Uncovered Options Trading System
E-Local is a person with trading privileges at an exchange with an electronic trading facility who trades electronically (rather than in a pit or ring) for his or her own account, often at a trading arcade.
E-Mini is a contract that is traded exclusively on an electronic trading facility. E-Mini is a trademark of the Chicago Mercantile Exchange (CME).
"Ease Off" is a minor and/or slow decline in the price of a market.
Economically Deliverable Supply is the portion of the deliverable supply of a commodity that is in position for delivery against a futures contract, and is not otherwise unavailable for delivery. For example, Treasury bonds held by long-term investment funds are not considered part of the economically deliverable supply of a Treasury bond futures contract.
An efficient market (in economic theory) is one in which market prices adjust rapidly to reflect new information. The degree to which the market is efficient depends on the quality of information reflected in market prices. In an efficient market, profitable arbitrage opportunities do not exist and traders cannot expect to consistently outperform the market unless they have lower-cost access to information that is reflected in market prices or unless they have access to information before it is reflected in market prices.
Electronic Communications Network (ECN) is frequently used for creating electronic stock or futures markets.
Electronic Order is an order placed electronically (without the use of a broker) either via the Internet or an electronic trading system.
Electronic Trading Facility is a trading facility that operates by an electronic or telecommunications network instead of a trading floor and maintains an automated audit trail of transactions.
Electronic Trading Systems are systems that allow participating exchanges to list their products for trading electronically. These systems may replace, supplement or run along side of the open outcry trading.
Eligible Commercial Entity is an eligible contract participant or other entity approved by the Commodity Futures Trading Commission (CFTC) that has a demonstrable ability to make or take delivery of an underlying commodity of a contract; incurs risks related to the commodity; or is a dealer that regularly provides risk management, hedging services, or market-making activities to entities trading commodities or derivative agreements, contracts, or transactions in commodities.
Eligible Contract Participant is an entity, such as a financial institution, insurance company, or commodity pool, that is classified by the Commodity Exchange Act as an eligible contract participant based upon its regulated status or amount of assets. This classification permits these persons to engage in transactions (such as trading on a derivatives transaction execution facility) not generally available to non-eligible contract participants, i.e., retail customers.
Elliot Wave is a theory named after Ralph Elliot, who contended that the stock market tends to move in discernible and predictable patterns reflecting the basic harmony of nature and extended by other technical analysts to futures markets. In technical analysis Elliot Wave method is a charting method based on the belief that all prices act as waves, rising and falling rhythmically.
Emergency is any market occurrence or circumstance which requires immediate action and threatens or may threaten such things as the fair and orderly trading in, or the liquidation of, or delivery pursuant to, any contracts on a contract market.
Enumerated Agricultural Commodities are commodities specifically listed in the Commodity Exchange Act: wheat, cotton, rice, corn, oats, barley, rye, flaxseed, grain sorghums, mill feeds, butter, eggs, Solanum tuberosum (Irish potatoes), wool, wool tops, fats and oils (including lard, tallow, cottonseed oil, peanut oil, soybean oil, and all other fats and oils), cottonseed meal, cottonseed, peanuts, soybeans, soybean meal, livestock, livestock products, and frozen concentrated orange juice.
Equity is used on a trading account statement and it refers to the residual dollar value of a futures or option trading account, assuming it was liquidated at current prices.
Euro is the official currency of most members of the European Union.
Eurocurrency is Certificates of Deposit (CDs), bonds, deposits, or any capital market instrument issued outside of the national boundaries of the currency in which the instrument is denominated (for example, Eurodollars, Euro-Swiss francs, or Euroyen).
Eurodollars is U.S. dollar deposits placed with banks outside the U.S. Holders and may include individuals, companies, banks, and central banks.
An option that may be exercised only on the expiration date in opposite to American Option that may be exercised any time before expiration date.
Even Lot is a unit of trading in a commodity established by an exchange to which official price quotations apply. See Round Lot.
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.
Exchange for Physicals (EFP) is a transaction in which the buyer of a cash commodity transfers to the seller a corresponding amount of long futures contracts, or receives from the seller a corresponding amount of short futures, at a price difference mutually agreed upon. In this way, the opposite hedges in futures of both parties are closed out simultaneously. Also called Exchange of Futures for Cash, AA (against actuals), or Ex-Pit transactions.
Exchange of Futures for Swaps (EFS) is a privately negotiated transaction in which a position in a physical delivery futures contract is exchanged for a cash-settled swap position in the same or a related commodity, pursuant to the rules of a futures exchange. See Exchange for Physicals.
Exchange Rate is the price of one currency stated in terms of another currency.
Exchange Risk Factor is the delta of an option as computed daily by the exchange on which it is traded.
Excluded Commodity, as defined by the Commodity Exchange Act is any financial instrument such as a security, currency, interest rate, debt instrument, or credit rating; any economic or commercial index other than a narrow-based commodity index; or any other value that is out of the control of participants and is associated with an economic consequence.
Exempt Board of Trade is a trading facility that trades commodities (other than securities or securities indexes) having a nearly inexhaustible deliverable supply and either no cash market or a cash market so liquid that any contract traded on the commodity is highly unlikely to be susceptible to manipulation. An exempt board of trade's contracts must be entered into by parties that are eligible contract participants.
An electronic trading facility that trades exempt commodities on a principal-to-principal basis solely between persons that are eligible commercial entities.
Exempt Commodity is the Commodity Exchange Act defines an exempt commodity as any commodity other than an excluded commodity or an agricultural commodity. Examples include energy commodities and metals.
Exempt Foreign Firm is a foreign firm that does business with U.S. customers only on foreign exchanges and is exempt from registration under Commodity Futures Trading Commission (CFT regulations based upon compliance with its home country's regulatory framework.
Exercise is the action taken by the holder of a call option if he wishes to purchase the underlying futures contract or by the holder of a put option if he wishes to sell the underlying futures contract.
Exercise Price (also referred to as Strike Price) is the price specified in the option contract, at which the underlying futures contract, security, or commodity will move from seller to buyer.
Exotic Options is any of a wide variety of options with non-standard payout structures or other features, including Asian options and look-back options. Exotic options are mostly traded in the over-the-counter market.
Expiration Date is the last date on which an option may be exercised. This is the date on which an option contract automatically expires; the last day an option may be exercised. It is not uncommon for an option to expire on a specified date during the month prior to the delivery month for the underlying futures contracts.
On an option exchange, every 3rd Friday of the month is expiration day for monthly options. A number of option series expire on this day.
At expiration all call options with a higher strike price than the expiration price of the underlying stock/currency or index will be worthless. All series with a lower strike price will have value and will be exercised. In the case of put options the opposite applies.
For all holders of call options it will be optimal when the value of the positions at expiration is as low as possible.
Options expiration date is the most important factor in calculating an options price:
FAB (Five Against Bond) Spread ia a futures spread trade involving the buying (selling) of a five-year Treasury note futures contract and the selling (buying) of a long-term (15-30 year) Treasury bond futures contract.
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.