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Glossary


Swap

In general, the exchange of one asset or liability for a similar asset or liability for the purpose of lengthening or shortening maturities, or raising or lowering coupon rates, to maximize revenue or minimize financing costs. Swap may entail selling one securities issue and buying another in foreign currency; it may entail buying a currency on the spot market and simultaneously selling it forward. Swaps also may involve exchanging income flows; for example, exchanging the fixed rate coupon stream of a bond for a variable rate payment stream, or vice versa, while not swapping the principal component of the bond. Swaps are generally traded over-the-counter.

See Also:

Coupon Rate: Coupon Rate (or simply Coupon) is a fixed dollar amount of interest payable per annum, stated as a percentage of principal value, usually payable in semiannual installments.

Exchange: A central marketplace with established rules and regulations where buyers and sellers meet to trade futures and options contracts or securities. Exchanges include designated contract markets and derivatives transaction execution facilities.

Low: Low is the lowest price of the day for a particular futures or options on futures contract.

Mini: Mini (e-Mini) refers to a futures contract that has a smaller contract size than an otherwise identical futures contract.

Mini: Mini (e-Mini) refers to a futures contract that has a smaller contract size than an otherwise identical futures contract.

Rally: Rally is an upward movement of prices.

Ring: Ring is a circular area on the trading floor of an exchange where traders and brokers stand while executing futures trades. Some exchanges use pits rather than rings.

Short: Short (shorting) is the selling side of an open futures contract.

Spot: Spot usually refers to a cash market for a physical commodity where the parties generally expect immediate delivery of the actual commodity.


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Risk Statement:

Naked options trading is very risky - many people lose money trading them. It is recommended contacting your broker or investment professional to find out about trading risk and margin requirements before getting involved into trading uncovered options.

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