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Soultrader

Glossary of Trading Pit Terms

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Many thanks goes out to Christine Grace for providing me with this glossary. Her website can be found here: www.bestrades.net

 

Terms used in the S&P trading pit. Listed in alphabetical order A - E

 

##Times

The number of times traders/institutions are bidding or offering. For example, …offered ten TIMES."

"20 up" S&P 500 Term

E.g. There are 20 contracts bid for and 20 contracts offered.

Arbitrage General Floor Term

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

Ask General Floor Term

One "asks" a price when he offers a contract for sale. Indicates a willingness to sell a futures contract at a given price.

At S&P 500 Term

Same as offer: e.g. 10 at 20 indicates that someone wants to sell 10 for 20 S&Ps.

Back Months General Floor Term

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

Barney S&P 500 Term

Smith Barney.

Bear General Floor Term

One who believes prices will move lower.

Bear Market General Floor Term

A market in which prices are declining.

Best

Highest Bid or lowest offer at that given time.

Bid General Floor Term

The price that the market participants are willing to pay. The current price you would get if you sold at market. This also means someone wants to buy contracts.

Bid S&P 500 Term

The price a buyer is willing to pay, E.g. 20 bid on a hundred: they want to pay 20.

Brokers S&P 500 Term

Order fillers executing for the public.

Bull General Floor Term

One who expects prices to rise.

Bull Market General Floor Term

A market in which prices are rising.

Buy On Close General Floor Term

To buy at the end of a trading session at a price within the closing range.

Buy On Opening General Floor Term

To buy at the beginning of a trading session at a price within the opening range.

Cabinet Trade (or "Cab") General Floor Term

A trade that allows options traders to liquidate deep out-of-the-money options by trading the option at a price equal to one-half tick.

Call General Floor Term

An option to buy a commodity, security or futures contract at a specified price anytime between now and the expiration date of the option contract.

Car

Carried from long ago, from grains at the CBOT, in which a "Car" was a contract that represented one railroad cargo car -- and still does. We say it instead of a "Contract", as slang, since its one syllable, and as the professionals know, is the preferred terminology on the trading floor. To recap: "XYC Co sells 100 Cars not held" means they just sold 100 Contracts with broker discretion to execute the order at the market.

Cash Commodity General Floor Term

The actual physical commodity as distinguished from a futures commodity.

CFTC General Floor Term

The Commodity Futures Trading Commission as created by the Commodity Futures Trading Commission Act of 1974. This government agency currently regulates the nation's commodity futures industry.

Choppy

No real trend. Market is erratic and usually controlled by locals.

Close The General Floor Term

The period at the end of the trading session. Sometimes used to refer to the closing range. (see Opening, The)

Closing Range (or Range) General Floor Term

The high and low prices, or bids and offers, recorded during the period designated as the official close. (see Settlement Price)

Commission (or Round Turn) General Floor Term

The one-time fee charged by a broker to a customer when a futures or options-on-futures position is liquidated either by offset or delivery.

Contract General Floor Term

Unit of trading for a financial or commodity future. Also, actual bilateral agreement between the parties (buyer and seller) of a futures or options-on-futures transaction as defined by an exchange. The terms of this type of contract include price, month...

Contract Month General Floor Term

The month in which futures contracts may be satisfied by making or accepting delivery. (see Delivery)

Day Order General Floor Term

An order that is placed for execution during only one trading session. If the order cannot be executed that day, it is automatically cancelled.

Day Trading General Floor Term

Refers to establishing and liquidating the same position or positions within one day's trading, thus ending the day with no established position in the market.

Deferred General Floor Term

Another term for "back months."

Delivery General Floor Term

The tender and receipt of an actual commodity or financial instrument, or cash in settlement of a futures contract.

Discount S&P 500 Term

The futures price below the cash price.

Even S&P 500 Term

Price is at an even dollar level: 975.00 or 1,332.00, for example. E.g. 989.00 a.k.a. "the buck".

Even up S&P 500 Term

There are as many contracts bid for as offered.

