Glossary

ADR

American Depository Receipt

AEX

Amsterdam Stock Exchange

Arbitrage

The process where a gap between two market makers' prices is exploited by buying from one while simultaneously selling to the other to lock in a profit.

Ask

The quoted offer at which someone can buy; also called the offer

At-the-money

This occurs when an option (call or put) has a strike price which is at the current market level.

Auction

The process of competitive or open bidding at exchanges for a particular financial product where the price is not set by negotiation.

Backwardation

A market condition where futures price is trading lower than the expected spot price at contract maturity.

Base rate

Interest rate set by central bank to lend other banks.

Bear market

A market distinguished by declining prices.

Bet per

The minimum point movement in each market.

Bid price

The price at which a stock, index or commodity can be sold.

Bid-ask price

The difference between what buyers are willing to pay and what sellers are asking for in terms of price

Blue chip stock

Stock of a financially sound company that has demonstrated its ability to pay dividends in both good and bad times.

BOBL

Medium term (4.5 to five years) German Government bond.

Bond

A certificate of debt issued by a government or corporation that guarantees payment of the original investment plus interest by a specified future date.

Broker ratings

Buy, sell or hold recommendations or ratings given to individual company stocks by securities analysts, depending on how the stock will perform in the short or long-term.

BUND

Long term (10 year) German Government Bond.

Bull market

A market distinguished by rising prices.

Buy bet

A bet that the price of a particular financial instrument will rise. Also called an up bet or going long.

Cable

Slang used amongst forex traders for Sterling/US dollar exchange rate. Derived from the fact that GBP/USD exchange rate was transmitted via transatlantic cable laid under Atlantic ocean in 1858.

Call

A 'call' option gives the purchaser the right, but not the obligation, to buy at a pre-arranged fixed price. A 'put' is the opposite of a 'call'.

Capital gains tax

A tax on investment profits. Spread betting winnings are free of any UK Capital Gains Tax under current laws.

Cash balance

This is the balance of your account, including all debits/credits and profits/losses from closed trades.

Cash price

The price of an asset for immediate delivery. In other words, the actual price of an instrument right now; this term is often used for stock indices, whereas the synonymous term of 'spot' is more often applied to forex and commodity prices.

Central bank

A government organisation that manages a country's monetary policy. For example, the US central bank is the Federal Reserve, and the German central bank is the Bundesbank.

Closing level

The price or market level where a financial instrument (or position) is closed.

Closing price

The price at which a product was traded to close the open position. Also refers to the price of the last underlying market transaction in a days trading session.

Commodity

A basic good used in commerce which is usually uniform across producers and can be traded on an exchange. Soft commodities are goods that are grown, such as coffee and sugar, while hard commodities are extracted through mining, such as gold and coal.

Complaints procedure

means the written policy governing complaints regarding any aspect of the ETX Capital Services pursuant to this Agreement, as published on the Website from time to time.

Contingent if done order

An order which gets executed when certain condition is met for a financial product. The condition can be in the form of stop loss or take profit.

Corporate action

means any event initiated by a corporation which impacts its shareholders. Examples include stock splits, consolidations, mergers and spinoffs.

Cross currency rates

Exchange rate between two currencies that does not involve US dollar.

Currency pair

The relative value of one currency compared to the other currency. The first currency is the base currency and the second is the quote currency.

Daily rolling market

means a spread bet market that has no expiry date. Rolling bets are automatically rolled over each night with an applicable financing charge applied to the clients account.

Derivatives

Financial contracts, such as futures and options, whose value is derived from an underlying asset, rate or index.

Discount

The amount by which a price for one instrument is less than that of another instrument. The term is also used in forex markets to describe the amount by which forward currency rates are less than spot rates.

Dividend

That part of a company's after-tax earnings that is distributed to shareholders. Dividends are paid at the company's discretion. They may be distributed as cash or by scrip dividend.

Dow Jones industrial index

The benchmark US stock market index that tracks the performance of a selection of thirty US blue-chip stocks.

Down bet

A bet that the price of a particular financial instrument will fall. Also referred to as a sell or going short.

Economic indicator

Statistical data about a country's economy such as figures on unemployment, the Consumer Price Index (CPI), Gross Domestic Product (GDP), money supply and housing starts. They give clues about the future direction of output and demand in an economy, prompting reaction from consumers, governments, companies and financial markets.

European Central Bank (ECB)

The central bank responsible for monetary policy of the EU.

