Glossary - C
contract that gives option buyer the right but not the obligation to
take delivery of the underlying security at a specific price within a
bond that may be terminated prior to maturity by its issuer.
derivative instrument that is linked to interest rates.
Asset Pricing Model
model for valuing financial assets based upon their systematic risk.
line that describes the optimal relationship between risk and reward for
an investment portfolio.
Japanese charting method, in which the price range between the open and
the close is plotted as a narrow rectangle known as a real body. If the
close is above the open, the body is white. If the close is below the
open, the body is black When the high and/or low for the session are
extraneous to the open and close the difference is plotted as a thin
line, known as a shadow. In
candlestick charting greater significance is given to the opening and
closing prices rather than the high and low.
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.
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.
actual physical commodity someone is buying or selling, e.g., soybeans,
corn, gold, silver, Treasury bonds, etc. Also referred to as "actuals".
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
of Deposit (CD)
time deposit with a specific maturity evidenced by a certificate.
oscillator created by subtracting a 10-day EMA from a three-day EMA of
the accumulation /distribution line.
price channel is constructed from two parallel lines. One joins a series
of rally highs; the other a series of reaction lows.
the behavior of nonlinear systems. A subset of nonlinear dynamics
analysis, chaos theory is a branch of mathematics focusing on irregular
and complex behavior that has an underlying order. In market analysis
chaos theory seeks to forecast the future prices, including sudden
changes that occur during periods of intense market activity.
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
type of netting frequently used with OTC derivative instruments.
range of prices at which buy and sell transactions took place during the
Chande Momentum Oscillator (CMO)
The Chande Momentum Oscillator (CMO) was developed by Tushar Chande, a scientist, inventor, and a respected trading system developer. Tushar Chande developed the CMO to capture what he calls "pure momentum." It is closely related to, although unique from, other momentum oriented indicators such as the RSI, Stochastic, Rate-of-Change, etc. It is most closely related to Welles Wilder's RSI (see Relative Strength Index)
held to secure an obligation.
fee charged by a broker for executing a transaction. Also referred to as
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.
Futures Trading Commission (CFTC)
federal regulatory agency established under the Commodity Futures
Trading Commission Act, as amended in 1974 that oversees futures trading
in the United States. The commission is comprised of five commissioners,
one of who is designated as chairman, all appointed by the President
subject to Senate confirmation, and is independent of all cabinet
the price movement one security with another. It is most normally used
to compare a stock or industry group with the market as a whole. This is
distinct from the RSI indicator that compares current price movement to
previous price movement of the same instrument.
Trends in relative strength can be analyzed in the same way as
any other price trend.
indication that tow or more price series or indicators are in agreement.
Originally used in Dow theory where the Dow Jones Industrials confirmed
trend movements in the Rails (now Dow Jones Transportation Average).
Area or Pattern
period in which there is no visible progress in price.
a congestion area that follows a strong trend, either up or down. In a
rising market a consolidation represents a temporary battle between
buyers and sellers prior to the resumption of the uptrend. In declining
markets a consolidation is followed by a resumption of falling prices.
Price Index (CPI)
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.
condition where forward prices exceed spot prices.
chart base on futures data in which the price for the data for the end
of a given contract and that for the beginning of the next contract are
merged in order avoid a sharp transition from one contract to the next.
price pattern in which prices trade in a sideways range prior to
resuming the prevailing trend.
idea that when everyone thinks alike such expectations are fully
discounted in the market place and a trend reversal is therefore
futures prices and spot prices come together at the futures expiration.
contra trend price movement, which typically retraces between one-third
to two-thirds of the previous price trend.
wave or cycle of waves moving against the current impulse trend's
of Funds Index
a call against a long position in the underlying stock. By receiving the
premium from the call, the writer realizes additional return on the
underlying security or gains an element of protection from a decline in
the value of the underlying security.
time span from harvest to harvest for agricultural commodities. The crop
marketing year varies slightly with each ag commodity, but it tends to
begin at harvest and end before the next year's harvest, e.g., the
marketing year for soybeans begins September 1 and ends August 31. The
futures contract month of November represents the first major new-crop
marketing month, and the contract month of July represents the last
major old-crop marketing month for soybeans.
compiled by the U.S. Department of Agriculture on various ag commodities
that are released throughout the year. Information in the reports
includes estimates on planted acreage, yield, and expected production,
as well as comparison of production from previous years.
accumulation pattern observed on bar charts. The pattern lasts from
seven to 65 weeks; the cup is in the shape of a "U" and the
handle is usually more than one or two weeks in duration. The handle is
a slight downward drift with low trading volume from the right-hand side
of the formation. The breakout should be accompanied with relatively
Developing complicated rules that map known conditions.
total amount of unused money on deposit in brokerage accounts. These are
“free” funds representing cash that can be employed in the purchase
The ratio of the coupon to the current market price of the debt instrument.
variation where a point of observation returns to its origin.
The process of buying and selling stocks based on a longer-term or primary market move. The cycle approximates to the 4-year business cycle, where primary movements in stock prices are normally related.
© 1995-2008 Pring Graphics
All rights reserved