Exercise or Strike Price General Floor Term

The price at which the holder (buyer) may purchase or sell the underlying futures contract upon the exercise of an option.

Expiration Date General Floor Term

The last day that an option may be exercised into the underlying futures contract. Also, the last day of trading for a futures contract.

__________________

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Alphabetical Order F - O

 

Fading or Fades

When a local bid or offer disappears without trading at the price quoted. Example: "Locals 450 bid, XYZ Bank has offered 50 at 500, 450 bid FADES bid best."

Fair Value S&P 500 Term

The theoretical price of the S&P future should trade above the cash index.

Fast Cash S&P 500 Term

A cash index shown above the pit that indicates where the spot is headed.

Fillers S&P 500 Term

Same as Brokers.

Floor Broker General Floor Term

An exchange member who is paid a fee for executing orders for Clearing Members or their customers. A Floor Broker executing orders must be licensed by the CFTC.

Floor Trader General Floor Term

An exchange member who generally trades only for his/her own account or for an account controlled by him/her. Also referred to as a "local."

For S&P 500 Term

Same as bid, E.g. 20 for 20: they want to pay 20 for 20 S&P's.

Futures General Floor Term

A term used to designate all contracts covering the purchase and sale of financial instruments or physical commodities for future delivery on a commodity futures exchange.

Futures Commission Merchant or FCM General Floor Term

A firm or person engaged in soliciting or accepting and handling orders for the purchase or sale of futures contracts, subject to the rules of a futures exchange and, who, in connection with solicitation or acceptance of orders, accepts any money or securities to margin any resulting trades or contracts. The FCM must be licensed by the CFTC.

Half

Price is at the half-dollar level: 975.50 or 1332.50, for example.

Handle General Floor Term

In the S&P 500, a handle is one dollar unit or 100 points. For example, if the market is trading at 988.00 (or "8 even") if the market moves up to the next handle the S&P's would be trading at 989.00 (or "89 even"). With the markets moving so quickly it is important to listen for the "handle" if not in front of a quote screen.

Hedge General Floor Term

The purchase or sale of a futures contract as a temporary substitute for a cash market transaction to be made at a later date. Usually it involves opposite positions in the cash market and futures market at the same time. (see Long Hedge, Short Hedge)

Hit S&P 500 Term

To sell, E.g. Solly sells to the buyer.

Holder General Floor Term

One who purchases an option.

Initial Performance Bond General Floor Term

The funds required when a futures position (or a short options-on-futures position) is opened. (Previously referred to as Initial Margin)

Lift S&P 500 Term

Buy on an uptick so that the offer is now higher than it was before.

Light

Same as "Small"

Limit Order General Floor Term

An order given to a broker by a customer that specifies a price; the order can be executed only if the market reaches or betters that price.

Limit Price General Floor Term

(see Maximum Price Fluctuation)

Liquidation General Floor Term

Any transaction that offsets or closes out a long or short futures position.

Local Only or Local Market S&P 500 Term

There are no brokers working any paper. Locals are on both sides of the market.

Locals S&P 500 Term

Traders trading for their own accounts: similar to market makers (Nasdaq) or Specialists (NYSE/AMEX). (see Floor Trader)

Long General Floor Term

The position of one who has bought a futures or options-on-futures contract to establish a market position through an offsetting sale; the opposite of short.

Long Hedge General Floor Term

The purchase of a futures contract in anticipation of an actual purchase in the cash market. Used by processors or exporters as protection against and advance in the cash price. (see Hedge, Short Hedge)

M.I.T. General Floor Term

Market-If-Touched. A price order that automatically becomes a market order if the price is reached.

Maintenance Performance Bond General Floor Term

(Previously referred to a Maintenance Margin) A sum, usually smaller than--but part of--the initial performance bond, which must be maintained on deposit in the customer's account at all times. If a customer's equity in any futures position drops to, or under, the maintenance performance bond level, a "performance bond call" is issued for the amount of money required to restore the customer's equity in the account to the initial margin level.

