existing pending or working order. Use the Cancel Replace Order button on the Friedberg Direct order entry page to modify an order.

Reportable Positions
The number of open contracts specified by the CFTC when a firm or individual must begin reporting total positions by delivery month to the authorized exchange and/or the CFTC.

Resistance
In technical trading, a price area where new selling will emerge to dampen a continued market rise. See also Support.

Retender
In specific circumstances, some contract markets permit holders of futures contracts who have received a delivery notice through the clearinghouse to sell a futures contract and return the notice to the clearinghouse to be reissued another long; others permit transfer of notices to another buyer. In either case, the trader is said to have retendered the delivery notice.

Retracement
A reversal within a major price trend.

Reversal
A change of direction in market price.

Rollover
Process whereby the settlement of a forex deal is rolled forward to another date. The cost of this process is based on the interest rate differential of the two currencies.

Roundturn
A completed futures transaction involving both a purchase and a liquidating sale, or a sale followed by a covering purchase.

RTH
See Regular Trading Hours.

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Scalper
A local trader in the pit who trades for small, short-term profits during the course of a trading session, rarely carrying a position overnight.

Security Futures
See Single Stock Futures.

Securities on Deposit (SOD)
Term used to describe securities pledged for margin purposes. Friedberg Direct allows customers to place their account equity into T-Bills and allows 95% of the T-Bill face value to be used for margining purposes.

Segregated Account
A special account used to hold and separate customers' assets from those of the broker or firm.

Self-Regulatory Organization (SRO)
Self-regulatory organizations (i.e., the futures exchanges and National Futures Association) enforce minimum financial and sales practice requirements for their members.
See also Designated Self-Regulatory Organization.

Settlement Price
The last price for a futures contract on any trading day, as determined by the exchange on which the futures contract is traded. The market may not actually have traded at the settlement price, in which case this price is said to be a "nominal" settlement.

Short
One who has sold futures contracts or plans to purchase a cash commodity (e.g., a food processor).

Short Option Value (SOV)
The current market value of all short options in a trading account. This amount of cash would flow out of the account (in addition to any commissions and fees) in the event that the options were offset (purchased) at the prices used to compute short option value.

Single Stock Futures
Futures contracts on individual securities.
See also Security Futures.

Snapshot Quotes
Market quotations which reflect the market price at a particular point in time. Such quotes do not refresh automatically but are refreshed when the user hits the reload button on his web browser or requests another quote. Friedberg Direct provides all customers with real-time snapshot quotes.

Special Offset
When a long position and a short position are specially matched and offset according to specific instructions from a customer, rather than according to standard industry offset practices.

Speculator
A market participant who tries to profit from buying and selling futures and options contracts by anticipating future price movements. Speculators assume market price risk and add liquidity and capital to the futures markets.

Split Fill
An order consisting of more than one lot, where contracts are filled at different prices. An order to sell 2 December Canadian Dollar contracts at .6200 stop might be reported as one contract filled at .6200, and one filled at .6199.

Spot Price
In futures markets, this term usually refers to a cash market price for a physical commodity that is available for immediate delivery. Whereas forex is concerned, the term generally refers to the current market price. Settlement of spot FX transactions usually occurs within two business days.

Spot Month
See Nearby Delivery Month.

Spreading
The simultaneous buying and selling of two related markets or commodities in the expectation that a profit will be made when the position is offset.

Stop Order
An order that becomes a market order when the futures contract reaches a particular price level. A sell stop is placed below the market, a buy stop is placed above the market.

Stop Close Only Order
This order type is used by the trader who desires his stop order to be filled only if elected in the closing range of trading. Since this order type may not be filled until the closing range, the price stipulated by the trader may be anywhere in relation to the current market. Stop Close Only orders are elected in the same fashion as regular stops, the difference being that Stop Close Only orders must be elected and filled during the closing range.

Stop Limit Order
Used by the trader who doesn't wish to be filled any worse than his stop price. Here, the stop and limit prices specified on the order are one and the same. This order becomes a straight limit order if, once the stop is elected, the broker is unable to execute the order at the stipulated price or better. Also, a stop limit order will be placed as a straight limit order if, when received by the exchange, the stop price already has been violated.

