Accrued Interest:
Interest earned between the most recent interest payment and the present date but not yet paid to the lender.

Add-on Method:
A method of paying interest where the interest is added onto the principal at maturity or interest payment dates.

Adjusted Futures Price:
The cash-price equivalent reflected in the current futures price. This is calculated by taking the futures price times the conversion factor for the particular financial instrument (e.g., bond or note) being delivered.

AMERICAN-STYLE OPTION:
An option contract that can be exercised at any time between the date of purchase and the expiration date. Most exchange-traded options are American style.

ANALYST:
Also known as a Financial Analyst or Security Analyst . Employee of a brokerage house, investment advisors or fund management funds who studies companies and makes buy and sell recommendations on securities. Most specialize in industries or sectors.

AON "All Or None.":
Abbreviation used on a buy or sell order to instruct the broker to fill the order entirely or fill none at all.

APPRECIATION:
The increase in value of an asset.

ARBITRAGE:
Arbitrage is the simultaneous purchase and sale of a security in order to profit from a differential in the price, usually on different exchanges or marketplaces.

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

ARMS INDEX:
Also known as Trading Index (TRIN):= #advancing issues/#declining issues Total up volume/total down volume An advance/decline market indicator. Less than 1.0 indicates bullish demand, while above 1.0 is bearish. The index often is smoothed with a simple moving average.

ASK:
Also known as the Ask Price or the Offer Price. During trading hours, the price at which a holder of a security was willing to sell at the time of the latest trade. During non-trading hours, the price at which a holder of a security was willing to sell at the time of the last trade on the most recent trading day. On NASDAQ, this is the price at which a market maker is willing to sell a stock.

ASSET:
Assets are cash, accounts receivable, inventory, real estate, tangible and intangible investments and securities - anything of value that a corporation owns.

ASSET ALLOCATION:
The division of an investment portfolio among major asset categories, such as bonds, common stocks or cash, usually to balance risk and reward appropriate for an investor's age.

Assign:
To make an option seller perform his 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).

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.

AUTHORIZED STOCK:
Every corporation is permitted to issue shares of its stock up to the number authorized in the corporation's charter. The number of authorized shares can be changed only by a vote of the company's shareholders.

AVERAGE:
An arithmetic mean of selected stocks intended to represent the behavior of the market or some component of it. One good example is the widely quoted Dow Jones Industrial Average, which adds the current prices of the 30 DJIA's stocks, and divides the results by a predetermined number, the divisor.

AVERAGE MATURITY:
The average time to maturity of securities held by a mutual fund. Changes in interest rates have greater impact on funds with longer average life.

BACK OFFICE:
Brokerage house clerical operations that support, but do not include, the trading of stocks and other securities. Includes all written confirmation and settlement of trades, record keeping and regulatory compliance.

Balance of Payment:
A summary of the international transactions of a country over a period of time including commodity and service transactions, and gold movements.

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

BASIS POINTS:
Refers to yield on bonds. Each percentage point of yield in bonds equals 100 basis points. If a bond yield changes from 7.25 % to 7.39 %, that's a rise of 14 basis points.

Basis:
The difference between the current cash price and the futures price of the same commodity. Unless otherwise specified, the price of the nearby futures contract month is generally used to calculate the basis.

BEAR:
An investor who believes a stock or the overall market will decline. A bear market is a prolonged period of falling stock prices, in the overall market.

BEAR RAID:
A situation in which large traders sell positions with the intention of driving prices down.

Bear Market:
A period of declining market prices.

Bear Spread:
In most commodities and financial instruments, the term refers to selling the nearby contract month, and buying the deferred contract, to profit from a change in the price relationship.

Bear:
Someone who thinks market prices will decline.

BETA (STOCKS):
Mathematical measure of a stock's risk in relation to the overall market. 0.7 means a stock price is likely to move up or down 70 % of the market change; 1.3 means the stock is likely to move up or down 30 % more than the market. High-beta stocks are great to own in a bull market, but not so fun to hold in a bear market.

BETA EQUATION (STOCKS):
The beta of a stock is determined as follows: [(n) (sum of (xy)) ]-[(sum of x) (sum of y)] [(n) (sum of (xx)) ]-[(sum of x) (sum of x)] where :n = # of observations (24-60 months) x = rate of return for the S&P 500 Index y = rate of return for the stock

BID:
During trading hours, the price a buyer is willing to pay for an stock at the time of the latest trade. During non-trading hours, the price a buyer is willing to pay for an stock at the time of the last trade on the most recent trading day.

Bid:
An expression indicating a desire to buy a commodity at a given price, opposite of offer.

Bid/Bid Into:
The bid is the price that a market maker buys stock at, and the general public sells stock at. As a trader you may try to buy stock on the bid, either to go long or to close a short position. Bid Into is used to buy a stock, or go long, creating an opening transaction by using either Selectnet or an E.C.N.

BLOCK TRADE:
A trade so large (usually 10,000 shares of stock or more) that the market cannot absorb it in a reasonable time at a reasonable price.

BLOW-OFF TOP:
A steep and rapid increase in price followed by a steep and rapid drop in price. This is an indicator seen in charts and used in technical analysis of stock price and market trends.

BLUE CHIP STOCK:
Stock in a well-established, financially-sound and stable company that has a very good record of paying dividends.

BOARD OF DIRECTORS:
A corporation's Board is elected by stockholders to oversee the management of a company.

BOND:
A bond is a promise made by the government or a corporation to repay funds loaned by investors at a specific rate by a specific date.

BOOK VALUE:
Usually Book Value Per Share. Calculated by dividing the Net Worth of a Company (common stock plus retained earnings) by the number of shares outstanding. This is the accounting value of a share of stock, the value of the company's assets a shareholder would theoretically receive if a company were liquidated.

BREAKOUT:
A technical analysis term, used to indicate a rise in a security's price above its resistance level (commonly its previous high price) or drop below its level of support (commonly the last lowest price.) The assumption is that the stock will continue to move in the same direction following the breakout, which generates a buy or sell signal.

BROKER:
An individual or company that charges a fee or commission for buying and selling securities. Brokers must register with the Securities and Exchange Commission as well as with states in which they do business.

BULL:
An investor who thinks the market or a specific security or industry will rise. A bull market is an extended period in which the market consistently rises.

BULL MARKET:
A market which is on a consistent upward trend.

Bull Spread:
In most commodities and financial instruments, the term refers to buying the nearby month, and selling the deferred month, to profit from the change in the price relationship.

BUSINESS CYCLE:
The cycle of economic growth and decline. There are four stages in the business cycle: expansion, growth, contraction and recession.

Butterfly Spread:
The placing of two interdelivery spreads in opposite directions with the center delivery month common to both spreads.

BUY AND HOLD:
A long-term investing strategy in which an investor's stock portfolio is fully invested in the market all the time.

BUYOUT:
Purchase of a controlling interest (or percent of shares) of a company's stock. A leveraged buyout is accomplished with borrowed money.

Calendar Spread:
See Interdelivery Spread or Horizontal Spread.

