Lingo topic · 36 terms
Options and derivatives
Contracts whose value comes from something else.
B
C
- Cboe EuroCurrency Volatility IndexA Cboe index that estimates how volatile traders expect EUR/USD to be over the next 30 days, based on option prices.
- ContangoWhen futures for later delivery cost more than the price for immediate delivery, the normal state when holding the asset has costs.
- Contract for DifferenceA contract with your broker to exchange the difference in an asset's price between when you open and close, without owning the asset.
- Cost of CarryThe total cost of holding a position over time: financing, storage and insurance, minus any income it earns.
- Currency ForwardA private agreement to exchange currencies at a fixed rate on a set date in the future.
- Currency FuturesStandardised exchange-traded contracts to buy or sell a currency at a set price on a set future date.
- Currency OptionA contract giving the right, but not the obligation, to exchange currencies at a set rate before or on a set date.
D
- DeltaHow much an option's price is expected to change for a one-unit move in the underlying asset.
- Delta HedgingOffsetting an option position's directional risk by trading the underlying asset, and adjusting as delta changes.
- DerivativesContracts whose value comes from something else, like a currency, stock or commodity. Futures, options, swaps and CFDs are all derivatives.
E
F
- Fed Funds FuturesFutures contracts based on the average federal funds rate in a month, used to read what markets expect the Fed to do.
- FuturesStandardised exchange-traded contracts to buy or sell something at a set price on a set future date.
- FX SwapTwo linked currency trades: swapping currencies now and swapping them back at a set rate on a later date.
G
I
- IMM DateThe standard quarterly settlement dates for many futures and derivatives: the third Wednesday of March, June, September and December.
- Implied VolatilityThe level of future price swings that option prices are 'implying', a measure of how nervous the market is.
- Interest Rate ParityThe principle that the difference between two countries' interest rates should equal the gap between the forward and spot exchange rates.
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N
O
- Open InterestThe number of futures or options contracts still open, not yet closed out or settled.
- OptionsContracts giving the right, but not the obligation, to buy (call) or sell (put) something at a set price before a set date.
- Options SkewThe pattern where options at different strike prices carry different implied volatilities, revealing which way traders fear a big move.
- Over-the-Counter DerivativesDerivative contracts like swaps and forwards that are agreed privately between two parties instead of traded on an exchange.
P
- Perpetual FuturesFutures contracts with no expiry date, kept in line with the spot price by regular funding payments between longs and shorts.
- PremiumAn extra amount paid above a reference price; in options, the price you pay to buy the option.
- Put-Call RatioThe number of put options traded divided by the number of call options, used as a gauge of fear versus greed.
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