Spread

'The spread' is a term borrowed from stock broking. If you ask a stockbroker for a share price, he will quote you two prices: a price you can buy the share at and a price you can sell it at. The difference between the two prices is known as the spread.
The spread is the difference between the sell (bid) price and the buy (offer) price.

Rollover

The process whereby a position approaching expiry is closed and similar position is opened in the next contract period.

Long/ Go long

Holding or opening a “Buy” position in anticipation of the underlying market rising. To go long means to buy. See “Buy”.

Short/ Go short

Holding or opening a “Sell” position in anticipation of the underlying market rising. To go short means to sell. See “Sell”.

Margin

A margin is the cash deposit you are required to make when you enter into a geared (leveraged) transaction. The margin provides collateral to cover any losses that may result from your trade.

Hedging

The action of reducing the risk of an outright position in one market by taking an opposite position in a similar or derivative market. For example if you went long on Wall Street you might go short on the S&P 500. In this case the hedge would not be exact. However it is unlikely that Wall Street will move heavily in the opposite direction to the S&P 500.

Gearing/ Leverage

Futures trading allows the client to buy (or sell) a financial product with substantially less money than the actual full market value of that financial product. E.g. If you were to place futures trades to the value of R100 000. GT247.com could ask for deposit of R10 000 and lend you the balance of R90 000 meaning that you don’t have to fund the entire position but simply put up a percentage (margin).

Spot

The actual price of a financial instrument for immediate settlement or delivery.

Liquid/ Illiquid Market

A liquid market will have many buyers and sellers and the bid-ask spread will usually be small. An illiquid market will have fewer buyers and sellers and the bid-ask spread may be wider. Also, in an illiquid market, a relatively small transaction can significantly move the price. This is less likely to happen in a liquid market. Illiquid markets are characterized by the lack of ability to buy and sell with relative ease. This usually occurs when the market in question does not have much trading volume.

Limit-up/limit-down

When an exchange enforces a temporary price ceiling or floor, suspends, restricts or closes the stock index for a set period of time in order to maintain a fair and orderly market and reduce the risk of large and sudden price movements.

Bear

Someone who believes that prices in a market are going to decline. In a bear market the bears are in a majority and so the market prices fall.

Bear Market

A 'bear market' is the term used to describe a market that is either expected to decline or is already in the process of declining.

Bull

Someone who believes that prices in a market are going to rise. In a bull market the bulls are in a majority and so the market prices rise.

Bull Market

A 'bull market' is the term used to describe a market that is either expected to rise or is already in the process of rising.

Expiry Date

The date on which a contract will expire, and after which can no longer be traded.

FSB

The Financial Services Board. The Government appointed body responsible for regulating Futures trading in South Africa.

Spread/ Futures Trade

A contract to buy or sell a certain underlying instrument for a specified price on a specified date. Futures contracts are traded on exchanges and their underlying instrument could be individual shares, share indices, bonds, commodities or a variety of other instruments. Many of GT247.com’s prices are derived from the futures contract prices.

Market Maker

Exchange registered companies that quote a two-way spread in relation to securities.

Open Positions

Any unexpired positions that you hold on your account.

Expiry Price

The official price at which the trade expires on the expiry date, commonly referred to as the “Make-up” or “Settlement Price”.

Margin Call

If a position moves against you, you may have to pay additional money over the initial deposit this is known as margin or margin call and will be made by GT247.com if your open positions are running at a loss over and above the initial deposit. It is therefore advisable that you do not open positions that require all your available funds as an initial deposit or you may be forced to close your position if you cannot pay the required margin.

Stop Loss

The level below purchase price at which you want to automatically close your trade, even though you will be losing money.

Stop Loss Order

An instruction to either buy or sell at a level that is less favorable than the current price of the financial instrument in question.

Tick

The minimum movement of the market in question, also commonly referred to as a “point”.

Volatility

The rapid change of price in respect of any market or financial instrument.

Sell

To place an opening trade at the bid price of a spread in anticipation of the underlying market falling, commonly referred to as “taking a short position” or “going short”. You can of course also sell at the bid price to close an existing long position.

Buy

To place an opening trade at the offer price of a spread in anticipation of the underlying market rising, commonly referred to as “taking a long position” or “going long”. You can of course also buy at the offer price to close an existing short position.

Fill

Used to describe when an order is executed, commonly expressed as having been “filled”.

Derivatives

A financial instrument, such as a future, whose price is derived from an underlying instrument.

Flat

A term indicating neither growth nor decline. It is often used when a particular market is neither rising nor falling. / If you (the customer) have no positions in the market (i.e. you had a long position but you recently sold), you are said to be flat.

Take Profit Order

An instruction to buy or sell in order to close your trade  once it reaches a certain level of profit. When a Take Profit order is hit on a trade, the trade is closed at the current market value.

Margin

Clients who hold open positions require what is called margin. Margin is calculated as the amount of money you must have in your account to satisfy GT247.com that you are able to honour your debt should your position lose money.

Underlying Instrument

Our trade prices are always based upon the prices of financial assets traded on various financial exchanges around the world. These financial assets are the 'underlying instruments'.

Reuters

Prestigious international news agency and pricing service.

Ask

The quoted offer at which someone can Buy. Also called the Offer Price

Bid

The quoted price at which an investor can Sell a stock, index or commodity

Guaranteed Stop

A guaranteed Stop order ensures, for a small fee, that any losses are restricted to the amount you specify in a closing order, both during and outside of market hours. A Guaranteed Stop are a protection against slippage

Margin Calculation

Margin is often calculated as R/point x (stop loss + Initial Spread) e.g. A Client buys R75 per point of Vodacom Future with a stop loss of 50 points, Margin Required = R75 x (50+6) = R4200

Order

A automated buy or sell instruction specified by a client on the trading platform when the market price reaches the level you are willing to buy/sell at i.e. a pending trade that is only executed as trade when the client’s conditions are met. E.g. A futures trader might place an order to buy an index future if its market price falls to a certain level.

Slippage/ Gapping

Slippage or gapping occurs when the market moves directly from one quoted price to another significantly different quoted price. Market gaps are common during times of volatility. Slippage has a bearing on stop loss orders, because the market may never trade at the price specified in a closing order. Guaranteed orders are a protection against slippage.

SENS

Securities Exchange News Service

Break Order

An instruction to buy or sell a product when it reaches a price that is better than that prevailing, at the time of the placing the order. It can be used to open a new position, where you anticipate a more favourable market price (buy or sell). It can also be used to close an existing open position, when the price reaches a certain level.

Index

An index is a method of measuring a stock market as a whole. The most regularly quoted market indices are based on the shares of large companies listed on a nation's largest stock exchanges, such as the UK FTSE 100 or the German DAX.

Commodity

Commodities are physical goods related to industry or agriculture. Examples include oil, natural gas and metals, and foodstuffs such as rice and coffee

Monthly Contract

Monthly contracts are most common in commodities. They expire in the month prior to the month stated for the contract itself. For example, the expiry date for Brent Crude Oil - June is in May.

Quarterly Contract

Quarterly contracts are the most popular - four a year, expiring in March, June, September and December. These terminate automatically at the end of the quarter, but can be extended to the next quarter. In Spread trading terms, quarterly contracts would be considered a long-term investment.

Daily Contract

Daily contracts automatically expire at the end of the trading day, so they are suited to someone looking for a price movement in a market within that timeframe.

Rolling Cash Contract

Rolling Cash contracts have no expiry date as such but are open ended trades which can be held indefinitely. They rolled over every night at the original price