Glossary

All A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

A

Above Par

Qualification of a security whose market value is above the nominal value.

Additional Margin

Embodies the margin, which would have to be rendered with the adverse price development accepted for the next day to offset all positions.

adjusted

The description of a position, which is neither long nor short.

Agio

In stock exchange trading: the difference between a security’s nominal value and higher market value, expressed in % of the nominal value.
In foreign exchange trading: the difference between the spot price and the higher forward price.

Allocation

The process through which the clearing house calculates the clearing member with long positions, who will oppose the delivery of the basic securities. Since the same clearing member mostly has both long and short positions in the same contract, the assignment algorithm is programmed in such a way that the number of deliveries to be effectively settled is as small as possible between clearing members.

allotted short position

A short position option, which has been allotted to be exercised and for which no delivery has yet taken place.

Allotting

A random process, through which the stock exchange determines those option writers, who must meet their received obligation and consequently deliver or accept the basic value.

American Option

An option, which can currently be exercised up to and including the expiry date.

Arbitration

Exploitation of local or international differences of exchange of the same values, for example securities, foreign currency, bank notes, whereby these values are bought on the market with the lowest prices and sold on the market with the highest prices. In the ideal case, arbitration is completely free of risk.

Assignment

The process through which the clearing house calculates the clearing member with long positions, who will oppose the delivery of the basic securities. Since the same clearing member mostly has both long and short positions in the same contract, the assignment algorithm is programmed in such a way that the number of deliveries to be effectively settled is as small as possible between clearing members.

at par

A commonly used term in investment banking, which means that the market value of a security corresponds to the nominal value.

At-the-money Option

An option, where the basic price corresponds to the current spot price of the basic value.

B

Bar Chart

In the bar chart, the highs and lows on the stock exchange within the set period (day, week, month) are clearly visible. The length of the price bar reflects the fluctuation of the value in the considered period. Additionally the left bar shows the opening price and the right bar the closing price within the considered period.

Basic Price

The price at which the basic security can be bought or sold when exercising the option.

Basic Risk

The danger that the ratio between the spot and forward price essentially changes in the time period between opening and offsetting the position.

Basic Security

Underlying tool of an option or a future agreement.

Basis

The difference between a financial tool’s spot price and forward price.

Basket of Deliverable Bonds

The total bonds, which meet certain conditions on the day of delivery and consequently are considered to satisfy a futures interest rate. The list of deliverable bonds is created by the stock exchange.

Bear Call Spread

Bear spread, which consists of the sale of a call with a lower exercise price and the simultaneous purchase of a call with the same expiry date but a higher exercise price.

Bear Put Spread

Bear spread, which consists of the sale of a put with a lower exercise price and the simultaneous purchase of a put with the same expiry date but a higher exercise price.

Bear Spread

A strategy consisting of the simultaneous sale and purchase of calls or puts, which returns a profit if the price of the underlying security falls.

Below Par

Qualification of a security whose market value is below the nominal value.

Best Order

An order, which must be concluded at the best possible price as soon as it comes onto the market.

Best/Cheapest Order

An order, which must be concluded at the best possible price as soon as it comes onto the market.

Black-Scholes Option Pricing Model

An analytical model for the calculation of theoretical option pricings, which takes into account both the daily rate of the basic values, the interest rate, the maturity, the volatility and potential dividend payments within the maturity period. The original model version was developed for the option pricing calculation of European options.

Bond Future

Futures contract on a long-term federal bond [Federal Government Bond]. Since the Federal Government Bonds are a continuous issue of the Federal Republic of Germany, there are a variety of Federal Government Bonds with different maturities. Subject to the bond future is a virtual obligation with a maturity between eight and ten years and an interest rate of six percent as well as a contract value of €100,000. The EUREX futures market is the trading centre.

Bonus Shares

If companies want to raise money on the capital market, in addition to issuing shares, they also have the option of issuing bonus shares. These special securities certify a property right where the investor legally stands between the creditor and co-owner. Therefore they have both with shares and with loans some common features. Bonuses [Genüsse], as they are called for short on the stock exchange, are in Germany issued particularly by banks and Sparkassen. Barely three percent of about 600 listed bonus shares come from companies in the industry, insurance and service provider sectors. With the purchase of a bonus share, the investor acquires a claim to a share in the business success of the issuing company. At first glance therefore, he is not different to a shareholder. Holders of bonus shares however must renounce the usual rights of a co-owner. They have, for example, no rights to participate or to vote in the Annual General Meeting. What combines bonus shares with a loan and marks it off from a share is the fact that the investor can retrieve his paid equity or cancel the certificate at any time. And he has the right to receive regular payments, the amount of which can be constant but can also be partly variable, depending on the type of certificate. Unlike with shares and loans, for this type of investment, there are no standards set by the legislator or the stock exchanges. The issuers can adjust every detail to their personal financial needs. General statements on bonus shares are therefore not possible. (Source: “Handbuch Wertpapiere“, Stiftung Warentest (Hrsg.), Berlin 2002)

Break-Even Price

The value of an option defined according to a mathematical option pricing model, where both the buyer and the option writer achieve the break-even price after considering the risk factor.

