An option contract that can be exercised only on or near its expiration date is "European-style option" .
An option contract that may be exercised at any time before it expires is " American-style option" .
The quoted price at which a customer can buy a currency pair. Also referred to as the offer, ask price or ask rate "Ask" .
For foreign exchange trading, currencies are quoted in terms of a currency pair. The first currency in the pair is the base currency. For example, in a CAD/JPY currency pair, the CAND dollar is the base currency. Also may be referred to as the primary currency is "Base Currency" . The quoted price where a customer can sell a currency pair. Also known as the 'bid price' or 'bid rate' is "Bid" .
Spread The point difference between the bid and ask (offer) price is "Bid/Ask" .
A call option gives the option buyer the right to purchase a particular currency pair at a stated exchange rate is "Call" .
The counterparty is the person who is on the other side of an OTC trade. For retail customers, the dealer will always be the counterparty is " Counterparty" .
The exchange rate between two currencies where neither of the currencies are the US dollar is "Cross-rate" .
The two currencies that make up a foreign exchange rate. For example, USD/YEN is a currency pair is "Currency pair" .
A firm in the business of acting as a counterparty to foreign currency transactions is "Dealer" .
Any party to a forex trade who is not an eligible contract participant as defined under the Commodity Exchange Act is "Retail customer". This includes individuals with assets of less than $10 million and most small businesses.
The common currency adopted by eleven European nations (i.e., Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain) on January 1, 1999 is "Euro" .
This is the last day on which an option may either be exercised or offset is "Expiration" .
A loose network of currency transactions negotiated between financial institutions and other large companies is "Interbank market" .
The ability to control large dollar amount of a commodity with a comparatively small amount of capital. Also known as 'gearing' is "Leverage" .
"Margin" is like Security Deposit.
"Offer" is ilke ask.
Any transaction that has not been closed out by a corresponding opposite transaction is "Open position" .
The smallest unit of trading in a foreign currency price is "Pip" .
The price an option buyer pays for the option, not including commissions. is "Premium".
A put option gives the option buyer the right to sell a particular currency pair at a stated exchange rate is "Put" .
The second currency in a currency pair is referred to as the quote currency. For example, in a USD/JPY currency pair, the Japanese yen is the quote currency. Also referred to as the secondary currency or the counter currency is "Quote Currency".
The process of extending the settlement date on an open position by rolling it over to the next settlement date is "Rollover" .
The amount of money needed to open or maintain a position is "Security deposit " . Also known as "margin".
The actual delivery of currencies made on the maturity date of a trade is "Settlement" .
A market of immediate delivery of and payment for the product, in this case, currency is "Spot market" .
A true spot transaction is a transaction requiring prompt delivery of and full payment for the currency. In the interbank market, spot transactions are usually settled in two business days. This term may also be used to refer to transactions that the parties expect to offset or roll over within two business days, but these transactions are not true spot transactions and are governed by the federal Commodity Exchange Act is "Spot transaction" .
A true forward transaction is an agreement that expects actual delivery of and full payment for the currency to occur on a future date. This term may also be used to refer to transactions that the parties expect to offset at some time in the future, but these transactions are not true forward transactions and are governed by the federal Commodity Exchange Act is "Forward transaction" .
The point or pip difference between the ask and bid price of a currency pair is "Spread" .
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