A basic, standardized swap contract created by the International Swaps and Derivatives Association in the late 1980s. The standard agreement identifies the two parties entering the transaction; describes the terms of the arrangement, such as payment, events of default and termination; and lays out all other legalities of the deal. By signing a master swap agreement, the two parties who wish to engage in a swap transaction simplify the process because the basic legal terms are already established and only the specific financial terms, such as rate and maturity, must be discussed. Signing a master swap agreement also makes it easier for the same parties to engage in additional transactions in the future because these can be based on the initial agreement.
An options strategy in which an investor writes (sells) call options on the open market without owning the underlying security. This stands in contrast to a covered call strategy, where the investor owns the security shares that are eligible to be exercised under the options contract. This strategy is sometimes referred to as an "uncovered call" or a "short call". A naked call strategy is inherently risky, as there is limited upside potential and (theoretically) unlimited downside potential should the stock rise above the exercise price of the options that have been sold.As a result of the risk involved, only experienced investors who strongly believe that the price of the underlying stock will fall or remain flat should undertake this advanced strategy. The margin requirements are often very high for this strategy as well due to the propensity for open-ended losses, and the investor may be forced to purchase shares on the open market prior to expiration if margin thresholds are breached. The upside to the strategy is that the investor could receive income in the form of premiums without putting up a lot of initial capital.
A must be filled (MBF) order is a trade that must be executed due to expiring options or futures contracts on those exchanges. Many MBF orders are filled on the third Friday of each month because index options often expire on those days each month. MBF orders have the advantage of being exempt from short sale rules. MBF orders must be put into the system by 5:30pm on the day before the expiration date. These orders then must be filled immediately at the opening of options or futures exchange on the following day, which is the expiration day. These orders must be filled at the opening price of the options or futures exchange.
1. The total number of options and/or futures contracts that are not closed or delivered on a particular day.2. The number of buy market orders before the stock market opens. 1. A common misconception is that open interest is the same thing as volume of options and futures trades. This is not correct, as demonstrated in the following example:-On January 1, A buys an option, which leaves an open interest and also creates trading volume of 1.-On January 2, C and D create trading volume of 5 and there are also five more options left open.-On January 3, A takes an offsetting position, open interest is reduced by 1 and trading volume is 1.-On January 4, E simply replaces C and open interest does not change, trading volume increases by 5.
A measure of the change in an option's value with respect to the percentage change in the underlying price. The omega gives option investors an idea of how the option price and the stock price that underlies it move together.Omega is the third derivative of the option price, and the derivative of gamma. If the omega on a Ford call option is calculated to be 1.6%, then for every 1% change in the price of Ford the price of the call option will rise by 1.6%.Also known as "speed".
A term for option contracts whose underlying securities are instruments other than equities. Examples of non-equity options would include options on bonds, commodities, debt issues and foreign currencies.
The world's largest physical commodity futures exchange. Trading is conducted through two divisions: the NYMEX Division, which is home to the energy, platinum and palladium markets, and the COMEX Division, where metals like gold, silver and copper and the FTSE 100 index options are traded. The NYMEX uses an outcry trading system during the day and an electronic trading system after hours. You'll hear the NYMEX referred to as "The Merc". In 1872, a group of dairy merchants founded "The Butter and Cheese Exchange of New York", and in 1994, the NYMEX merged with the COMEX (commodity exchange). Futures and options on energy and precious metals have become great tools when companies try to manage risk by hedging their positions. The ease with which these instruments are traded is vital to hedging activities and gauging future prices, making the NYMEX a vital part of the trading and hedging worlds.
A commodities exchange in New York that trades futures and options on sugar, cotton, coffee, cocoa and orange juice, in addition to interest rates, currency and indexes. This exchange was formed from the merging of the New York Cotton Exchange (NYCE) and the Coffee, Sugar & Cocoa Exchange(CSC).
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