The Complete Guide to Futures Trading: What You Need to Know about the Risks and Rewards

Glossary

This glossary is a compilation of industry terms derived from a number of sources. The definitions are not meant to state or suggest the correct legal significance or meaning of any word or phrase. The terms and definitions were collected to help enhance your understanding of the futures and options language used in this book.

arbitrage The simultaneous purchase and sale of identical or equivalent financial instruments or commodity futures in order to benefit from a discrepancy in their price relationship.

arbitration The procedure of settling disputes between members, or between members and customers.

assignment To make an option seller perform his or her obligation to assume a short futures position (as a seller of a call option) or a long futures position (as a seller of a put option).

associated person (AP) An individual who solicits orders, customers, or customer funds (or who supervises persons performing such duties) on behalf of a futures commission merchant, an introducing broker, a commodity trading advisor, or a commodity pool operator.

at-the-money option An option with a strike price that is equal, or approximately equal, to the current market price of the underlying futures contract.

back months The futures or options on futures months being traded that are furthest from expiration.

bar chart A chart that graphs the high, low, and settlement prices for a specific trading session over a given period of time.

basis The difference between the current cash price ...