Tradefair has provided these definitions for educational purposes only. If there is any difference between the definition in this glossary and the definition in the trading terms with Tradefair, the trading terms take precedent.
American Depository Receipt
The simultaneous buying and selling of a security at two different prices in two different markets, with the aim of creating profits without risk
The quoted offer at which someone can buy; also called the offer price
At a price equal to the face value of a security
Many auctions occur in the financial markets; such as the post market auction on the UK 100. This occurs from 1630 to 1635, after which the official settlement is declared
Authority to deal
Authorising someone to spread bet on your behalf. For this Tradefair would require your written notification and we would perform an identity check
A pair of linked agreements or transactions in which all liabilities, obligations and rights of one agreement or transaction are mirrored in the second.
Back to Base
Any realised profits or losses, adjustments, fees or charges - that are denominated in a currency not of your Base Currency - will be automatically converted back to your Base Currency.
This occurs when the bid price exceeds the offer price for a stock. This is a market distortion usually when stock is suspended or under a share repurchase scheme
A technical analysis tool. A chart pattern depicting the period when the supply and demand of a certain stock are in relative equilibrium, resulting in a narrow trading range. The merging of the support level and resistance level
The official lending rate at which the Bank of England offers to the market
Basis point is a way of expressing variations in bond yields. One basis point is 0.01 percentage point. Basis points also are used for interest rates
Someone who believes that prices in the stock market are going to decline. Opposite of a bull
The measure of an asset's risk in relation to the market
Same as tick size. The minimum point movement in each market, for example the UK 100 has moved 10 ticks this equates to a 10 index point move in the UK 100
The quoted price at which someone can sell
The difference between what buyers are willing to pay and what sellers are asking for in terms of price
Black-Scholes option pricing model
A model for pricing call options based on arbitrage arguments. Uses the stock price, the exercise price, the risk-free interest rate, the time to expiration, and the expected standard deviation of the stock return
Plus or minus two standard deviations where the standard deviations are calculated historically in a moving window estimation. Hence, the bands will widen if the most recent data is more volatile. If the prices break out of the band, this is considered a significant move
Bonds are debt and are issued for a certain period of time
Someone who believes that prices in the stock market are going to rise. Opposite of a bear
Same as taking a long position
An instruction to buy at a different price to where the market is currently trading
A commonly used term to describe the exchange rate between British pound sterling and the U.S. dollar
An option that gives the holder the right to buy the underlying asset. Opposite of a put
Capital Gains Tax
Under current UK legislation, profits made via financial spread betting are free of CGT. However, tax laws are subject to change and depend on individual circumstances.
Central Counterparty Clearing
Central counterparty clearing (or "clearing") is a way of reducing a client’s credit exposure. For example, when a client enters into a trade with us in a centrally cleared market, we’ll enter into a back-to-back transaction with the clearing house. This mirrors the terms of our trade with the client and in line with this, we use part or all of the client’s margin requirement to post margin to the clearing house.
Centrally Cleared Markets
This means that when you enter into a trade in respect of that market, that trade will be "cleared" through a clearing house.
Centrally Cleared Trades
These are trades that are sent through to a clearing house, which acts as a central counterparty, and assumes the counterparty risk to trades which are registered with it. By doing this, it underpins many important financial markets.
Client Money Pool
A general pool of client money held for all the firm’s clients for whom we receive or hold client money. (This is in accordance with CASS 7.1.1.A R)
Contract for Difference
Person who analyses markets with the use of charts
A clearing house is an organisation that takes on the counterparty risk to trades that are registered with it and therefore underpins many important financial markets.
The price at which a product was traded to close the open position. Also refers to the price of the last transaction in a days trading session
Contingent if done order
Instructions you give us to attach a stop loss and/or limit order to your opening order if it is triggered and filled
The confirmation of your trade describing the market, the unit of trading, the action (buy or sell), the price and the expiry date
Cost of Carry
The interest intrinsic in our share futures prices, excluding any dividends payable during the contract period
Consumer Price Index, used as a measure of inflation
Foreign exchange rate between two currencies other than the US dollar
A financial future contract for the delivery of a specified foreign currency
Daily Funded Trade (DFT)
A Daily Funded Trade (DFT) is typically a short term spread bet with some of the tightest spreads on offer. Daily Financing and dividends are not included in the calculation of Our Price but appear as separate charges or credits to your account. Each DFT has a long term settlement date. As with all spread bets, profits and losses are crystallised only when you close or partially close the trade.
