Leading Indicators
Such statistics as unemployment rates,
CPI, Federal Funds Rate, retail sales, personal income, discount rate and the prime rate that are used to predict economic activity.
LIBO
Stands for the London Interbank Offer Rate, and is the rate at which major international banks lend to one another. It is widely used as the
benchmark for short-term interest rates.
LIFFE
London International Financial Futures Exchange, made up of the three largest future exchanges in the UK.
Limit Order
An order with restrictions on the maximum price to be paid or the minimum price to be received. As an example, if the current price of
USD/YEN is 102.00/05, then a limit order to buy USD would be at a price below 102. (ie 101.50)
Liquid and Illiquid Markets
A liquid market is one in which changes in supply and demand have little impact on the asset's price. It is characterized by many bids,
offers and players/traders, low volatility and tight spreads. Illiquid markets have less players and larger spreads.
Liquidation
The process of closing out long or short positions by offsetting transactions. Also refers to the process of selling all assets of a bankrupt
company to pay off first creditors and then shareholders.
Liquid Assets
Those assets, usually short dated assets like Treasury Bills that can easily be turned into money.
Liquidity
The ability of a market to accept large transaction with minimal to no impact on price stability
Long (Position)
Refers to the ownership of securities, commodities or
currencies, in which there is no intent to sell due to speculation that the price will rise.
M
Margin
A percentage of the total value of a transaction that a trader is required to deposit as collateral. Buying on margin refers to
investing with borrowed funds, and the margin requirement insures against heavy losses.
Margin Call
This is a call by a broker or dealer to raise
the margin requirement of an account. The call is typically made after the value of a security (securities) has significantly
declined in value.
Market Maker
A broker-dealer firm that owns shares of a security and is willing to buy and sell at the quoted bid and ask prices. The firm lists
buy and sell prices to attract customers.
Market Order
An order to buy or sell a stock at the best
available price.
Market Risk
The risk associated with investing in the market and cannot be hedged or avoided.
Maturity
The date that the security is due to be redeemed or repaid.
Mine and Yours
Terms used to signal when a trader wants
to buy (mine) and sell (yours).
Money Market
Highly liquid markets for short-term
investing in monetary instruments and debts, typically maturing in less than one year. Because of large transaction cost relative to
potential interest, transactions occur in large amounts and thus participants are mainly banks and other large financial
institutions.
N
Net Worth
The difference between the values of assets and liabilities. For public companies this is referred to as shareholder
equity.
O
Off-Balance Sheet
Financing or the raising of money by a company that does not appear on the company's balance sheet, such as Interest
Rate Swaps and Forward Rate Agreements.
Offer
The price (or rate) at which a seller is willing to sell at.
Offsetting Transaction
When a trader enters an equivalent but opposite position to an already existing position, thereby balancing his
positions. An offsetting transaction to an initial purchase would be a sale.
One Cancels Other Order (O.C.O. Order)
An
order that through its execution cancels the other part of the same order.
Open/Open Position
An order that has yet to be
executed and is still valid. An open position puts a trader at risk if the market prices rise or fall, i.e. the
trader is vulnerable to movements in the exchange rate.
Open Order
An order to buy or sell that
remains valid until it is executed or canceled by the customer. An order that is executed when the price of a share
or currency reaches a predetermined price.
Options
These are tradable contracts giving the right, but not obligation, to buy or sell commodities, securities or
currencies at a future date and at a prearranged price. Options are used to hedge against adverse price movements or
to speculate against price rises or falls. Holding options is riskier than holding shares, but offer potentially
higher returns.
Order
An instruction by a customer to a broker/trader to buy or sell at certain price or market price. The order remains
valid until executed or cancelled by the customer.
Overnight
A position that remains open until the start of the next business day.
Over-the-Counter Market
A market not regulated by a stock exchange, such as the United States' NASDAQ. Over-the-counter refers to a stock not
traded on an exchange, typically resulting from the company's inability to meet the requirements. Over-the-counter
security transactions are made directly between brokers.
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