Uncovered Options Trading System
Paper Profit or Loss is the profit or loss that would be realized if open contracts were liquidated as of a certain time or at a certain price. Paper Profit or Loss is usually referred to paper trading which means not real trading or virtual trading without indolent of real money with the purpose of training, education and testing.
Par refers to the standard delivery point(s) and/or quality of a commodity that is deliverable on a futures contract at contract price. Serves as a benchmark upon which to base discounts or premiums for varying quality and delivery locations. Par in bond markets refers to an index (usually 100) representing the face value of a bond.
Path Dependent Option is an option whose valuation and payoff depends on the realized price path of the underlying asset, such as an Asian option or a Lookback option.
Pay/Collect is a shorthand method of referring to the payment of a loss (pay) and receipt of a gain (collect) by a clearing member to or from a clearing organization that occurs after a futures position has been marked-to-market.
Pegged Price is the price at which a commodity has been fixed by agreement.
Pegging is a process of effecting transactions in an instrument underlying an option to prevent a decline in the price of the instrument shortly prior to the option's expiration date so that previously written put options will expire worthless, thus protecting premiums previously received.
Pip is the smallest price unit of a commodity or currency.
Pit (also referred to as a ring) is the area on the trading floor where trading in futures or options contracts is conducted by open outcry. It is a specially constructed area on the trading floor of some exchanges where trading in a futures contract or option is conducted. On other exchanges, the term ring designates the trading area for commodity contract.
Point Balance is a statement prepared by futures commission merchants to show profit or loss on all open contracts using an official closing or settlement price, usually at calendar month end.
Point-and-Figure is a method of charting that uses prices to form patterns of movement without regard to time. It defines a price trend as a continued movement in one direction until a reversal of a predetermined criterion is met.
Ponzi Scheme is named after Charles Ponzi, a man with a remarkable criminal career in the early 20th century, the term has been used to describe pyramid arrangements whereby an enterprise makes payments to investors from the proceeds of a later investment rather than from profits of the underlying business venture, as the investors expected, and gives investors the impression that a legitimate profit-making business or investment opportunity exists, where in fact it is a mere fiction.
One of the major cuts of the hog carcass that, when cured, becomes bacon.
Portfolio Insurance is a trading strategy that uses stock index futures and/or stock index options to protect stock portfolios against market declines.
Portfolio Margining (sometimes referred to as risked-based margining) is a method for setting margin requirements that evaluates positions as a group or portfolio and takes into account the potential for losses on some positions to be offset by gains on others. Specifically, the margin requirement for a portfolio is typically set equal to an estimate of the largest possible decline in the net value of the portfolio that could occur under assumed changes in market conditions.
Position is a commitment, either long or short, in the market, in the form of one or more open contracts..
Position Accountability is a rule adopted by an exchange requiring persons holding a certain number of outstanding contracts to report the nature of the position, trading strategy, and hedging information of the position to the exchange, upon request of the exchange.
Position Limit is the maximum number of speculative futures contracts one can hold as determined by the Commodity Futures Trading Commission (CFTC) and/or the exchange where the contract is traded.
Position Trader is a trader who either buys or sells contracts and holds them for an extended period of time, as distinguished from a day trader. Position Trader will normally initiate and offset a futures position within a single trading session.
Positive Carry is the cost of financing a financial instrument (the short-term rate of interest), where the cost is less than the current return of the financial instrument.
Posted Price is an announced or advertised price indicating what a firm will pay for a commodity or the price at which the firm will sell it.
Prearranged Trading is trading between brokers in accordance with an expressed or implied agreement or understanding, which is a violation of the Commodity Exchange Act and Commodity Futures Trading Commission (CFTC) regulations.
Premium is the price (payment) paid by the buyer of an option to an options seller. Options premium is received by the seller of an option (by options writer), In futures market Premium is the cash prices that are above the futures price. At the same time term "Premium" may refer to the amount a price would be increased to purchase a better quality commodity. In some cases Premium stands for a futures delivery month selling at a higher price than another.
Price Basing is a situation where producers, processors, merchants, or consumers of a commodity establish commercial transaction prices based on the futures prices for that or a related commodity (e.g., an offer to sell corn at 5 cents over the December futures price). This phenomenon is commonly observed in grain and metal markets.
Price Discovery is the determination of the price of a commodity by the market process. Price Discovery determination is based on supply and demand conditions. Price discovery may occur in a futures market or cash market.
Price Limit (also referred to as Maximum Price Fluctuation) is the maximum advance or decline, from the previous day's settlement price, permitted for a futures contract in one trading session.
(1) For producers, their major purchaser of commodities; (2) to processors, the market that is the major supplier of their commodity needs; and (3) in commercial marketing channels, an important center at which spot commodities are concentrated for shipment to terminal markets.
Program Trading is the purchase (or sale) of a large number of stocks contained in or comprising a portfolio. Originally called program trading when index funds and other institutional investors began to embark on large-scale buying or selling campaigns or "programs" to invest in a manner that replicates a target stock index, the term now also commonly includes computer-aided stock market buying or selling programs, and index arbitrage.
Prompt Date is the date on which the buyer of an option will buy or sell the underlying commodity (or futures contract) if the option is exercised.
Prop Shop is a proprietary trading group, especially one where the group's traders trade electronically at a physical facility operated by the group.
Proprietary Account is an account that a futures commission merchant carries for itself or a closely related person, such as a parent, subsidiary or affiliate company, general partner, director, associated person, or an owner of 10 percent or more of the capital stock. The Futures Commission Merchant (FCM) must segregate customer funds from funds related to proprietary accounts.
Proprietary Trading Group is an organization whose owners, employees, and/or contractors trade in the name of accounts owned by the group and exclusively use the funds of the group for all of their trading activity.
In trade parlance, Public is non-professional speculators as distinguished from hedgers and professional speculators or traders.
Public Elevators are Grain elevators in which bulk storage of grain is provided to the public for a fee. Grain of the same grade but owned by different persons is usually mixed or commingled as opposed to storing it "identity preserved." Some elevators are approved by exchanges as regular for delivery on futures contracts.
P&S (Purchase and Sale Statement) is a statement sent by a futures commission merchant to a customer when any part of a futures position is offset, showing the number of contracts involved, the prices at which the contracts were bought or sold, the gross profit or loss, the commission charges, the net profit or loss on the transactions, and the balance. FCMs also send P&S Statements whenever any other event occurs that alters the account balance including when the customer deposits or withdraws margin and when the FCM places excess margin in interest bearing instruments for the customer's benefit.
Put is an option contract that gives the holder the right but not the obligation to sell a specified quantity of a particular commodity or other interest at a given price (the "strike price") prior to or on a future date. Call options is another type of options.
Put Option is an option which gives the buyer the right, but not the obligation, to sell the underlying futures contract at a particular price (strike or exercise price) on or before a particular date. Call options on futures gives right to buy underlying futures contracts at specific price on or before expiration date.
Pyramiding is the use of profits on existing positions as margin to increase the size of the position, normally in successively smaller increments.
Quotation is the actual price or the bid or ask price of either cash commodities or futures or options contracts at a particular time.
Naked options trading is very risky - many people lose money trading them. It is recommended contacting your broker or investment professional to find out about trading risk and margin requirements before getting involved into trading uncovered options.