CALL OPTION:
An option contract that gives the holder of the option the right (but not the obligation) to purchase, and obligates the writer to sell, a specified number of shares of the underlying stock at the given strike price, on or before the expiration date of the contract.

Call Option:
An option that gives the buyer the right, but not the obligation, to purchase (go ?long") the underlying futures contract at the strike price on or before the expiration date.

Cancel:
To cancel a previous order, will be followed by a cancel message on your order entry screen.

Canceling Order:
An order that deletes a customer's previous order.

CAPITAL EXPENDITURES:
Funds used by a company to acquire or upgrade physical assets such as property, plant or equipment.

CAPITAL GAIN:
When a stock is sold for a profit, it's the difference between the net sales price of securities and their net cost, or original basis. If a stock is sold below cost, the difference is a capital loss.

CAPITAL LOSS:
The difference between the net cost of a security and the net sale price, if that security is sold at a loss.

CAPITALIZATION:
Also known as Invested Capital. The sum of a corporation's stock, long-term debt and retained earnings.

Carrying Charge:
For physical commodities such as grains and metals, the cost of storage space, insurance, and finance charges incurred by holding a physical commodity. In interest rate futures markets, it refers to the differential between the yield on a cash instrument and the cost of funds necessary to buy the instrument. Also referred to as cost of carry or carry.

Carryover:Grain and oilseed commodities not consumed during the marketing year and remaining in storage at year's end. These stocks are "carried over" into the next marketing year and added to the stocks produced during that crop year.

CASH DIVIDEND:A dividend paid in cash to a corporation's shareholders. A dividend paid in cash to a company's shareholders. The amount is normally paid from company's profits and is taxable as income to the shareholders. A cash distribution may include capital gains and return of capital in addition to the dividend.

CASH FLOW:
In investments, it represents earnings before depreciation amortization and non-cash charges. Sometimes called cash earnings. Cash Flow from operations (called Funds From Operations (FFO) by real estate and other investment trusts, is important because it indicates the ability to pay dividends.

Cash Commodity:
An actual physical commodity someone is buying or selling, e.g., soybeans, corn, gold, silver, Treasury bonds, etc. Also referred to as actuals.

Cash Contract:
A sales agreement for either immediate or future delivery of the actual product.

Cash Market:
A place where people buy and sell the actual commodities, i.e., grain elevator, bank, etc. See Spot and Forward Contract.

Cash Settlement:
Transactions generally involving index-based futures contracts that are settled in cash based on the actual value of the index on the last trading day, in contrast to those that specify the delivery of a commodity or financial instrument.

Certificate of Deposit (CD):
A time deposit with a specific maturity evidenced by a certificate.

CHANGE:
(Net Change) The difference between the last traded price and the previous trading day's closing price.

Charting:
The use of charts to analyze market behavior and anticipate future price movements. Those who use charting as a trading method plot such factors as high, low, and settlement prices; average price movements; volume; and open interest. Two basic price charts are bar charts and point-and-figure charts. See Technical Analysis.

Cheap:
Colloquialism implying that a commodity is underpriced.

Cheapest to Deliver:
A method to determine which particular cash debt instrument is most profitable to deliver against a futures contract.

CHURNING:
An unethical practice employed by some brokers to increase their commissions by excessively trading in a client's account.

Clear:
The process by which a clearinghouse maintains records of all trades and settles margin flow on a daily mark-to-market basis for its clearing member.

Clearing Margin:
Financial safeguards to ensure that clearing members (usually companies or corporations) perform on their customers' open futures and options contracts. Clearing margins are distinct from customer margins that individual buyers and sellers of futures and options contracts are required to deposit with brokers. See Customer Margin.

Clearing Member:
A member of an exchange clearinghouse. Memberships in clearing organizations are usually held by companies. Clearing members are responsible for the financial commitments of customers that clear through their firm.

Clearinghouse:
An agency or separate corporation of a futures exchange that is responsible for settling trading accounts, clearing trades, collecting and maintaining margin monies, regulating delivery, and reporting trading data. Clearinghouses act as third parties to all futures and options contracts–acting as a buyer to every clearing member seller and a seller to every clearing member buyer.

CLOSE:
Used only during non-trading hours. The security's closing price at the end of the most recent trading day. Quoted in fractions.

CLOSELY HELD SHARES:
Shares held by individuals closely related to a company.

CLOSING PURCHASE:
A transaction in which the purchaser's intention is to reduce or eliminate a short position in a stock, or in a given series of options.

CLOSING SALE:
A transaction in which the seller's intention is to reduce or eliminate his long position in a stock, or a given series of options.

Closing Range:
A range of prices at which buy and sell transactions took place during the market close.

COM Membership:
A Chicago Board of Trade membership that allows an individual to trade contracts listed in the commodity options market category.

COMMISSION:
The fee paid to a broker to execute a trade (buy or sell securities), based on number of shares, bonds, options and/or their dollar value. A commission increases the tax basis of the purchased security (thereby reducing the eventual capital loss or gain). In 1975, deregulation led to the creation of discount brokers, who charge lower commissions than full service brokers. Full service brokers offer advice and usually have a full staff of analysts who follow specific industries. Discount brokers simply execute a client's order--and usually do not offer an opinion on a stock.

Commission House:
See Futures Commission Merchant (FCM).

Commodity Pool:
An enterprise in which funds contributed by a number of persons are combined for the purpose of trading futures contracts or commodity options.

Commodity Trading Adviser:
A person who, for compensation or profit, directly or indirectly advises others as to the value or the advisability of buying or selling futures contracts or commodity options. Advising indirectly includes exercising trading authority over a customer's account as well as providing recommendations through written publications or other media.

Commodity:
An article of commerce or a product that can be used for commerce. In a narrow sense, products traded on an authorized commodity exchange. The types of commodities include agricultural products, metals, petroleum, foreign currencies, and financial instruments and index, to name a few.

COMMON STOCK:
A class of stock in a company, normally with voting rights. Corporations may have several classes of common stock, as well as preferred stock, or they may have a single class of common stock. Common stockholders are on the bottom of the ladder in a corporation's ownership structure, and have rights to a company's assets only after bond holders, preferred shareholders and other debt holders have been satisfied.

Computerized Trading Reconstruction System:
A Chicago Board of Trade computerized surveillance program that pinpoints in any trade the traders, the contract, the quantity, the price, and time of execution to the nearest minute.

CONFIDENCE INDICATOR:
A measure of investors' faith in the economy and the securities market. A low or deteriorating level of confidence is considered by many technical analysts as a bearish sign.

CONFIRMATION:
The written statement provided by a broker stating that a "trade" in the securities markets has been completed. Confirmation is issued immediately after a trade is executed. It spells out details as the date, price, settlement terms, commission, etc.

Consumer Price Index (CPI):
A major inflation measure computed by the U.S. Department of Commerce. It measures the change in prices of a fixed market basket of some 385 goods and services in the previous month.

CONVERGENCE:
The movement of the price of a futures contract toward the price of the underlying cash commodity. At the start, the contract price is higher because of the time value. But as the contract nears expiration, the futures price and the cash price converge.