Ex-dividend

A share bought without the right to receive the next dividend which is retained by the seller.

Expiration/expiry date

The date that a spread bet expires. The bet is settled automatically on this date unless the client closes the bet beforehand or instructs ETX Capital to roll the bet over to the next expiry date.

Fair value

This is the theoretical price at which a futures contract should trade when compared to the cash or spot price.

Force majeure

means an unforeseen event beyond the control of ETX Capital that prevents it from performing its obligations under this agreement.

FSA

Financial Services Authority. The governing body that regulates the financial services industry including spread betting.

FTSE

Financial Times Stock Exchange. These firms are jointly responsible for the compilation and maintenance of the main stock indices reflecting the performance of the UK's top shares.

FTSE 100

The index that highlights the performance of the UK's top 100 companies, as ranked by their market capitalisation. We refer to this as UK100 in our literature.

FTSE ALL SHARE

An index covering about 800 shares representing 98% of UK market value. There are indices for business sub-sectors as well.

FTSE MID 250

The index of the next 250 companies, after the top 100.

FTSE 350

The index of the top 350 companies by market capitalisation. It is a combination of the FTSE 100 and FTSE 250 stocks.

Futures

A financial contract obligating the buyer/seller to purchase/sell an asset such as a physical commodity or a financial instrument, at a predetermined future date and price.

Gap

A break between prices on a chart that occurs when the price of an asset class makes a sharp move up or down with no trading occurring in between. A gap normally indicates there was no buying or selling interest (between the gap).

Gearing

The relationship between potential profit or loss and the initial outlay. A position with high gearing or leverage stands to make or lose a large amount from a small initial outlay.

Gilts

UK Government Bonds. So called because the certificates were originally gilt edged.

Good For the Day (GFD)

An order, which if not filled, expires at close of business on the day it is received.

Good Till Cancelled (GTC)

An order that will be carried forward indefinitely until it is either filled or cancelled by you.

Good Till Date

An order, which if not filled, expires at close of business on a date specified by you.

Hedging

A strategy to reduce the risk of an open position.

Index

A statistical indicator that represents the total value of the stocks that constitute it e.g. the FTSE or the Dow Jones. It often serves as a barometer for a given market or industry and acts as a benchmark from which financial or economic performance is measured.

If done orders

An "if done" order allows you to attach a stop and/or a limit to an opening order. The "if done" order only becomes active if the opening order is triggered.

Illiquid Market

A market in which it is difficult to sell or buy due to lack of interested buyers/sellers.

Interbank rates

Foreign Exchange rates at which large international banks quote other large international banks.

Interim dividends

A company's distribution of profits to shareholders halfway through the financial year.

Interim report

All companies quoted on the London stock exchange must release an interim report after the first 6 months of their financial year. It tends to concentrate on profitability, and may be used to justify an interim dividend.

In-the-money

This describes an option with intrinsic value.

Intrinsic value

For a call option, this occurs when the level of the market is higher than the strike. Conversely a put option has intrinsic value if the strike is higher than the market level. In both cases the amount of the intrinsic value is calculated by deducting the strikes from the market level.

IPO

Initial Public Offering. The offering of shares making their market debut.

Leverage or gearing

Leverage or gearing allows traders to gain a large exposure with a relatively small outlay.

Limit order

An order to buy or sell a product when it hits a certain price. A limit order is placed when you want to place a trade at a better price than the current quote.
Limit orders can be filled at better levels than expected. This can occur when markets do not move smoothly. They "gap" from one price to another at times and your limit order will be filled at the next available price to ETX Capital.

Liquid market

A liquid market has a sufficient volume of two-way business for a trade to occur without moving prices unduly. The market will normally exhibit narrow bid-offer spreads.

Liquidation value

This is the sum of the net amount of your cash balance and your open Profit/Loss.

Long bet

means an opening bet that is made by buying a market in the hope to profit from any upward price movement.

Margin

The amount required from a client - in addition to any deposit due - to cover losses when a price moves adversely. Sometimes called 'variation margin'.

Initial margin

Deposit required to open a financial contract, e.g. Futures, CFD, Spread Bet

Initial margin requirement

Minimum sum required to be deposited in order for a client to open a contract. Also known as initial deposit.

Maintenance margin

The minimum amount of equity that must be maintained to support you existing open positions.

Margin call

A call for additional funds in a margin account either because the value of equity in the account has fallen below a required minimum.

Market hours

Hours during which a market can be traded with ETX Capital.