Bull Call Spread

A bull market strategy, which consists of the purchase of a call with a lower exercise price and the simultaneous sale of a call with a higher exercise price and the same expiry date.

Bull Put Spread

A bull market strategy, which consists of the purchase of a put with a lower exercise price and the simultaneous sale of a put with a higher exercise price and the same expiry date.

Bull Spread

A strategy consisting of the simultaneous purchase and sale of calls or puts, which returns a profit if the price of the underlying security increases. For example: sale of an option with a higher exercise price and the simultaneous purchase of an option of the same type with a lower exercise price.

Bull/Bear-Ratio

The bull/bear ratio describes a percentage ratio of the weighted recommendations submitted to us on the number of the entire recommendations (purchases, retentions, sales). With this tool you can analytically estimate the current situation of a share, an index or the entire market from an analyst point of view. If this value is positive and also still very high, then many shares are undervalued and can normally be closed at constant rates. With a positive low value, the share/index/market is estimated fairly and can normally be closed at constant rates. A negative value on the contrary means that the share is expensive and the rate will probably fall. Our bull/bear ratio fluctuates between -100% (very very bad) up to +100% (very very good). Analysts advertise, as is known, many purchasing recommendations and few sales recommendations and instead issue a retention for a sale. Here it was found that every fourth retention is, in our calculation, treated as a sale.

Butterfly Spread

An option position consisting of a total of 4 contracts with the same expiry date, resulting from the purchase of an option with a low basic price, the sale of options with moderate basic prices and the purchase of an option with a high basic price. The strategy is based on the acceptance of a stable market situation or at least a declining volatility.

C

Call

An option contract, which entitles its holder, during a certain period or at a set time, to buy a certain amount of a certain commodity at a previously determined price and which obliges the option writer to sell the basic security if the holder decides to exercise his option.

Candlestick

This type of Asian chart is similar to the bar chart. The bottom of the candlestick marks the opening price, the top the closing price. The relevant top and bottom candlestick lines show the highest or lowest price. If the closing price is above the opening price then the candlestick is shown as light and if below the opening price, then it is dark. Through this colour difference, a candlestick chart is more transparent than a bar chart.

Candlestick Chart

This type of Asian chart is similar to the bar chart. The bottom of the candlestick marks the opening price, the top the closing price. The relevant top and bottom candlestick lines show the highest or lowest price. If the closing price is above the opening price then the candlestick is shown as light and if below the opening price, then it is dark. Through this colour difference, a candlestick chart is more transparent than a bar chart.

Cap

A contractually tradeable right to a previously agreed maximum interest rate, which refers to a benchmark interest rate. As soon as the benchmark interest rate goes above the cap’s maximum interest rate, the buyer makes use of his right to exercise and receives the relevant difference in interest.

Cash Compensation

The settlement of an agreement through payment or receipt of a cash sum instead of the physical delivery of the basic security. In futures with cash compensation, the cash compensation is calculated as the difference between the settlement price of the last trading stage and the settlement price of the previous day. In options, the cash compensation is defined by the difference between the exercise price of the option and the last end-of-day valuation rate of the basic security.

Cash Settlement

The settlement of an agreement through payment or receipt of a cash sum instead of the physical delivery of the basic security. In futures with cash compensation, the cash compensation is calculated as the difference between the settlement price of the last trading stage and the settlement price of the previous day. In options, the cash compensation is defined by the difference between the exercise price of the option and the last end-of-day valuation rate of the basic security.

Cash-and-Carry Arbitration

The purchase of a tool on the spot market and the simultaneous sale of the same tool on the futures market.

CEO - Chief Executive Officer

It is currently heavily discusses in Business Studies whether the concept of a strong CEO should also be used in German companies.