Conversion Factor:
A factor used to equate the price of T-bond and T-note futures contracts with the various cash T-bonds and T-notes eligible for delivery. This factor is based on the relationship of the cash-instrument coupon to the required 8 percent deliverable grade of a futures contract as well as taking into account the cash instrument's maturity or call.

CORNER A MARKET:
To purchase enough of the available supply of a commodity or stock in order to manipulate its price.

COUPON RATE:
In bonds, notes or other fixed income securities, the stated percentage rate of interest, usually paid twice a year.

Coupon:
The interest rate on a debt instrument expressed in terms of a percent on an annualized basis that the issuer guarantees to pay the holder until maturity.

COVERED CALL:
A short call option position in which the writer owns the number of shares of the underlying stock represented by the option contracts. Covered calls generally limit the risk the writer takes because the stock does not have to be bought at the market price, if the holder of that option decides to exercise it.

COVERED PUT:
A put option position in which the option writer's also is short the corresponding stock or has deposited, in a cash account, cash or cash equivalents equal to the exercise of the option. This limits the option writer's risk because money or stock is already set aside. In the event that the holder of the put option decides to exercise the option, the writer's risk is more limited than it would be on an uncovered or naked put option.

Cross-Hedging:
Hedging a cash commodity using a different but related futures contract when there is no futures contract for the cash commodity being hedged and the cash and futures markets follow similar price trends (e.g., using soybean meal futures to hedge fish meal).

Crush Spread:
The purchase of soybean futures and the simultaneous sale of soybean oil and meal futures. See Reverse Crush.

CURRENT RATIO:
Indicator of short-term debt paying ability. Determined by dividing current assets by current liabilities. The higher the ratio, the more liquid the company. CURRENT YIELD For bonds or notes, the average annual rate of return received from an investment, based on income received during a year divided by the security's market price.

CURRENT LIABILITIES:
Appears on a company's balance sheet, representing amounts owed for interest, accounts payable, short-term loans, expenses incurred but unpaid and other debts due within one year.

Current Yield:
The ratio of the coupon to the current market price of the debt instrument

Customer Margin:
Within the futures industry, financial guarantees required of both buyers and sellers of futures contracts and sellers of options contracts to ensure fulfilling of contract obligations. FCMs are responsible for overseeing customer margin accounts. Margins are determined on the basis of market risk and contract value. Also referred to as performance-bond margin. See Clearing Margin.

Daily Trading Limit: The maximum price range set by the exchange cash day for a contract.

DAY ORDER: An order to buy or sell stock that automatically expires if it can't be executed on the day it is entered.

Day Traders: Speculators who take positions in futures or options contracts and liquidate them prior to the close of the same trading day.

Dealer Flip: To indicate when a market maker flips from the bid to the offer, or the offer to the bid, in a stock that he has been making a market in.

DEBT/EQUITY RATIO: Indicator of financial leverage. Compares assets provided by creditors to assets provided by shareholders. Determined by dividing long term debt by common stockholders' equity.

DECLARATION DATE: The date on which a firm's directors meet and announce the date and amount of the next dividend.

Deferred (Delivery) Month: The more distant month(s) in which futures trading is taking place, as distinguished from the nearby (delivery) month.

Delta: A measure of how much an option premium changes, given a unit change in the underlying futures price. Delta often is interpreted as the probability that the option will be in-the-money by expiration.

Demand, Law of: The relationship between product demand and price.

DERIVATIVE: SECURITY A financial security, such as an option, or future, whose value is derived in part from the value and characteristics of another security, the underlying security.

DETREND: To remove the general drift, tendency or bent of a set of statistical data as related to time.

DEVALUATION: A significant fall in the value of a currency, as compared to gold or another country's currency.

DIFFERENCE FROM S&P: A mutual fund's return minus the change in the Standard & Poors 500 Index for the same time period. A notation of -5.00 means the fund return was 5 percentage points less than the gain in the S&P, while 0.00 means that the fund and the S&P had the same return.

Differentials: Price differences between classes, grades, and delivery locations of various stocks of the same commodity.

DILUTION: Dilution is the effect on a company's earnings per share caused by the conversion of convertible securities or the issuance of additional shares of stock. Dilution reduces earnings per share by increasing the number of shares potentially outstanding.

Discount Method: A method of paying interest by issuing a security at less than par and repaying par value at maturity. The difference between the higher par value and the lower purchase price is the interest.

Discount Rate: The interest rate charged on loans by the Federal Reserve Bank.

Discretionary Account: An arrangement by which the holder of the account gives written power of attorney to another person, often his broker, to make trading decisions. Also known as a controlled or managed account.

DISTRIBUTIONS: Payments from fund or corporate cash flow. May include dividends from earnings, capital gains from sale of portfolio holdings and return of capital. Fund distributions can be made by check or by investing in additional shares. Funds are required to distribute capital gains (if any) to shareholders at least once per year. Some Corporations offer Dividend Reinvestment Plans (DRP).

DIVERGENCE: When two or more averages or indices fail to show confirming trends.

DIVIDEND YIELD: (FUNDS) Indicated Yield represents return on a share of a mutual fund held over the past 12 months. Assumes fund was purchased 1 year ago. Reflects effect of sales charges (at current rates), but not redemption charges.

DIVIDENDS PER SHARE: Dividends paid for the past 12 months divided by the number of common shares outstanding, as reported by a company. The automatic reinvestment of shareholder dividends in more shares of a company's stock, often without commissions. Some plans provide for the purchase of additional shares at a discount to market price. Dividend reinvestment plans allow shareholders to accumulate stock over the long term using dollar cost averaging.

Down Off : When a market maker was the high bid and he is no longer willing.

Down to Bid: Pay that price for the stock, the market maker then adjusts his bid down to a price at which he will resume buying. Typically this is a bearish sign.

Down to Ask: When a market maker lowers his current ask / offer to the current offering price, in hopes of selling as much stock as possible before the price drops to a uncomfortable level. A bearish sign.

DOWNGRADE: A classic negative change in ratings for a stock, and or other rated security.

Drops Bid: A market maker who is currently the high bid in a stock suddenly adjusts his bid price downward because he is no longer willing to pay the bid price for that stock.

E.C.N.: Electronic Communications Network, consists of ARCA (Archipelago), BTRD (Bloomberg), INCA (Instinet), ISLD (Island), and TNTO (Terra Nova). E.C.N.s work as order matching systems, and allow traders to advertise a price better than the current bid or offer.

EARNINGS Net income for the company during the period.

EARNINGS PER SHARE (EPS): Also referred to as Primary Earnings Per Share. Calculated by taking the company's net income for the past 12 months and dividing that by the number of common shares outstanding, as reported by a company. This figure is calculated based on the most recent trading day's closing price. The company often uses a weighted average of shares outstanding over reporting term.

EARNINGS YIELD: The ratio of Earnings Per Share after allowing for tax and interest payments on fixed interest debt, to the current share price. The inverse of the Price/Earnings ratio. It's the Total Twelve Months Earnings divided by number of outstanding shares, divided by the recent price, multiplied by 100. The end result is shown in percentage.

Econometrics: The application of statistical and mathematical methods in the field of economics to test and quantify economic theories and the solutions to economic problems.