Market feed

means the automated live streaming prices of the underlying markets from their respective exchanges.

Market order

A financial contract which is executed at the current available market price.

Mid-Price

The price derived by the average of bid and ask rate.

NASDAQ

The National Association of Securities Dealers' Automated Quotations System is an electronic stock exchange based in New York listing many leading high-tech companies.

Normal Market Size (NMS)

A system that categorizes the size of transactions that is normal for a particular security and forces market makers to deal within these sizes

OCO (One Cancels Other)

Two linked orders where, if one is filled, the other is automatically cancelled.

Offer price

The price at which a stock, index or commodity can be bought.

Opening level

means the price or market level at which a position was initiated.

Open position

Trades that are currently running within a portfolio.

Order

Instruction to a broker to buy or sell a certain financial contract provided that the condition of order is met.

Options

Financial derivative instrument that gives the contractual right, but not obligation, to buy (a call) or sell (a put) an investment at a specified price within a set period of time.

Option premium

The payment required to be paid by the buyer of the option to the seller of the option.

Out-of-the-money

This describes an option with no intrinsic value.

Partial fill

Partial fill occurs when only a part of an order is executed due to thin liquidity conditions.

Power of attorney

Authorising someone to spread bet on your behalf. For this ETX Capital would require your written notification and we would perform an identity check.

Put

A 'put' option gives the right, but not the obligation, to sell at a pre-determined fixed price. The opposite of a 'put' is a 'call'.

Quarterly bets

Bets that expire prior to their expiry date in March, June, September or December, but which can be closed out any time before the expiry date.

Resistance

A term used in technical analysis indicating a price level at which analysis suggests a predominance of selling ñ and hence a greater likelihood that the price will fail to break through the level.

Rights issue

A privilege allowing existing shareholders to buy shares shortly before they are offered to the public at a specified and usually discounted price and usually in proportion to the number of shares already owned. Such corporate actions mean that ETX Capital will adjust any position accordingly.

Roll over

To transfer a bet from an expiring contract to a new contract. At ETX Capital you will pay only half the spread in order to roll over your bet.

Scrip dividend

A scrip dividend is a scrip or bonus issue of shares made at no charge to shareholders in proportion to their holdings in lieu of a cash dividend.

Sell bet

A bet that will be profitable for every point or tic that the price falls. Also called a down bet or going short.

SETS

Stock Electronic Trading Service. The order driven system used to trade FTSE 100, ex-FTSE 100 and reserve shares.

Settlement price

The last traded price for a financial contract on any trading day.

Shares

Shares represent ownership of part of a company. They are also known as equities.

Shorting

Refers to selling an asset that you do not own with the aim of buying it back cheaper at a later date. In spread betting, it refers to placing a 'down bet' or a trade in anticipation of a falling market.

Slippage

The difference between the level of an order and the actual price at which it was executed. Can occur during periods of higher volatility when market prices move rapidly or gap.

Spread

The difference between our Buy and Sell price.

Stop loss

A pre-determined level at which you would like to close your bet to limit your loss if the price moves against you.
Stop losses are not guaranteed and can be filled at worse levels than expected. This can occur when markets do not move smoothly. They "gap" from one price to another at times and your stop loss will be filled at the next print.

Stop order

Stops are orders to sell below, or buy above, the current price. Stop orders can be used to close or open a new position if the price breaks through a perceived support/resistance level.

Strike price

The fixed price at which the holder of an option in entitled to buy or sell.

Support level

A technique used in technical analysis to indicate a price floor at which you would expect the price to 'bounce' off. Opposite of this is resistance.

Tic

Or 'pip' or 'point', means the smallest possible movement (up or down) in the price of a contract.

Time value

This is the value of an option after deducting any intrinsic value from the market price. This extrinsic premium reflects the probability that the option will move further into the money prior to expiration.

Trading funds available

This is your liquidation value minus the margin required for open trades. If this figure is positive this is the amount you have left to trade with, if negative this is the amount you will need to deposit.

Underlying market

The market upon which the derivative market price is dependent. For example EURUSD March 12 Futures derivative price is dependent on the underlying Spot EURUSD price.

Up bet

A bet that will be profitable for every point or tic that a price rises. Also called a buy or going long.

Volatility

A statistical measure of a market's price movements over time.

Watch list

A list of markets selected for surveillance. Watch lists can be created in your account online.

Working order

Instruction by a client to a dealer or broker to execute a trade at a specific level.