Margin Deposit -
The margin deposit is not a down payment on a purchase of equity, as many perceive margins to be in the stock markets. Rather, the margin is a performance bond, or good faith deposit, to ensure against trading losses. The margin requirement allows traders to hold a position much larger than the account value, which allow for this high leverage. In the event that funds in the account fall below margin requirements, brokerage firms will automatically close all open positions. Margin call - A request from a broker or dealer for additional funds or other collateral to guarantee performance on a position that has moved against the client. If the equity balance in your account falls below the margin requirement, a margin call will be generated. In the event that an account exceeds its maximum allowable leverage, ALL open positions are liquidated immediately, regardless of the size or the nature of positions held within the account. Market Maker - A dealer who regularly quotes both bid and ask prices and is ready to make a two-sided market for any financial instrument. Market Risk - Exposure to changes in market prices. Mark-to-Market - Process of re-evaluating all open positions with the current market prices. These new values then determine margin requirements. Maturity - The date for settlement or expiry of a financial instrument.
N
Narrow Market
- occurs when there is light trading and greater fluctuations in prices relative to volume. This is often interchanged for THIN MARKET.
O
Offer
- The rate at which a dealer is willing to sell a currency. Offsetting transaction - A trade with which serves to cancel or offset some or all of the market risk of an open position. One Cancels the Other Order (OCO) - A designation for two orders whereby one part of the two orders is executed the other is automatically cancelled. Open order – An order that will be executed when a market moves to its designated price. Normally associated with Good ‘til Cancelled Orders. Open position - A deal not yet reversed or settled with a physical payment. Over the Counter (OTC) - Used to describe any transaction that is not conducted over an exchange. Overnight - A trade that remains open until the next business day