Equilibrium Price: The market price at which the quantity supplied of a commodity equals the quantity demanded.

EQUITY OPTIONS: Securities that give the holder the right to buy or sell a specified number of shares of stock, at a specified price for a certain (limited) time period. Typically one option equals 100 shares of stock.

EQUITY: The value of the common stockholders' equity in a company as listed on the balance sheet.

Eurodollars: U.S. dollars on deposit with a bank outside of the United States and, consequently, outside the jurisdiction of the United States. The bank could be either a foreign bank or a subsidiary of a U.S. bank.

EUROPEAN-STYLE OPTION: An option contract that can only be exercised on the expiration date.

EX-DIVIDEND DATE: The first day of trading when the seller, rather than the buyer, of a stock will be entitled to the most recently announced dividend payment. This date set by the NYSE (and generally followed on other US exchanges) is currently two business days before the record date. A stock that has gone ex-dividend is marked with an x in newspaper listings on that date.

EXCHANGE: The marketplace in which shares, options and futures on stocks, bonds, commodities and indices are traded. Principal US stock exchanges are: New York Stock Exchange (NYSE), American Stock Exchange (AMEX) and the National Association of Securities Dealers (NASDAQ). Principal European stock exchanges are: the London Stock exchange (UK), La Bourse de Paris (France), Frankfurt (Germany) Stock Exchange and the Amsterdam Exchange (Netherlands).

Exchange for Physicals: A transaction generally used by two hedgers who want to exchange futures for cash positions. Also referred to as "against actuals" or "versus cash".

EXECUTION: The process of completing an order to buy or sell securities. Once a trade is executed, it is reported by a Confirmation Report; settlement (payment and transfer of ownership) occurs in the U.S. between 1 (mutual funds) and 5 (stocks) days after an order is executed. Settlement times for exchange listed stocks are in the process of being reduced to three days in the U.S.

EXERCISE: To implement the right of the holder of an option to buy (in the case of a call) or sell (in the case of a put) the underlying security.

Exercise Price: See Strike Price.

Exercise: 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.

Expanded Traded Hours: Additional trading hours of specific futures and options contracts at the Chicago Board of Trade that overlap with business hours in other time zones.

EXPIRATION CYCLE: An expiration cycle relates to the dates on which options on a particular security expire. A given option will be placed in 1 of 3 cycles, the January cycle, the February cycle, or the March cycle. At any point in time, an option will have contracts with 4 expiration dates outstanding, 2 in near-term months and 2 in far-term months.

EXPIRATION DATE: The last day (in the case of American-style) or the only day (in the case of European- style) on which an option may be exercised. For stock options, this date is the Saturday immediately following the 3d Friday of the expiration month; however, brokerage firms may set an earlier deadline for notification of an option holder's intention to exercise. If Friday is a holiday, the last trading day will be the preceding Thursday.

Extrinsic Value: See Time Value.

Face Value: The amount of money printed on the face of the certificate of a security; the original dollar amount of indebtedness incurred.

Federal Funds: Member bank deposits at the Federal Reserve; these funds are loaned by member banks to other member banks.

Federal Funds Rate: The rate of interest charged for the use of federal funds.

Federal Reserve System: A central banking system in the United States, created by the Federal Reserve Act in 1913, designed to assist the nation in attaining its economic and financial goals. The structure of the Federal Reserve System includes a Board of Governors, the Federal Open Market Committee, and 12 Federal Reserve Banks.

Fill: Used when a order is executed.

Fill-or Kill: A customer order that is a price limit order that must be filled immediately or canceled.

Financial Instrument: There are two basic types: (1) a debt instrument, which is a loan with an agreement to pay back funds with interest; (2) an equity security, which is share or stock in a company.

Financial Analysis Auditing Compliance Tracking System (FACTS): The National Futures Association's computerized system of maintaining financial records of its member firms and monitoring their financial conditions.

First Notice Day: According to Chicago Board of Trade rules, the first day on which a notice of intent to deliver a commodity in fulfillment of a given month's futures contract can be made by the clearinghouse to a buyer. The clearinghouse also informs the sellers who they have been matched up with.

Five 5 Minute Rule: Explanation is that if you buy 1000 shares of stock, on the S.O.E.S.system you may not buy more stock on the S.O.E.S. system for 5 minutes, after the time of your initial execution. The same applies to the sell side. However, if you buy 600 shares of a stock on the S.O.E.S. system you may buy up to 400 shares on the S.O.E.S., to round your position up to a 1000 share block. There are exceptions for E.C.N.s and selectnet. You can buy or sell on these systems as many shares, and as many times as you want.

Floor Broker (FB): An individual who executes orders for the purchase or sale of any commodity futures or options contract on any contract market for any other person.

Floor Trader (FT): An individual who executes trades for the purchase or sale of any commodity futures or options contract on any contract market for such individual's own account.

Forex Market: An over-the-counter market where buyers and sellers conduct foreign exchange business by telephone and other means of communication. Also referred to as foreign exchange market.

Forward (Cash) Contract: A cash contract in which a seller agrees to deliver a specific cash commodity to a buyer sometime in the future. Forward contracts, in contrast to futures contracts, are privately negotiated and are not standardized.

Full Carrying Charge Market: A futures market where the price difference between delivery months reflects the total costs of interest, insurance, and storage.

Full Membership (CBOT): A Chicago Board of Trade membership that allows an individual to trade all futures and options contracts listed by the exchange.

FUNDAMENTAL ANALYSIS: A method of evaluating stocks based on fundamental factors, such as revenues, earnings, future growth, return on equity, profit margins, and so on, to determine a company's underlying value and potential for future growth.

FUTURES CONTRACT: Agreement to buy or sell a set number of shares of a specific stock in a designated future month at a price agreed upon by the buyer and seller. The contracts themselves are often traded on the futures market. A futures contract differs from an option because an option is the right to buy or sell, whereas a futures contract is the promise to actually make a transaction.

Futures Commission Merchant (FCM): An individual or organization that solicits or accepts orders to buy or sell futures contracts or options on futures and accepts money or other assets from customers to support such orders. Also referred to as "commission house" or "wire house'.

Gamma: A measurement of how fast delta changes, given a unit change in the underlying futures price.

GIM Membership (CBOT): A Chicago Board of Trade membership that allows an individual to trade all futures contracts listed in the government instrument market category.

GLOBEX: A global after-hours electronic trading system.

GOING PUBLIC The process of selling shares that were formerly privately-held to new investors for the first time.

GOOD 'TIL CANCELED Abbreviated "GTC." This is an order to buy or sell a security that is good until the investor cancels it. Most brokerage firms let GTC orders automatically expire after 30 - 60 days.

Grain Terminal: Large grain elevator facility with the capacity to ship grain by rail and/or barge to domestic or foreign markets.

Gross Domestic Product: The value of all final goods and services produced by an economy over a particular time period, normally a year.

Gross National Product: Gross Domestic Product plus the income accruing to domestic residents as a result of investments abroad less income earned in domestic markets accruing to foreigners abroad.

Gross Processing Margin: The difference between the cost of soybeans and the combined sales income of the processed soybean oil and meal.

