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Glossary of Terms
As the commerce and industry have evolved, each sector has developed a vocabulary that uniquely describes its products,
technology, and business practices, known as a jargon of respective domain. Often, these words seem incomprehensible to
the layman. This short lexicon is not meant to be a comprehensive dictionary of markets; nevertheless it would be a useful
guide for the beginners who are keen to no more about financial markets and futures industry.
F
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Fair Value :-
Theoretical value.
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Fast Market :-
Transactions in the ring that take place
in such volume and with such rapidity that price reporters are behind
with price quotations, so they insert "Fast" and show a range of prices.
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Fence :-
A long (short) underlying position together
with a long (short) out-of-the-money put and a short (long) out-of-the-money
call. All options must expire at the same time.
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FIA :-
Futures Industry Association. A national
not-for-profit futures industry trade association that represents the
brokerage community on industry, regulatory, political, and educational
issues.
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Fill :-
The price at which an order is executed.
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Fill or Kill :-
An order which must be filled immediately,
and in its entirety. Failing this, the order will be canceled.
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Fineness :-
The purity of precious metal measured in parts per thousand.
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Fine Weight :-
The weight of precious metal contained in
a coin or bullion as determined by multiplying the gross weight by the
fineness.
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First Notice Day :-
The first day on which the clearinghouse
notifies clearing members of delivery allocations.Energy
contracts have only one notice day. Metals contracts have notice days
just prior to the beginning and end of the delivery period.
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Floor :-
1) The main trading area of an exchange.
2) A supply contract between a buyer and seller of a commodity, whereby
the seller is assured that he will receive at least some minimum price.
This type of contract is analogous to a put option.
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Floor Broker :-
An exchange member who executes orders to
buy or sell futures and options in the trading ring on the floor of a
commodities exchange.
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Floor Trader or Local :-
An exchange member who buys or sells futures
and/or options for his own account.
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Force Majeure :-
A standard clause which indemnifies either
or both parties to a transaction whenever events which the Exchange declares
to be reasonably beyond the contract.
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Forward Contract :-
A supply contract between a buyer and seller,
whereby the buyer is obligated to take delivery and the seller is obligated
to provide delivery of a fixed amount of a commodity at a predetermined
price on a specified future date. Payment in full is due at the time of,
or following, delivery. This differs from a futures contract where settlement
is made daily, resulting in partial payment over the life of the contract.
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Free on Board (FOB) :-
A transaction in which the seller provides
a commodity at an agreed unit price, at a specified loading point within
a specified period; it is the responsibility of the buyer to arrange for
transportation and insurance.
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Fuel Oil :-
Refined petroleum products used as a fuel
for home heating and industrial and utility boilers. Fuel oil is divided
into two broad categories, distillate fuel oil, also known as No. 2 fuel,
gasoil, or diesel fuel; and residual fuel oil, also known as No. 6 fuel,
or outside the United States, just as fuel oil. No. 2 fuel is a light
oil used for home heating, in compression ignition engines, and in light
industrial applications. No. 6 oil is a heavy fuel used in large commercial,
industrial, and electric utility boilers.
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Fundamental Analysis :-
The study of pertinent supply and demand
factors which influence the specific price behavior of commodities. See
also Technical Analysis. .
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Futures Contract :-
A supply contract between a buyer and seller,
whereby the buyer is obligated to take delivery and the seller is obligated
to provide delivery of a fixed amount of a commodity at a predetermined
price at a specified location. Futures contracts are traded exclusively
on regulated exchanges and are settled daily based on their current value
in the marketplace.
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Futures Commission Merchant :-
An FCM is the only industry participant who
receives, handles, and manages customer funds, margin payments, and commission
charges. He is also responsible for confirmation of trade slips, customer
statements, and guarantees.
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Futures-Equivalent :-
A term frequently used with reference to
speculative position limits for options on futures contracts. The futures-equivalent
of an options position is the number of options multiplied by the previous
day's risk factor or delta for the options series. For example, 10 deep
out-of-the money options with a risk factor of 0.20 would be considered
two futures-equivalent contracts. The delta or risk factors used for this
purpose is the same as that used in delta-based margining and risk analysis
systems.
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