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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.
H
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Hallmark :-
A stamped impression on the surface of a
precious metals bar that indicates the producer, serial number, weight,
and purity of metal content.
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Hedge :-
The initiation of a position in a futures
or options market that is intended as a temporary substitute for the sale
or purchase of the actual commodity. The sale of futures contracts in
anticipation of future sales of cash commodities as a protection against
possible price declines, or the purchase of futures contracts in anticipation
of future purchases of cash commodities as a protection against the possibility
of increasing costs.
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Hedger :-
A trader who enters the market with the specific
intent of protecting an existing or anticipated physical market exposure
from unexpected or adverse price fluctuations.
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Hedge Ratio :-
1) Ratio of the value of futures contracts
purchased or sold to the value of the cash commodity being hedged, a computation
necessary to minimize basis risk. 2) The ratio, determined by an option's
delta, of futures to options required to establish a riskless position.
For example, if a $1/barrel change in the underlying futures price leads
to a $0.25/barrel change in the options premium, the hedge ratio is four
(four options for each futures contract).
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Historical Volatility :-
The annualized standard deviation of percent
changes in futures prices over a specific period. It is an indication
of past volatility in the marketplace.
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Horizontal Spread :-
Calendar or time spread.
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