Uncovered Options Trading System
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.
FAN (Five Against Note) Spread is a futures spread trade involving the buying (selling) of a five-year Treasury note futures contract and the selling (buying) of a ten-year Treasury note futures contract.
Fast Market (also called "Fast Tape") is the ransactions in the pit or ring take place in such volume and with such rapidity that price reporters behind with price quotations insert "FAST" and show a range of prices.
Feed Ratio is the relationship of the cost of feed, expressed as a ratio to the sale price of animals, such as the corn-hog ratio. These serve as indicators of the profit margin or lack of profit in feeding animals to market weight.
Fibonacci Numbers is a number sequence discovered by a thirteenth century Italian mathematician Leonardo Fibonacci (circa 1170-1250), who introduced Arabic numbers to Europe, in which the sum of any two consecutive numbers equals the next highest number—i.e., following this sequence: 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, and so on. The ratio of any number to its next highest number approaches 0.618 after the first four numbers. These numbers are used by technical analysts to determine price objectives from percentage retracements.
Fictitious Trading is wash trading, bucketing, cross trading, or other schemes which give the appearance of trading but actually no bona fide, competitive trade has occurred.
Fill is the execution of an order.
Fill or Kill Order (FOK) is an order that demands immediate execution or cancellation. Typically involving a designation, added to an order, instructing the broker to offer or bid (as the case may be) one time only; if the order is not filled immediately, it is then automatically cancelled.
Final Settlement Price is the price at which a cash-settled futures contract is settled at maturity, pursuant to a procedure specified by the exchange.
Financial Instrument, as used by the Commodity Futures Trading Commission (CFTC), refers to any futures or option contract that is not based on an agricultural commodity or a natural resource. It includes currencies, equity securities, fixed income securities, and indexes of various kinds.
Financial Settlement is cash settlement, especially for energy derivatives.
First Notice Day is the first day on which notice of intent to deliver a commodity in fulfillment of an expiring futures contract can be given to the clearinghouse by a seller and assigned by the clearinghouse to a buyer.
Fixed Income Security is a security whose nominal (or current dollar) yield is fixed or determined with certainty at the time of purchase, typically a debt security.
A person, individual with exchange trading privileges who, in any pit, ring, post, or other place provided by an exchange for the meeting of persons similarly engaged, executes for another person any orders for the purchase or sale of any commodity for future delivery.
A person, individual with exchange trading privileges and who is a member of an exchange and who executes his own trades by being personally present in the pit or ring for futures trading. See Local.
Force Majeure is a clause in a supply contract that permits either party not to fulfill the contractual commitments due to events beyond their control. These events may range from strikes to export delays in producing countries.
Forced Liquidation is the situation in which a customer's account is liquidated (open positions are offset) by the brokerage firm holding the account, usually after notification that the account is under-margined due to adverse price movements and failure to meet margin calls.
Forex refers to the over-the-counter market for foreign exchange transactions. Also called the foreign exchange market.
Forward (Cash) Contract is a contract which requires a seller to agree to deliver a specified cash commodity to a buyer sometime in the future, where the parties expect delivery to occur. Terms may be more "personalized" than is the case with standardized futures contracts (i.e., delivery time and amount are as determined between seller and buyer). A price may be agreed upon in advance, or there may be agreement that the price will be determined at the time of delivery.
Forward Market is the over-the-counter market for forward contracts.
"Free On Board" (FOB) indicates that all delivery, inspection and elevation, or loading costs involved in putting commodities on board a carrier have been paid.
Front Month is the nearby delivery month, the nearest traded contract month. There are also used "Back Month" terminology.
Front Running (Aaso known as trading ahead), with respect to commodity futures and options, is the taking a futures or option position based upon non-public information regarding an impending transaction by another person in the same or related future or option.
Front Spread is a delta-neutral ratio spread in which more options are sold than bought. Also called ratio vertical spread. A front spread will increase in value if volatility decreases.
Fully Disclosed account is an account carried by a Futures Commission Merchant in the name of an individual customer; the opposite of an Omnibus Account.
Fund of Funds is a commodity pool that invests in other commodity pools rather than directly in futures and options contracts.
Fundamental Analysis is a method of anticipating future price movement using supply and demand information. In opposite to technical analysis it carries studies of basic, underlying factors that will affect the supply and demand of the commodity being traded in futures contracts.
Fungibility is the characteristic of interchangeability. Futures contracts for the same commodity and delivery month traded on the same exchange are fungible due to their standardized specifications for quality, quantity, delivery date, and delivery locations.
Futures (also called Futures Contract) is a legally binding agreement to buy or sell a commodity or financial instrument at a later date. Futures contracts are normally standardized according to the quality, quantity, delivery time and location for each commodity, with price as the only variable.
Futures Commission Merchant (FCM) is an individual or organization which solicits or accepts orders to buy or sell futures contracts or commodity options and accepts money or other assets from customers in connection with such orders. An FCM must be registered with the Commodity Futures Trading Commission (CFTC).
Futures Contract is an agreement to purchase or sell a commodity for delivery in the future: (1) at a price that is determined at initiation of the contract; (2) that obligates each party to the contract to fulfill the contract at the specified price; (3) that is used to assume or shift price risk; and (4) that may be satisfied by delivery or offset.
Futures Industry Association (FIA) is a membership organization for futures commission merchants (FCMs) which, among other activities, offers education courses on the futures markets, disburses information, and lobbies on behalf of its members.
Futures Option is an option on a futures contract.
Futures Price could be referred to the price of a commodity for future delivery that is traded on a futures exchange or Futures Price could refer to the price of any futures contract.
Futures-equivalent is a term frequently used with reference to speculative position limits for options on futures contracts. The futures-equivalent of an option position is the number of options multiplied by the previous day's risk factor or delta for the option series. For example, ten deep out-of-money options with a delta of 0.20 would be considered two futures-equivalent contracts. The delta or risk factor used for this purpose is the same as that used in delta-based margining and risk analysis systems.
Gamma is a measurement of how fast the delta of an option changes, given a unit change in the underlying futures price; the "delta of the delta."
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.