GROWTH RATES The compounded annualized rate of growth of a company's revenues, earnings, dividends or another figure.

He Drops: This term is used when a market maker "drops" his bid, from being the best bid, to a lower level after filling his obligation on S.O.E.S.

He Lifts: Used when a market maker "lifts" his current offer up and is no longer the lowest offer, after he has filled his obligation on S.O.E.S.

He Stays: Used when a market maker has filled his obligation on S.O.E.S. on the bid or the offer and he remains as the high bid, or the high offer, and continues buying or selling stock at the current levels.

HEAD & SHOULDERS In technical analysis, a chart formation in which a stock price reaches a peak and declines, rises above its former peak and again declines and rises again but not to the second peak and then again declines. The first and third peaks are shoulders, while the second peak is the formation's head. Technical analysts generally consider a head and shoulders formation to be a very bearish indication.

Hedger: An individual or company owning or planning to own a cash commodity–corn, soybeans, wheat, U.S. Treasury bonds, notes, bills etc.– and concerned that the cost of the commodity may change before either buying or selling it in the cash market. A hedger achieves protection against changing cash prices by purchasing (selling) futures contracts of the same or similar commodity and later offsetting that position by selling (purchasing) futures contracts of the same quantity and type as the initial transaction.

Hedging: The practice of offsetting the price risk inherent in any cash market position by taking an equal but opposite position in the futures market. Hedgers use the futures markets to protect their business from adverse price changes. See Selling (Short) Hedge and Purchasing (Long) Hedge.

HIGH During trading hours, the highest price at which an issue has traded during the current day. During non-trading hours, the highest price at which an issue has traded during the most recent trading day.

HIGH PRICE 52-Week The highest (intraday) price at which an issue has traded during the past 52 weeks, adjusted for any stock splits.

High Bid: To indicate when a market maker is willing to buy stock at a higher price than other market makers at that particular moment. This is a bullish indicator.

Hit the Bid: Indicates when a trader has sold a stock on the current bid price.

Horizontal Spread: The purchase of either a call or put option and the simultaneous sale of the same type of option with typically the same strike price but with a different expiration month. also referred to as a calendar spread.

In-the-Money Option: An option having intrinsic value. A call option is in-the-money if its strike price is below the current price of the underlying futures contract. A put option is in-the-money if its strike price is above the current price of the underlying futures contract. See Intrinsic Value.

INITIAL PUBLIC OFFERING (IPO) A company's first sale of stock to the public. Securities offered in an IPO are often, but not always, those of young, small companies seeking outside equity capital and a public market for their stock. Investors purchasing stock in IPO's generally must be prepared to accept very large risks for the possibility of large gains. IPO's by investment companies (closed end funds) usually contain underwriting fees which represent a load to buyers.

Inside Market: This is the located between the highest bid and the lowest offer quoted at that time.

INSIDER INFORMATION Relevant information about a company that has not yet been made public. It is illegal for holders of this information to make trades based on it, however received.

INSIDER Any person who has or has access to relevant non-public information about a company, including directors, officers and any stockholder who owns more than 10% of a corporation.

INSIDER TRADING: Illegal trading by anyone considered an insider who has access to non-public information, and who attempts to profit from that knowledge.

Intercommodity Spread: The purchase of a given delivery month of one futures market and the simultaneous sale of the same delivery month of a different, but related, futures market.

Interdelivery Spread: The purchase of one delivery month of a given futures contract and simultaneous sale of another delivery month of the same commodity on the same exchange. Also referred to as an intramarket or calendar spread.

Intermarket Spread: The sale of a given delivery month of a futures contract on one exchange and the simultaneous purchase of the same delivery month and futures contract on another exchange.

Intrinsic Value: The amount by which an option is in-the-money. See In-the-Money Option

Inverted Market: A futures market in which the relationship between two delivery months of the same commodity is abnormal.

Invisible Supply: Uncounted stocks of a commodity in the hands of wholesalers, manufacturers, and producers that cannot e identified accurately; stocks outside commercial channels but theoretically available to the market.

Lagging Indicators: Market indicators showing the general direction of the economy and confirming or denying the trend implied by the leading indicators. Also referred to as concurrent indicators.

Last Trading Day: According to the Chicago Board of Trade rules, the final day when trading may occur in a given futures or option contract month. Futures contracts outstanding at the end of the last trading day must be settled by delivery of the underlying commodity or securities or by agreement for monetary settlement (in some cases by EFPs).

Leading Indicators: Market indicators that signal the state of the economy for the coming months. Some of the leading indicators include: average manufacturing workweek, initial claims for unemployment insurance, orders for consumer goods and material, percentage of companies reporting slower deliveries, change in manufacturers' unfilled orders for durable goods, plant and equipment orders, new building permits, index of consumer expectations, change in material prices, prices of stocks, change in money supply.

Leverage: The ability to control large dollar amounts of a commodity with a comparatively small amount of capital.

Lift Offer: Term used when a market maker moves up his offer price and is no longer willing to sell stock at his previous offer price. Typically a bullish sign.

LIMIT ORDER: An order to buy a stock at or below a specified price or to sell a stock at or above a specified price. For instance, you could tell a broker "Buy me 100 shares of xyz Corp at $8 or less" or to "sell 100 shares of xyz at $10 or better."

Limit Order: An order in which the customer sets a limit on the price and/or time of execution.

Liquid: A characteristic of a security or commodity market with enough units outstanding to allow large transactions without a substantial change in price. Institutional investors are inclined to seek out liquid investments so that their trading activity will not influence the market price.

Liquidate: Selling (or purchasing) futures contracts of the same delivery month purchased (or sold) during an earlier transaction or making (or taking) delivery of the cash commodity represented by the futures contract. See Offset.

Long: One who has bought futures contracts or owns a cash commodity.

Low Offer: Is used when a market maker lowers his offering price and is now the lowest offer available, and is willing to sell his stock at a lower price than anyone else. Bearish signal on stock.

MARGIN REQUIREMENT (OPTIONS): The amount of cash an uncovered (naked) option writer is required to deposit and calculated by multiplying the number of shares times the current market price day price changes.

Margin Call: A call from a clearinghouse to a clearing member, or from a brokerage firm to a customer, to bring margin deposits up to a required minimum level. Margin: See Clearing Margin and Customer Margin.

MARKET CYCLE: The period between the 2 latest highs or lows of the S&P 500, showing net performance of a fund through both an up and a down market. A market cycle is complete when the S&P is 15 % below the highest point or 15 % above the lowest point (ending a down market). The dates of the last market cycle are: 12/04/87 to 10/11/90 (low to low).

MARKET ORDER: An order to buy or sell a stock at the going price.

MARKET CAPITALIZATION: The total value of all outstanding shares. Calculated by multiplying the number of shares times the current market price. It is a measure of corporate size.

MARKET MAKER On the NASDAQ system, a broker-dealer willing to accept the risk of holding a particular number of shares of a particular security in order to facilitate trading in that security. Over 500 firms act as NASDAQ market makers, displaying buy and sell quotations for a guaranteed number of shares.

