Futures Trading Glossary
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Source: National Futures Association; published here with permission. This publication (Glossary of Futures Terms - An Introduction to the Language of the Futures Industry)
is the property of the National Futures Association.
Par
The face value of a security.
Pit
The area on the trading floor where trading in futures or options contracts is conducted by open outcry.
Pool
See Commodity Pool.
Position
A commitment, either long or short, in the market.
Position Limit
A trader who either buys or sells contracts and hold them for an extended period of time, as distinguished from
a day trader.
Prearranged Trading
Trading between brokers in accordance with an expressed or implied agreement or understanding. Prearranged
trading is a violation of the Commodity Exchange Act.
Premium
refers to (1) the amount a price would be in creased to purchase a better quality commodity; (2) a futures
delivery month selling at a higher price than another; (3) Cash prices that are above the futures price; (4) the
price paid by the buyer of an option; or (5) the price received by the seller of an option.
Price Discovery
The process of determing the price of a commodity by trading conducted in open outcry at the exchange.
Price Limit
The maximum advance or decline, from the previous day's settlement price, permitted for a futures contract
in one trading session. Also referred to as Maximum Price Fluctuation.
Purchase and Sale Statement (P&S)
A statement sent by a Futures Commission Merchant to a customer when a futures or options position has been
liquidated or offset. The statement shows the number of contracts bought or sold, the price at which the
contracts were bought or sold, the gross profit or loss, the commission charged and the net profit or loss
on the transaction. Sometimes combined with a Confirmation Statement.
Put Option
An option which gives the buyer the right, but not the obligation, to sell the underlying futures contract
at a particular price (strike or exercise price) on or before a particular date.
Pyramiding
The use of unrealized profits on existing futures positions as margin to increase the size of the position,
normally in successively smaller increments.
Source: National Futures Association; published here with permission. This publication (Glossary of Futures Terms - An Introduction to the Language of the Futures Industry)
is the property of the National Futures Association.
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