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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.
P
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Pin Risk :-
The risk to a trader who has sold an option
that, at expiration, has a strike price identical to, or pinned to, the
underlying futures price. In this case, the trader will not know whether
he will be required to assume his options obligations. .
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Pit or Ring :-
The place on the floor of an exchange where
a commodity futures or options contract is traded by open outcry.
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Platinum Group Metals (PGM) :-
Platinum and related metals, including palladium,
rhodium, ruthenium, and iridium.
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Point or Tick :-
The smallest monetary unit of change in a
futures price or an options premium.
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Position :-
The net total of a trader's open contracts,
either long or short, in a particular underlying commodity.
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Position Limit :-
For a single trader or firm, the maximum
number of allowable open contracts in the same underlying commodity.
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Premium :-
1) The price or cost of an option determined
competitively by buyers and sellers in open outcry trading on the exchange
trading floor. 2) An upward adjustment in price allowed for delivery of
a commodity of higher grade against a futures contract.
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Price Discovery :-
The manner of making prices visible and readily
available to the public.
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Price Gaps :-
A chart pattern of the price movement of
a commodity when the low price of one bar on a chart is higher than the
high of the preceding bar (or inversely, the high is lower than the low
of the preceding bar); depicting a price or price range where no trades
take place. The price patterns are used by technical analysts to try to
recognize changes in a price trend. .
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Put Option :-
An option which gives the buyer, or holder,
the right, but not the obligation, to sell a futures contract at a specific
price within a specific period of time in exchange for a one-time premium
payment. It obligates the seller, or writer, of the option to buy the
underlying futures contract at the designated price, should an option
be exercised at that price. See call option.
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