FINS 5535: Vocabulary Here is some trading terminology (source: Hull, Ch. 2) This material is examinable.

day trade: a trade where the trader announces to the broker that he/she plans to close out the position in the same day. spread transaction: when the trader simultaneously takes a long position in the contract corresponding to one month and a short position in a contract corresponding to another month. open interest: the total number of contracts outstanding. volume of trading: the number of contracts traded in a given day. notice of intention to deliver: the decision on when to deliver is made by the party with the short position. When they decide to deliver, the notice of intention states how many contracts will be delivered and, in the case of commodities, also specifies where delivery will be made and what grade will be delivered. The exchange then chooses a party with a long position to accept delivery. triple witching hour: for the S&P 500, stock index futures, stock index options, and options on stock index futures all expire on the same day. The media has coined the term triple witching hour to describe trading during the last hour of an expiration day. To avoid chaotic trading at expiration, the settlement price for the S&P 500 futures contract is the opening price of the index the morning after the last trading day. commission brokers: individuals who execute trades for other people and charge a commission for doing so. locals: individuals who add liquidity to the market by trading on their own accounts. scalpers: speculators who watch for very-short-term trends and attempt to profit from small changes in the contract price. day traders: individuals who hold their positions for less than one trading day. position traders: individuals who hold their positions for much longer periods of time. market order: a request that a trade be carried out immediately at the best price available in the market. limit order: specifies a particular price. The order can only be executed at this price or at one more favourable to the investor. stop order or stop-loss order: also specifies a particular price. The order is executed at the best available price once there is a bid or offer at this particular price or a less favourable price. market-if-touched order or board order: is executed at the best available price after a trade occurs at a specified price or at a price more favourable than the specified price. discretionary order or market-not-held order: is traded as a market order except that execution may be delayed at the brokers discretion in an attempt to get a better price. time-of-day order: specifies the particular period of time during the day when the order can be executed. open order or good-till-canceled order: is in effect until executed or until the end of trading in the particular contract. fill-or-kill order: must be executed immediately when received or not at all.