Marking-to-Market: To debit or credit on a daily basis a margin account based on the close of that day's trading session. In this way, buyers an sellers are protected against the possibility of contract default.

MERGER: The combination of two or more companies, generally by offering the stockholders of one company securities in the acquiring company in exchange for the surrender of their stock.

Minimum Price Fluctuation: See Tick.

Money Supply: The amount of money in the economy, consisting primarily of currency in circulation plus deposits in banks: M-1–U.S. money supply consisting of currency held by the public, traveler's checks, checking account funds, NOW and super- NOW accounts, automatic transfer service accounts, and balances in credit unions. M-2–U.S. money supply consisting M-1 plus savings and small time deposits (less than $100,000) at depository institutions, overnight repurchase agreements at commercial banks, and money market mutual fund accounts. M-3–U.S. money supply consisting of M-2 plus large time deposits ($100,000 or more) at depository institutions, repurchase agreements with maturities longer than one day at commercial banks, and institutional money market accounts.

Moving-Average Charts: A statistical price analysis method of recognizing different price trends. A moving average is calculated by adding the prices for a predetermined number of days and then dividing by the number of days.

Municipal Bonds: Debt securities issued by state and local governments, and special districts and counties.

MUTUAL FUND: An open end investment company that pools investors' money to invest in a variety of stocks, bonds, or other securities. A mutual fund issues and redeems shares to meet demand, and the redemption value per share is the net asset value per share, less in some cases a redemption fee which represents a rear-end load. A closed end fund, often incorrectly called a mutual fund, is instead an investment trust. Both are investment companies regulated by the Investment Company Act of 1940.

NASDAQ: Stands for the National Association of Securities Dealers Automated Quotation System. A nationwide computerized quotation system for current bid and asked quotations on over 5,500 over-the-counter stocks.

Negative Yield Curve: See Yield Curve.

NOISE: Price and volume fluctuations that can confuse interpretation of market direction.

Off the Offer: When a market maker who was the low offer lifts, or raises, his offer and he is no longer the low offer. The reason being is that he is no longer willing to sell his stock at that price level. This is a bullish sign.

Offer Out: Price at which a market maker sells his stock at, and the general public buys at. When "Offer Out" you are in essence taking the role of a market maker by offering to sell your stock on the offer, on a E.C.N. or Selectnet. This strategy is used to close a long position in most cases, or it can be used to create a open position, thus creating a short position.

Offer: An expression indicating one's desire to sell a commodity at a given price; opposite of bid.

Offset: Taking a second futures or options position opposite to the initial or opening position. See Liquidate.

OPEC: Organization of Petroleum Exporting Countries, emerged as the major petroleum pricing power in 1973, when the ownership of oil production in the Middle East transferred from the operating companies to the governments of the producing countries or to their national oil companies. Members are: Algeria, Ecuador, Gabon, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela.

Open Market Operation: The buying and selling of government securities–Treasury bills, notes, and bonds—by the Federal Reserve.

Open Interest: The total number of futures or options contracts of a given commodity that have not yet been offset by an opposite futures or option transaction nor fulfilled by delivery of the commodity or option exercise. Each open transaction has a buyer and a seller, but for calculation of open interest, only one side of the contract is counted.

Open Outcry: Method of public auction for making verbal bids and offers in the trading pits or rings of futures exchanges.

Open / Close: Describes open and closing transactions. In more detail, "To Open" means your initial transaction to enter you in a position. "To Close" is used to describe a transaction that will exit you from a position. There are opening buys and opening sells, there are closing buys and closing sells. If you have an opening buy you must have a closing sell, and in turn, if you have a opening sell you must have a closing buy.

Opening Range: A range of prices at which buy an sell transactions took place during the opening of the market.

OPTION: Gives the buyer the right, but not the obligation, to buy or sell stock at a set price on or before a given date. Investors, not companies, issue options. Investors who purchase call options bet the stock will be worth more than the price set by the option (the strike price), plus the price they paid for the option itself. Buyers of put options bet the stock's price will go down below the price set by the option.

Option Buyer: The purchaser of either a call or put option. Option buyers receive the right, but not the obligation, to assume a futures position. Also referred to as the holder.

Option Seller: The person who sells an option in return for a premium and is obligated to perform when the holder exercises his right under the option contract. Also referred to as the writer.

Option Spread: The simultaneous purchase and sale of one or more options contracts, futures, and/or cash positions.

Option Writer: See Option Seller.

Option Premium: The price of an option–the sum of money that the option buyer pays and the option seller receives for the rights granted by the option.

Original Margin: The amount a futures market participant must deposit into his margin account at the time he places an order to buy or sell a futures contract. Also referred to as initial margin.

OTHER CURRENT ASSETS: Value of non-cash assets, including prepaid expenses and accounts receivable, due within 1 year.

Out-of-the-Money Option: An option with no intrinsic value, i.e., a call whose strike price is above the current futures price or a put whose strike price is below the current futures price.

OVER THE COUNTER MARKET: Abbreviated as OTC, used to describe a security that is traded through via broker-dealers on telephone and computer networks (such as NASDAQ) rather than through an auction exchange.

OVERBOUGHT\OVERSOLD: Technical analysis terms that try to define when a market's prices have moved too far and too fast in either direction than are justified by the fundamentals.

Override: Another name is "On the O." Used when a trader is going to offer his stock at a price that is higher than the current offer, or bid at a price that is currently lower than the current bid price.

P/E RATIO: TO EPS GROWTH Calculated by dividing a stock's P/E Ratio divided by its Earnings Per Share growth rate, to provide some indication of the value the market has put on a company's earnings expectations compared to what the company has actually earned in the past.

P/E RATIO EQUATION Assume XYZ sells for $25.50 per share and has earned $2.55 per share this year $25.50 = 10 times $2.55 XYZ stock sells for 10 times earnings. P/E (Price/Earnings Ratio) Price/Earnings Ratio (P/E) is the relationship between the price of a stock and its earnings per share. It is determined by dividing

Par: The face value of a security. For example, a bond selling at par is worth the same dollar amount it was issued for or at which it will be redeemed at maturity.

PERCENT CHANGE (Percent Change) The percent change in price since yesterday's close. Percent change is calculated by finding the difference between the last traded price and the previous closing price, and multiplying the difference by 100.

Pit: The area on the trading floor where futures and options on futures contracts are bought and sold. Pits are usually raised octagonal platforms with steps descending on the inside that permit buyers and sellers of contracts to see each other.

Point-and-Figure Charts: Charts that show price changes of a minimum amount regardless of the time period involved.

Position: A market commitment. A buyer of a futures contract is said to have a long position and, conversely, a seller of futures contracts is said to have a short position.

PREMIUM: In financial instruments, the dollar amount by which a security trades above its principal value. See Option Premium.

PREVIOUS CLOSE: The price at which an issue traded just prior to the previous day's market close. For issues with asked and bid quotations, such as over-the-counter issues, the close price is the average of the ask and bid prices.

Price Limit Order: A customer order that specifies the price at which a trade can be executed.

Price Discovery: The generation of information about "future" cash market prices through the futures markets.