Opening and closing of a position in the same contract in one day
To remove a stock's listing on an exchange
The sale of a futures contract may require the seller to deliver the commodity during the delivery month, if the short position is not offset prior to that time
Date by which a seller must fulfil the obligations of a forward or futures contract
The ratio of the change in price of an option to the change in price of the underlying asset
A financial contract whose value is based on or derived from, a traditional security (such as a stock or bond), an asset or a market index
Portion of a company's earnings paid to stockholders. Tradefair clients who have buy positions in share contracts are not entitled to dividend payments
Double Witching Day
The last trading day before expiry of options and futures on the same underlying asset
European Central Bank
Exchange Delivery Settlement Price. Used by many markets to arrive at the Expiry Price
Date at which a contract will be expired. Not to be confused with Last Day of Trading
Price at which contracts are settled if they are left to expiry
Price at which theoretical future contracts should be trading above or below the leading future contract. Fair values for stock indices are determined by differentials in interest rates and dividend payments
Excessively rapid trading in a specific security that causes a delay in its electronic updating
Execution of an opening or closing order
Examination of a company's financials, assets, management, market niche, and products to determine value
Trading contract that specifies a future date for delivery of an object
The ratio of a change in the option delta to a change in the price of the asset on which the option is written
Where the market trades through a level specified by the client in an order. Market gaps are common during times of volatility. Guaranteed orders protect against gapping
The use of debt to increase exposure to high risk/reward. Gearing is also known as leverage
For a small fee you can protect an order against the risk of any market gaps
A transaction that reduces risk
International Monetary Market
A futures contract on an index in the futures market
Indices, either positive or negative, which indicate the strength and significant trends in our nation's economy. Inflation, interest rates and employment figures are examples
Individual Segregated Clearing Account ("ISCA")
This is a client account into which we only book trades for that client. If the client elects to use an ISCA, we will open a separate ISCA at the clearing house for trades of that client.
The rate at which the general level of prices for goods and services is rising
Initial Margin Requirement
Amount needed as available trading resources in your account in order to open a position. This may be reduced by placing a stop loss on a market, where Orders Aware is available and this amount may increase depending on the size of your spread bet or CFD trade. See Step Margin.
Initial Public Offering. Private company's first offer of stock to the public
A put option that has a strike price higher than the underlying future price, or a call option with a strike price lower than the underlying futures price
The value of an option if it were to expire immediately with the underlying stock at its current price
Issued Share Capital
Total amount of shares that have been issued
Economic indicators that follow rather than precede a country's overall pace of economic activity.
Last Day of Trading
The last day on which you can open or close a trade in a particular market. Not to be confused with Expiry Date.
A clearing house that is majority owned by the London Stock Exchange Group. It was formed by a merger between The London Clearing House Limited and Clearnet.
Economic indicators that change before the economy changes.
Live pricing system that provides market depth.
Leverage is also known as gearing. Where a position can be taken in product with only a fraction of its value.
Debt, financial obligation, or potential loss.
Minimum selling or maximum buying price as instructed by the client. A limit order is an order to buy or sell at a better price to where the market is currently trading.
Limit up, limit down
Price change, up or down, a product is allowed to make during one day of trading.
A market characterized by the ability to buy and sell with relative ease.
Opening a buy position in expectation that the market price will rise.
The deposit or available credit needed on your account in order to have your positions open
A call from the credit department for further funds to be deposited in the account to support additional exposure from running losses
The number of shares of a company in issue, multiplied by its share price
Normal Market Size (NMS)
A system that categorizes the size of transactions that are normal for a particular security and forces market makers to deal within these sizes
The price offered at which someone can buy; also called the ask
Omnibus Segregated Clearing Account ("OSCA")
This is a client account into which we will book trades for multiple clients. We may open more than one OSCA, but we will not open a separate OSCA for each client.
One Cancels the Other (OCO)
OCO orders you can leave two separate opening orders in the same market so that if one of them is triggered and filled, the other is cancelled. This leaves you with just the one open position.
A long or short position whose value will change with a change in prices
A financial derivative instrument that gives the right to purchase (call) or sell (put) a fixed amount of stock at a specified price and within a certain time limit.