Stop with Limit Order
Used by the trader who wishes to give the floor broker a limit as to how far through the specified stop the order may be filled. Two prices must be stipulated when the order is placed -- the stop price and the limit price. When the stop is elected, the order will be filled if it is possible to do so without exceeding the limit price. If this isn't possible, the order becomes a working limit order. Also, a stop with limit order will be placed as a straight limit order if, when received by the exchange, the stop price already has been violated.

Straddle
A position consisting of a long (short) call and a long (short) put, where both options have the same underlying, expiration date, and strike price.

Strangle
A position consisting of a long (short) call and a long (short) put, where both options have the same underlying and expiration date, but different strike prices. Typically, both options are out-of-the-money.

Streaming Quotes
Market quotations that continuously and automatically update on the trader's screen. You can sign yourself up for streaming quotes through the Friedberg Direct platform.

Strike Price
The price at which the buyer of a call (put) option may choose to exercise his right to purchase (sell) the underlying futures contract. Also called Exercise Price.

Submit
To send a newly-entered order to the appropriate trading pit, exchange, or electronic trade matching platform for execution, without first reviewing the order on a verification screen. Alternatively, Friedberg Direct customers have the opportunity to review a verification screen first before sending an order to market.

Support
In technical analysis, a price area where new buying is likely to come in and stem any decline. See also Resistance.

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T-Bill
See Treasury Bill.

Technical Analysis
An approach to analysis of futures markets which examines patterns of price change, rates of change, and changes in volume of trading, open interest and other statistical indicators.
See also Charting.

Tick
The smallest allowable increment of price movement for a futures contract. Also referred to as Minimum Price Fluctuation.

Time and Sales
Official exchange transcript of the prices at which a futures contract traded, as well as the precise times at which such trades occurred.

Time Value
The amount of money options buyers are willing to pay for an option in anticipation that over time a change in the underlying futures price will cause the option to increase in value. In general, an option premium is the sum of time value and intrinsic value. Any amount by which an option premium exceeds the option's intrinsic value can be considered time value.

Too Late to Cancel
When a trader attempts to modify or replace an order that has already been executed but not yet reported as having been filled, the order is said to be too late to cancel.

Total Equity (TE)
Money balance figure calculated by adding futures open trade equity (the gain or loss on open futures positions) to cash balance.

Treasury Bill
Short-term, interest-bearing obligation of the U.S. or Cdn government. Friedberg Direct allows customers to place their account equity into T-Bills and allows 95% of the T-Bill face value to be used for margining purposes.

Trend
The general direction, either upward or downward, in which prices have been moving.

Trendline
In charting, a line drawn across the bottom or top of a price chart indicating the direction or trend of price movement. If up, the trendline is called "bullish;" if down, it is called "bearish."

Two-Way Price
When both a bid and offer forex rate is quoted by the dealer.

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Unable
A working order which has not yet been able to be executed.

Uncovered Option
A short call or put option position which is not covered by the purchase or sale of the underlying futures contract or physical commodity. Also referred to as a Naked Option.

Underlying Futures Contract
The specific futures contract that the option conveys the right to buy (in case of a call) or sell (in the case of a put).

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Variable Limit
A price system that allows for larger than normal allowable price movements under certain conditions. In periods of extreme volatility, some exchanges permit trading at price levels that exceed regular daily price limits.

Variation Margin
Additional margin required to be deposited by a clearing member firm to the clearinghouse during periods of great market volatility or in the case of high-risk accounts.

Volatility
A measurement of the change in price over a given time period.

Volume
The number of purchases and sales of futures contracts made during a specified period of time, often the total transactions for one trading day.

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Warehouse Receipt
A document guaranteeing the existence and availability of a given quantity and quality of a commodity in storage; commonly used as the instrument of transfer of ownership in both cash and futures transactions.

Whipsaw
Slang for a condition in a highly volatile market where a sharp price movement in one direction is quickly followed by a sharp reversal and movement in the opposite direction.

Writer
See Grantor.