Margin General Floor Term

(see Performance Bond)

Market Order General Floor Term

An order for immediate execution given to a broker to buy or sell at the best obtainable price.

Mark-To-Market General Floor Term

The daily adjustment of margin accounts to reflect profits and losses.

Maximum Price Fluctuation General Floor Term

The maximum amount the contract price can change, up or down, during one trading session, as stipulated by Exchange rules.

Minimum Price Fluctuation General Floor Term

Smallest increment of price movement possible in trading a given contract, often referred to as a "tick."

Morgan S&P 500 Term

Morgan Stanley.

Nearby General Floor Term

The nearest active trading month of a futures or options-on-futures contract. Also referred to as "lead month."

Not Held

Means the executing broker(s) have been given an order (generally of size) to execute using their discretion. Filling Brokers have a keen sense of the market, participant relationships, and what the market will bear given the current liquidity which can change at any moment. Therefore, the trader upstairs "hands over the wheel" to allow the Filling Broker to provide his or her added value to the intended transaction.

Offer General Floor Term

Also called "ask." Indicates a willingness to sell a futures contract at a given price. The price they want to sell, E.g. 100 offered at 20: they want to sell 20's. (see Ask) The current price you would pay if you bought at the market.

Offered

This means offered for sale. 100 Offered at 50 means 100 contracts offered for sale at, say 1445.50. If you hear a big offer, this means wants to sell a big number of contracts above the market.

Offset General Floor Term

Selling if one has bought, or buying if one has sold, a futures or options-on-futures contract.

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Alphabetical Order O - R

 

On S&P 500 Term

Same as bid, E.g. 10 on 1: someone wants to pay 10 for 1 S&P.

On the Bid/Offer

XYZ House is ON THE BID"…"ABC Bank joins the bid." They have orders to buy on the Bid - usually limit orders. The inverse is true for the Offer.

Open Interest General Floor Term

Total number of futures or options-on-futures contracts that have not yet been offset or fulfilled by delivery. An indicator of the depth or liquidity of a market (the ability to buy or sell at or near a given price) and of the use of a market for risk- and/or asset-management.

Open Order General Floor Term

An order to a broker that is good until it is canceled or executed.

Opening Price (Or Range) General Floor Term

The range of prices at which the first bids and offers were made or first transactions were completed.

Opening, The General Floor Term

The period at the beginning of the trading session during which all transactions are considered made or first transactions were completed.

Option General Floor Term

A contract giving the holder the right, but not the obligation, hence, "option," to buy (call option) or sell (put option) a futures contract in a given commodity at a specified price at any time between now and the expiration of the option contract.

Out-Trades General Floor Term

A situation that results when there is some confusion or error on a trade. A difference in pricing, with both traders thinking they were buying, for example, is a reason why an out-trade may occur.

Paper S&P 500 Term

Pre-existing written orders held by brokers usually from retails or institutions, not locals.

Performance Bond General Floor Term

(Previously referred to as Margin) Funds that must be deposited as a performance bond by a customer with his or her broker, by a broker with a clearing member, or by a clearing member, with the Clearing House. The performance bond helps to ensure the financial integrity of brokers, clearing members and the Exchange as a whole.

Performance Bond Call General Floor Term

(previously referred to as Margin Call) A demand for additional funds because of adverse price movement.

Position General Floor Term

An interest in the market, either long or short, in the form of open contracts. (see Open Interest)

Premium General Floor Term

1.) The excess of one futures contract price over that of another, or over the cash market price. 2.) The amount agreed upon between the purchaser and seller for the purchase or sale of a futures option -- purchasers pay the premium and sellers (writers) receive the premium.

Premium S&P 500 Term

The futures price above the cash price.

Price Trades

Price trades and is printed.

Print

A price that is actually traded and sent out (printed) to real-time data feeds.

Program Traders S&P 500 Term

(Ranked in order of activity) Morgan Stanley, UBS Warburg, RBC Dominion, CS First Boston, Bear Sterns, Salomon Brothers, Lehman Bros, Merrill Lynch, and Susquehanna.