Also called the option seller; the party who grants a right to trade a security at a given price in the future
Buy or sell instruction given by a client to a dealer
A term used for the SETS system employed in London. Orders to buy and sell are allowed to collect on an order book where they can match and execute against one another
The Tradefair dealing quote. Orders can be left based on our quote, meaning they will not be triggered or filled until the Tradefair buy or sell price hits the specific level
A call option is out of the money if the strike price is greater than the market price of the underlying security. That is, you have the right to purchase a security at a price higher than the market price, which is not valuable
Where the client has specified that they wish only part of their stake filled on a closing order
Face value of a security
A collection of investments, real and/or financial
Power of Attorney
Authorising someone to spread bet on your behalf. For this Tradefair would require your written notification and we would perform an identity check. Same as Authority to deal
Price Tolerance is the amount of slippage you are prepared to accept in order for your trade to be executed, even if at the time of execution, the price has moved away from that selected by you. This is commonly referred to as slippage, though the benefit of Price Tolerance is that you can control the amount of slippage you are prepared to accept.
A financial derivative instrument used in options trading. A put would give an investor the right, but not the obligation, to sell the underlying instrument at a fixed price up to a predetermined date. The opposite of a put is a call
A Tradefair quote will incorporate our spread which is the difference between the buying and selling price. Also see Our Quote
A real-time stock or bond quote is one that states a security's most recent price as opposed to a delayed quote. Tradefair dealing prices update in real-time
A price level above which it is supposedly difficult for a security or market to rise
Small individual investors who commit capital for their personal account rather than on behalf of another
A privilege allowing existing shareholders to buy shares shortly before they are offered to the public at a specified and usually discounted price and usually in proportion to the number of shares already owned. Such corporate actions mean that Tradefair will adjust any position accordingly
Risk Free Rate (RFR)
An interest rate usually created or monitored by the central bank behind a national currency. It defines a daily benchmark for borrowing and lending for lending over various time periods. For our financing we utilise the overnight (ON) rate for borrowing from one day to the next.
Return On Capital Employed
Transferring a trade that is near expiry into the next contract period
Securities and Exchange Commission
Used to characterize a group of securities that are similar with respect to industry
Same as taking a short position
A figure determined by the closing price
Opening a sell position in expectation that the market price in that underlying product will fall
Market in which commodities are bought and sold for cash and immediate delivery
The difference between the buy and sell price
Step Margin is the process by which the amount of initial margin charged per trade may increase depending on the size of your spread bet or CFD trade. The amount of initial margin charged for any additional trades [within the same market], occur at specified step margin levels.
Stop Loss Order
An order to close a position at a particular level when the price moves against you
An opening or closing order to buy or sell at a worse price to where the market is currently trading
Purchase or sale of an equal number of puts and calls with the same terms at the same time
Buying or selling an out-of-the-money put option and call option on the same underlying instrument, with the same expiration. Profits are made only if there is a drastic change in the underlying instrument's price
The stated price per share for which underlying stock may be purchased or sold by the option holder upon exercise of the option contract
A price level below which it is supposedly difficult for a security or market to fall. That is, the price level at which a market tends to stop falling because there is more demand than supply; can be identified on a technical basis by seeing where the market has stopped falling in the past
Temporary halt in trading in a particular security, in advance of a major news announcement or to correct an imbalance of orders to buy and sell
Refers to a type of short term (one day to a couple of weeks) trading, triggered by technical analysis, for example, momentum
Acquiring control of a corporation by stock purchase or exchange
Analysis of a financial market by charting its performance, using historical patterns, and focusing on trends
The minimum point movement in each market
Time to Maturity
The time remaining until a financial contract expires
Portion of an option price that is in excess of the intrinsic value, due to the amount of volatility in the stock; sometime referred to as premium.Time value is positively related to the length of time remaining until expiration
Range between the highest and lowest prices at which a stock is traded
The security or market that Tradefair prices are based on (derived from)
Same as open P + L e.g. any running profit from an open position can be used as additional margin. Conversely, any running loss will need to be funded, especially if there is no stop loss in place
Situation that changes rapidly or suffers from extreme fluctuations
A derivative product that is a certificate giving authority to the holder to buy securities at a certain price. Warrants are like call options, but with longer time spans - sometimes years
An order that remains working until it is filled or cancelled