CFO - Chief Financial Officer

Chief Financial Officer

Chart Analysis

The graphical presentation of the price development of a share or an index is called a chart. The presentation is in the form of either a line graph, a bar chart, a candlestick chart or a Point & Figure chart. Using past price developments, the chart-makers predict future price developments. Trends, oppositional and supporting lines are also plotted in the charts as well as floating averages and the turnover being shown. Furthermore certain formations (e.g. triangles, pennants, flags, keys and head-and-shoulders) help the chart analysts to estimate the coming price development. And finally still the most different types of indicators (e.g. Advanced Decline Line, Bollinger Bands, Coppock, MACD, Overbought/Oversold, Relative Strengths and Stochastics) are calculated and assessed in the refinement of the analyses

Chart Engineering

The graphical presentation of the price development of a share or an index is called a chart. The presentation is in the form of either a line graph, a bar chart, a candlestick chart or a Point & Figure chart. Using past price developments, the chart-makers predict future price developments. Trends, oppositional and supporting lines are also plotted in the charts as well as floating averages and the turnover being shown. Furthermore certain formations (e.g. triangles, pennants, flags, keys and head-and-shoulders) help the chart analysts to estimate the coming price development. And finally still the most different types of indicators (e.g. Advanced Decline Line, Bollinger Bands, Coppock, MACD, Overbought/Oversold, Relative Strengths and Stochastics) are calculated and assessed in the refinement of the analyses

Cheapest Deliverable Loan

A loan deliverable to satisfy a futures interest rate, which can be delivered cheaper than all others. The difference between the balance of an invoice and the cost of delivery of the cheapest deliverable loan therefore corresponds to the largest possible profit or the smallest possible loss, compared to the delivery of other loans.

Chinese Wall

The banking term “Chinese Wall” has been used since August 2001 in connection with Deutsche Bank. It means the strict separation of the share analysis and securities trade department within a bank. Certainly this is constantly questioned by market analysts and consumer protectors. This is also the case at Deutsche Bank. After the analysts of the large Frankfurt bank approved an early purchase recommendation for the Telekom shares following the close of the market on Friday, the T-share price rose on Monday against the general negative trend by 1.7 percent. The next day, Deutsche Bank sold 44 million shares by order of a large investor and the price crashed to a new annual low.

CIO - Chief Information Officer

Head of EDP, information processing: the CIO is in charge of the entire area of internal data and information processing.

CKO- Chief Knowledge Officer

Head of Knowledge Management in the company

Clearing House

An associated futures market or integrated institute, which clears all deals closed on the exchange and enters each deal as a contracting party of the buyer’s clearing member and the seller’s clearing member.

Clearing Member

The approved exchange member at the clearing house via whom the non-clearing members have to conduct their business.

Collar

The simultaneous purchase of a cap and the sale of a floor. If the cap premium can be partly or fully financed through the sale of a floor, free hedging is achieved.

Commodity Contract

A contractual agreement to buy or sell a standardised amount of certain goods at a previously set price at an agreed future date. In comparison to financial futures, commodity contracts are for physical goods, such as grain, metals, crude oil etc.

Community Obligations

Loans: a collective term for interest-bearing obligations with a fixed agreed duration. Both civil adjustments (e.g. federation, states and communities) and private companies (industrial obligations, industrial loans) emerge as issuers. Loans are a beneficial financial alternative to investment projects compared to conventional bank financing. A loan securitises a creditor’s claim, that is to say, pays a certain amount, which the security issuer owes the investor. This sum of money, also called nominal value, can for example be €100.00 or another amount and/or another currency. It is to be paid back to the investor at a previously agreed time. The period of time between starting to pay interest on an issue and repayment (redemption) is described as the duration of a security. If part of the duration has already expired then the remaining period until redemption is described as maturity. Loans include, for example, mortgage bonds, industrial obligations, community obligations and civil loans.

Contango

In stock exchange trading: the difference between a security’s nominal value and higher market value, expressed in % of the nominal value.
In foreign exchange trading: the difference between the spot price and the higher forward price.

Contract Bond

A guarantee of the clearing house, which ensures the contract bond for all transactions conducted on the stock exchange.

Contract Month

The month during which the basic security is delivered on a set day.

Conversion

An arbitration strategy, which consists of the purchase of the basic security and a put and the sale of a call of the same type of option. In this strategy, “expensive” calls are sold and “cheap” puts are bought.

Conversion Arbitration

An arbitration strategy, which consists of the purchase of the basic security and a put and the sale of a call of the same type of option. In this strategy, “expensive” calls are sold and “cheap” puts are bought.

COO - Chief Operating Officer

Head of production, engineering: the head of the operating business so to say.

Cost of carry

Positive or negative net financial costs of the ownership of the contract matter, which consist of the storage costs, insurance premiums and the interests to finance the acquisition of the goods, less the interests earned and dividends (with financial assets).