Pulls or Pulled

When an offer or bid quoted gets cancelled/withdrawn. Example: 20 offered at 500, 450 bid in ten, 500 offer PULLED.

Put General Floor Term

An option to sell a commodity, security, or futures contract at a specified price at any time between now and the expiration of the option contract.

Rally General Floor Term

An upward movement of prices following a decline; the opposite of a reaction.

Range General Floor Term

The high and low prices or high and low bids and offers, recorded during a specified time.

Reaction General Floor Term

A decline in prices following an advance. The opposite of rally.

Registered Representative General Floor Term

A person employed by, and soliciting business for, a commission house or Futures Commission Merchant.

Retail

Retail brokerage business usually from individual traders calling their brokers.

Roll-over S&P 500 Term

As the front month expires and the following month becomes the front month.

Round-Turn General Floor Term

Procedure by which a long or short position is offset by an opposite transaction or by accepting or making delivery of the actual financial instrument or physical commodity.

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Alphabetical Order S - Z

 

Scalp General Floor Term

To trade for small gains. Scalping normally involves establishing and liquidating a position quickly, usually within the same day, hour or even just a few minutes.

Settlement Price General Floor Term

A figure determined by the closing range that is used to calculate gains and losses in futures market accounts. Settlement prices are used to determine gains, losses, margin calls, and invoice prices for deliveries. (see Closing Range)

Sizing Up

When locals check quantity on a paper bid or offer. Example: "XYZ Bank 50 offered at 500, 450 bid paper, locals SIZING UP the bid."

Short General Floor Term

The position of one who has sold a futures contract to establish a market position and who has not yet closed out this position through an offsetting purchase; the opposite of long.

Short Hedge General Floor Term

The sale of a futures contract in anticipation of a later cash market sale. Used to eliminate or lessen the possible decline in value of ownership of an approximately equal amount of the cash financial instrument or physical commodity. (see hedge, long hedge.)

Small

Small contract lot. Not a big order. (Usually less than 9 contracts) but this is relative remember. Usually a term that is heard in a quiet market.

Solly S&P 500 Term

Solomon Brothers. Generally smart money, they used to be the best.

Speculator General Floor Term

One who attempts to anticipate price changes and, through buying and selling futures contracts, aims to make profits; does not use the futures market in connection with the production, processing, marketing or handling of a product. The speculator has no interest in making or taking delivery.

Spot S&P 500 Term

The S&P cash index (commonly SPY or $SPY on most screens).

Spread General Floor Term

The simultaneous purchase and sale of futures contracts for the same commodity or instrument for delivery in different months, or in different but related markets. A spreader is not concerned with the direction in which the market moves, but only with the difference between the prices of each contract.

Spread, The S&P 500 Term

The following contract month minus the front month, E.g. march-dec.

Stop Order (Or Stop) General Floor Term

An order to buy or sell at the market when and if a specified price is reached.

Take S&P 500 Term

Buy, E.g. Locals buy the hundred at 60.

Thin S&P 500 Term

No action, no one really trading or showing any bids or offers. Very little paper.

Tick General Floor Term

Refers to a change in price, either up or down. (see Minimum Price Fluctuation)

Trend General Floor Term

The general direction of the market.

Volume General Floor Term

The number of transactions in a futures or options-on-futures contract made during a specified period of time.

"Watch the [bid/offer, or price]"

Bid or Offer

Our way of telling you that activities on the floor warrant your attention to one side of the market. Example "Watch your bid", the bid may be firming up or breaking down and the market could turn soon. A stock trader would equate this information to his or her Level 2 screen.

Webber S&P 500 Term

Paine Webber. They do a lot of asset allocation business: S&P's; Bonds.

Witter S&P 500 Term

Dean Witter.

Working S&P 500 Term

The Broker is trying to execute an order.

X'd Out ( Or Cancelled Out ) S&P 500 Term

When a trade is whistled no good and is stricken.

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