Price Limit: The maximum advance or decline–from the previous day's settlement–permitted for a contract in one trading session by the rules of the exchange. See also Variable Limit.

PRICE/EARNINGS RATIO Shows the "multiple" of earnings at which a stock sells. Determined by dividing the most recent trading day's closing price by the company's latest 12 month or trailing four quarters primary earnings per share.(adjusted for stock splits). Earnings per share for the P/E ratio is determined by dividing earnings for past 12 months by the number of common shares outstanding. Higher "multiple" means investors have higher expectations for future growth, and have bid up the stock's price.

PRICE/SALES RATIO: Determined by dividing stock's current price by revenue per share (adjusted for stock splits). Revenue per share for the P/S ratio is determined by dividing revenue for past 12 months by number of shares outstanding.

PRICE-TO-BOOK RATIO: Calculated by dividing a stock's market price per share by its book value per share. An attempt to determine a value for a stock compared to the value of its assets. A lower Price-To-Book Ratio might imply a stock is undervalued.

PRICE-TO-CASH-FLOW RATIO: Calculated by dividing a stock's Price per share by its Cash Flow per share, to determine the market's expectation of a company's financial liquidity.

PRIMARY MARKET: The first buyer of a newly issued security buys that security in the primary market. All subsequent trading of those securities is done in the secondary market.

Primary Dealer: A designation given by the Federal Reserve System to commercial banks or broker/dealers who meet specific criteria. Among the criteria are capital requirements and meaningful participation in the Treasury auctions.

Prime Rate: Interest rate charged by major banks to their most creditworthy customers.

Producer Price Index (PPI): An index that shows the cost of resources needed to produce manufactured goods during the previous month.

PROGRAM TRADING: Trades based on signals from computer programs, usually entered directly from the trader's computer to the market's computer system and executed automatically.

PROXY Document: intended to provide shareholders with information necessary to vote in an informed manner on matters to be brought up at a stockholders' meeting. Includes information on closely held shares. Shareholders can and often do give management their proxy, representing the right and responsibility to vote their shares as specified in the proxy statement.

Purchasing Hedge or Long Hedge: Buyer futures contracts to protect against a possible price increase of cash commodities that will e purchased in the future. At the time the cash commodities are bought, the open futures position is closed by selling an equal number and type of futures contracts as those that were initially purchased. Also referred to as a buying hedge. See Hedging.

PUT OPTION: An option contract that gives the holder the right to sell (or "put"), and places upon the writer the obligation to purchase, a specified number of shares of the underlying stock at the given strike price on or before the expiration date of the contract.

QUICK RATIO: Indicator of a company's financial strength (or weakness). Calculated by taking current assets less inventories, divided by current liabilities. Also called Acid Test.

Range (Price): The price span during a given trading session, week, month, year, etc.

RECORD DATE: Date by which a shareholder must officially own shares in order to be entitled to a dividend. For example, a firm might declare a dividend on Nov 1, payable Dec 1 to holders of record Nov 15. Once a trade is executed an investor becomes the "owner of record" on settlement, which currently takes 5 business days for securities, and one business day for mutual funds. Stocks trade ex-dividend the fourth day before the record date, since the seller will still be the owner of record and is thus entitled to the dividend.

Refreshes: Essentially the same as "He Stays." Used when a market maker has filled someone at the bid or offer and the market maker remains, continuing to buy or sell stock at the quoted price.

RELATIVE STRENGTH: Calculated by dividing the performance of a stock's price over a period by a market index. Used to determine a stock's performance relative to the market and other stocks. Value below 1.0 means the stock shows relative weakness in price movement (underperformed the market); a value above 1.0 means the stock shows relative strength over the 1-year period.

Resistance: A level above which prices have had difficulty penetrating.

RETAINED EARNINGS: Also known as the Retention Ratio. The percentage of earnings not paid out in dividends but retained by the company to be reinvested in its core business or to pay debt.

RETRACEMENT: A price movement in the opposite direction of the previous trend.

RETURN ON EQUITY (ROE): Indicator of profitability. Determined by dividing net income for the past 12 months by common stockholders' equity (adjusted for stock splits). Result is shown as a percentage.

REVERSE STOCK SPLIT: A proportionate decrease in the number of shares, but not the value of shares of stock held by shareholders. Shareholders maintain the same percentage of equity as before the split. For example, a 1-for-3 split would result in stockholders owning 1 share for every 3 shares owned before the split. A firm generally institutes a reverse split to boost its stock's market price and attract investors.

SALES CHARGE: The fee charged by a mutual fund when purchasing shares, usually payable as a commission to a marketing agent, such as a financial advisor, who is thus compensated for his assistance to a purchaser. It represents the difference, if any, between the share purchase price and the share net asset value.

Scalper: A trader who trades for small, short-term profits during the course of a trading session, rarely carrying a position overnight.

SEC: The Securities and Exchange Commission, the primary federal regulatory agency of the securities industry.

SECONDARY MARKET: A market that provides for the purchase or sale of previously owned securities. Most trading is done in the secondary market. The New York Stock Exchange, as well as all other stock exchanges, the bond markets, etc., are secondary markets.

SECURITY: A security is a piece of paper that can be assigned a value and sold, or any investment made with the expectation of a profit.

SELLING SHORT: A bet by an investor that a stock will go down in price . If an investor thinks the price of a stock is going down, the investor could borrow the stock from a broker and sell it. Eventually, s/he must buy the stock back on the open market. If the stock declines in price between the time the investor sells the shares and buys them back, a profit is realized. For instance, you borrow 1000 shares of XYZ on July 1 and sell it for $8 per share. Then, on Aug 1, you purchase 1000 shares of XYZ at $7 per share. You've made $1000 (less commissions and other fees) by selling short.

Selling Hedge or Short Hedge: Selling futures contracts to protect against possible declining prices of commodities that will be sold in the future. At the time the cash commodities are sold, the open futures position is closed by purchasing an equal number and type of futures contracts as those that were initially sold. See Hedging.

SETTLEMENT DATE: The date on which payment is made to settle a trade. For stocks traded on US exchanges, settlement is currently 5 business days after the trade, but this will be reduced to 3 days in 1995. For mutual funds, settlement usually occurs in the U.S. the day following the trade. In some regional markets, foreign shares may require months to settle.

Settlement Price: The last price paid for a commodity on any trading day. The exchange clearinghouse determines a firm's net gains or losses, margin requirements, and the next day's price limits, based on each futures and options contract settlement price. If there is a closing range of prices, the settlement price is determined by averaging those prices. Also referred to as settle or closing price.

SHARE REPURCHASE A company's own plan to buy back its own shares from the marketplace, reducing the number of outstanding shares, and typically an indication that the company's management thinks the shares are undervalued.

Speculator: A market participant who tries to profit from buying and selling futures and options contracts by anticipating future price movements. Speculators assume market price risk and add liquidity and capital to the futures markets.

Spot: Usually refers to a cash market price for a physical commodity that is available for immediate delivery.

Spread: The spread is the difference between the bid price and the offer price.