Counterparty Risk

The risk that one contracting party does not fulfil its obligations and this consequently causes financial loss for the other contracting party. On futures and options stock exchanges, the clearing house acts as a counterparty for each transaction.

Covered Calls Writing

The sale of calls, which are covered by the owner of the basic security.

Covered Option

A share option, which is hedged through the provision and pledging of a corresponding number of prescribed titles by the options writer.

Covered Option Writer

The writer of a call who holds a long position in the basic security.

Covered Short Call

The sale of calls, which are covered by the owner of the basic security.

Credit Risk

The risk that one contracting party does not fulfil its obligations and this consequently causes financial loss for the other contracting party. On futures and options stock exchanges, the clearing house acts as a counterparty for each transaction.

Cross Hedge

The hedging of a spot market position in a certain financial tool by entering a future position in another financial tool, whereby the strategy is based on the assumption that the price development of both different tools runs parallel.

CTD Loans

A loan deliverable to satisfy a futures interest rate, which can be delivered cheaper than all others. The difference between the balance of an invoice and the cost of delivery of the cheapest deliverable loan therefore corresponds to the largest possible profit or the smallest possible loss, compared to the delivery of other loans.

Currency Future Contract

A contractual agreement to deliver a standardised amount of a certain currency at a previously negotiated price at a later agreed maturity date.

Currency Option

An agreement to buy or sell a set amount of foreign currency at an agreed price.

Current Market Value

The value at which the options price is above the internal value, that is the difference between the exercise price and the basic security price, and which reflects the remaining period until the option expires.

Current Yield

The average return of a fixed-interest security in relation to the remaining term to maturity is defined as the current yield.

D

Daily Price Fluctuation Limit

The maximum price fluctuation of a contract allowed by the stock exchange in a session in comparison to the end-of-day valuation rate of the previous day on the stock exchange.

Daily Price Fluctuation Limits

The maximum price fluctuation of a contract allowed by the stock exchange in a session in comparison to the end-of-day valuation rate of the previous day on the stock exchange.

Daily Revaluation

Each open position is reassessed daily based on the end-of-day valuation rate, from which result the potential profit or loss and the margin to be remargined or credited.

Daily Settlement

Each open position is reassessed daily based on the end-of-day valuation rate, from which result the potential profit or loss and the margin to be remargined or credited.

Daily Settlement Price

The rate set by the stock exchange at the end of each trading day base don the prices paid during the last trading minutes, which serves to calculate the change in value of the open position compared to the previous day at the stock exchange.

Day Trading

The position, which is to be offset again at the opening day.

DCM

A member of the clearing house of a futures market, who is authorised to clear individual deals and its clients deals.

Delivery

Meeting the contractual obligations of a futures market position.

Delivery Month

The month during which the basic security is delivered on a set day.

Delta

A measure for the change in the option price with a change of the basic security by one unit.

Delta Factor

A measure for the change in the option price with a change of the basic security by one unit.

Delta Hedging

A hedging strategy whereby an option position is built up whose value develops depending on the basic security price so that profits or losses in the hedged position are settled through profits or losses in the option position.

Deport

The market situation in which the futures contracts, which mature soon, are traded at higher prices than the contracts with a later maturity date. This situation often emerges if the supply does not satisfy the demand.

Derivative Financial Tool

A financial tool, which refers to another tool, for example shares, indices, goods etc.

Derivative Product

A financial tool, which refers to another tool, for example shares, indices, goods etc.

Designated Sponsor

The market-wide and predominantly very liquid securities in the German Stock Index (DAX) hardly need specific specialists to look after the liquidity in the markets and accordingly the fair prices for investors. Yet beyond the large title, it makes a lot of sense and is practised in all the large stock exchanges in the world that specialists operate as liquidity providers. Sometimes they are called Designated Sponsors, sometimes Animators and sometimes also Specialists or Market Makers. The specialists set binding prices for the purchase and sale of shares. Through this the probability of executing the order increases. The investors can assume that they can buy and sell such looked after shares at any time at fair prices, therefore their securities will be valued in line with the market. On the new market, each share must have at least two Designated Sponsors. The Designated Sponsor in turn can look after several shares as a liquidity provider. And this is generally also the case because otherwise the business is not worthwhile for the specialists. At the start of 2000 it was observed that some banks abandoned Designated Sponsor Mandates, since for them it did not pay. These were subsequently often taken over by other specialists, for example brokers, to round off their business activities. So that investors and issuers can reconstruct the work and quality of these specialists, the stock exchange publishes a quarterly performance rating for these Designated Sponsors. In the last quarterly assessment at the end of April 2002, 48 out of 62 people received the highest performance rating “AA”. The German Shares Institute advises investors to also include these quality criteria for a share when making an investment decision. The rating can be found on the Internet at www.xetra.de.

