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Glossary of Options And Futures Related Terms: F-I

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This article is from the Investing Articles: Stocks and Options series.

Glossary of Options And Futures Related Terms: F-I

Floor Broker

An exchange member who is paid a fee for executing orders for Clearing Members or their customers. A Floor Broker executing orders must be licensed by the exchange he is working on.

Floor Trader

An exchange member who generally trades only for his/her own account or for an account controlled by him/her. Also referred to as a "local."

Futures

A term used to designate all contracts covering the purchase and sale of financial instruments or physical commodities for future delivery on a commodity futures exchange.

Futures Commission Merchant

A firm or person engaged in soliciting or accepting and handling orders for the purchase or sale of futures contracts, subject to the rules of a futures exchange and, who, in connection with solicitation or acceptance of orders, accepts any money or securities to margin any resulting trades or contracts. The FCM must be licensed by the CFTC.

Hedge

A conservative strategy used to limit investment loss by effecting a transaction which offsets an existing position.

Holder

The party who purchased an option. Initial Performance Bond The funds required when a futures position (or a short options on futures position) is opened. Sometimes referred to as Initial Margin)

In-the-money

A call option is in-the-money if the strike price is less than the market price of the underlying security. A put option is in-the-money if the strike price is greater than the market price of the underlying security.

Intrinsic Value

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

 

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