Spreading: The simultaneous buying and selling of two related markets in the expectation that a profit will be made when the position is offset. Examples include: buying one futures contract and selling another futures contract of the same commodity but different delivery month; buying and selling the same delivery month of the same commodity on different futures exchanges; buying a given delivery month of one futures market and selling the same delivery month of a different, but related, futures market.

STOCK SPLIT: A proportional increase in a company's outstanding shares. After the split, the market value of the shares remains the same, though the number of shares held by each shareholder is proportionately increased.

Stock Market: A market in which shares of stock are bought and sold.

Stock Index: An indicator used to measure and report value changes in a selected group of stocks. How a particular stock index tracks the market depends on its composition–the sampling of stocks, the weighing of individual stocks, and the method of averaging used to establish an index.

Stop Order: An order to buy or sell when the market reaches a specified point. A stop order to buy becomes a market order when the futures contract trades (or is bid) at or above the stop price. A stop order to sell becomes a market order when the futures contract trades (or is offered) at or below the stop price.

Stop-Limit Order: A variation of a stop order in which a trade must be executed at the exact price or better. If the order cannot be executed, it is held until the stated price or better is reached again.

STRIKE PRICE: The stated price per share for which underlying stock may be purchased (in the case of a call) or sold (in the case of a put) by the option holder upon exercise of the option contract.

Supply, Law of: The relationship between product supply and its price.

Support: The place on a chart where the buying of futures contracts is sufficient to halt a pric decline.

Suspension: The end of the evening session for specific futures and options markets traded at the Chicago Board of Trade.

TECHNICAL ANALYSIS: A method of evaluating securities by analyzing data of a stock's market activity, generally price and volume. Technical analysts use charts to identify patterns that can suggest future activity.

Ticks: Down Ticks, Up Ticks, and Zero Plus Ticks, these are all important types of ticks. An "Up Tick" occurs when a stock trades higher than the previous trade on the bid or offer. "Down Ticks" occur when a stock trades at a price lower than the current bid or offer, remember the stock has to trade. A Zero Plus Tick happens when a stock Up Ticks on a trade and the following trade is executed at the same price level. One thing to note NASD. rules states, you may only "short" stock on a Up Tick or a Zero Plus Tick.

TIME VALUE The portion of the premium that is based on the amount of time remaining until the expiration date of the option contract, and that the underlying components that determine the value of the option may change during that time. Time value is generally equal to the difference between the premium and the intrinsic value.

Time Limit Order: A customer order that designates the time during which it can be executed.

Time and Sales Ticker: Part of the Chicago Board of Trade Market Profile® system consisting of an on-line graphic service that transmits price and time information throughout the day.

Time-Stamped: Part of the order-routing process in which the time of day is stamped on an order. An order is time-stamped when it is (1) received on the trading floor, and (2) completed.

Timed Out: After you place an order, whether on the S.O.E.S. system or on a E.C.N., the order will only be "live" for a specified amount of time. When your order has "Timed Out" this means that is has run out of time and it will be automatically canceled buy the proper exchange. Time constraints vary for each type of order.

Too Late: Too Late applies to the S.O.E.S. system. It is used when a trader has placed an order to buy or sell a stock and then changes his mind, and wishes to cancel the order. After attempting to cancel the order the trader receives a message in his order entry screen that says "Too Late," this means that it too late to cancel the order and will be getting his execution soon.

Trade Balance: The difference between a nation's imports and exports of merchandise.

U R Out: That is what will appear on your screen after you have successfully canceled an order, and it means exactly what it reads. After receiving this message you are free to re-enter the order if you wish.

U.S. Treasury Note: Government-debt security with a coupon and original maturity of one to 10 years.

U.S. Treasury Bond: Government-debt security with a coupon and original maturity of more than 10 years. Interest is paid semiannually.

U.S. Treasury Bill: A short-term U.S. government debt instrument with an original maturity of one year or less. Bills are sold at a discount from par with the interest earned being the difference between the face value received at maturity and the price paid.

UNCOVERED CALL A short call option position in which the writer does not own shares of underlying stock represented by his option contracts. Also called a "naked" call, it is much riskier for the writer than a covered call, where the writer owns the underlying stock. If the buyer of a call exercises the option to call, the writer would be forced to buy the stock at market price. A short put option position in which the writer does not have a corresponding short stock position or has not deposited, in a cash account, cash or cash equivalents equal to the exercise value of the put. Also called "naked" puts, the writer has pledged to buy the stock at a certain price if the buyer of the options chooses to exercise it. The nature of uncovered options means the writer's risk is unlimited.

Underlying Futures Contract: The specific futures contract that is bought or sold by exercising an option.

Up to Bid: This happens when a market maker moves his current bid to the highest bid. This is a bullish sign because the market maker will now pay a higher price to buy a stock than any other market maker at that time.

Variation Margin: During periods of great market volatility or in the case of high-risk accounts, additional margin deposited by a clearing member firm to an exchange.

Vertical Spread: Buying and selling puts or calls of the same expiration month but different strike prices.

Violation Short Sale: A trader will receive this message in his order entry system window. It is given when trader has attempted to short a stock on a down tick, which is against NASD. rules. The order is automatically and immediately canceled.

VOLATILITY A measure of risk based on standard deviation in fund performance over 3 years. Scale is 1-9; higher rating indicates higher risk. Std Deviation Rating Std Deviation Rating up to 7.99 1 20.00-22.99 6 8.00-10.99 2 23.00-25.99 7 11.00-13.99 3 26.00-28.99 8 14.00-16.99 4 29.00 and up 9 17.00-19.99 5

VOLUME During trading hours, the cumulative number of shares which have traded during the current day. During non-trading hours, the cumulative number of shares which traded during the most recent trading day.

WALLFLOWER: Stock that has fallen out of favor with investors; tends to have a low P/E.

WARRANT: A security entitling the holder to buy a proportionate amount of stock at some specified future date at a specified price, usually one higher than current market. This "warrant" is then traded as a security, the price of which reflects the value of the underlying stock. Warrants are usually issued as a "sweetener" bundled with another class of security to enhance the marketability of the latter,

WATCH LIST A list of securities selected for special surveillance by a brokerage, exchange or regulatory organization; firms on the list are often takeover targets, companies planning to issue new securities or stocks showing unusual activity.

WRITER: The seller of an option contract.

YIELD: The percentage rate of return paid on a stock in the form of dividends, or the rate of interest paid on a bond or note.

YIELD TO CALL: The percentage rate of a bond or note, if your were to buy and hold the security until the call date. This yield is valid only if the security is called prior to maturity. Generally bonds are callable over several years and normally are called at a slight premium. The calculation of yield to call is based on the coupon rate, length of time to the call and the market price.

YIELD TO MATURITY: The percentage rate of return paid on a bond, note or other fixed income security if you buy and hold it to its maturity date. The calculation for YTM is based on the coupon rate, length of time to maturity and market price. It assumes that coupon interest paid over the life of the bond will be reinvested at the same rate.

Yield Curve: A chart in which the yield level is plot on the vertical axis and the term to maturity of debt instruments of similar creditworthiness is plotted n the horizontal axis. The yield curve is positive when long-term rates are higher than short-term rates However, yield curve is negative or inverted.