Diagonal Spread

A spread position, where the bought and sold options show different exercise prices and expiry dates.

Direct Clearing Member

A member of the clearing house of a futures market, who is authorised to clear individual deals and its clients deals.

Disagio

The difference between the nominal and parity values and the lower market value. In a futures contract, disagio means that the agreement price is lower than the spot price of the basic value. In an option, it means that the optional premium is lower than the intrinsic value of the option.

Dividends

A dividend is the distribution of company profits, which is carried out once a year if at all. Dividends, like interest rates, are traded by fixed interest securities. Setting up an exemption order is therefore recommended.

Dynamic Hedging

A hedging strategy whereby an option position is built up whose value develops depending on the basic security price so that profits or losses in the hedged position are settled through profits or losses in the option position.

E

earnings before interest and taxes

EBIT, (abbreviation for Earnings Before Interest and Taxes) is a company’s absolute ratio of profit. It is calculated from the annual profit before tax and net interest and before exceptional items. By eliminating these named factors, a comparable statement is received on the actual operative earning power of a company and is independent of the individual capital structure. When using the annual profit or the net profit, namely companies with a higher equity ratio based on lower borrowing costs tend to perform better. EBIT forms the basis for the EBIT Margin comparison ratio, which sets the EBIT in relation to profit.

Earnings Before Interest, Taxes, Depreciation and Amortization

EBITDA (abbreviation for Earnings Before Interest, Taxes, Depreciation and Amortization) is a company’s absolute ratio of profit. It comprises the annual profit before tax, interest and amortization of a company. EBITDA is an internationally distributed and one of the most significant success ratios in assessing the operative earning power of a company. Since the companies enter in the balance sheet under different legislations, internationally viewed, the EBITDA ratio enables the operative earning power building on the EBIT-significant comparisons as received through the accounted annual profit. For example, companies, which like investing, have high profit-reducing amortizations and consequently have a lower annual profit than companies, which invest less. As a result, EBITDA has a certain validating character. The EBIT Margin ratio is suitable in order to use EBITDA sensibly in a comparison of companies.

EBIT

EBIT, (abbreviation for Earnings Before Interest and Taxes) is a company’s absolute ratio of profit. It is calculated from the annual profit before tax and net interest and before exceptional items. By eliminating these named factors, a comparable statement is received on the actual operative earning power of a company and is independent of the individual capital structure. When using the annual profit or the net profit, namely companies with a higher equity ratio based on lower borrowing costs tend to perform better. EBIT forms the basis for the EBIT Margin comparison ratio, which sets the EBIT in relation to profit.

EBIT MARGIN

Also: EBIT Operating Margin. EBIT Margin is an operative company ratio. It is calculated from the relation of the EBIT to the profit. It is predestined as a relative ratio in order to compare the EBIT earning power of different companies with each other.

EBITDA

EBITDA (abbreviation for Earnings Before Interest, Taxes, Depreciation and Amortization) is a company’s absolute ratio of profit. It comprises the annual profit before tax, interest and amortization of a company. EBITDA is an internationally distributed and one of the most significant success ratios in assessing the operative earning power of a company. Since the companies enter in the balance sheet under different legislations, internationally viewed, the EBITDA ratio enables the operative earning power building on the EBIT-significant comparisons as received through the accounted annual profit. For example, companies, which like investing, have high profit-reducing amortizations and consequently have a lower annual profit than companies, which invest less. As a result, EBITDA has a certain validating character. The EBIT Margin ratio is suitable in order to use EBITDA sensibly in a comparison of companies.

EBITDA-MARGE

Also: EBITDA Operating Margin. EBITDA Margin is an operative company ratio. It is calculated from the relation of the EBITDA to the turnover. It is predestined as a relative ratio in order to compare the EBITDA earning power of different companies with each other.

Electronic Stock Exchange

A stock exchange where trade is carried out using a fully computerised system.

Electronic Trading System

A trading system where the stock transactions are conducted using a computer system.

End-of-day Valuation Rate

The rate set by the stock exchange at the end of each trading day base don the prices paid during the last trading minutes, which serves to calculate the change in value of the open position compared to the previous day at the stock exchange.

End-of-day Value

The rate set by the stock exchange at the end of each trading day base don the prices paid during the last trading minutes, which serves to calculate the change in value of the open position compared to the previous day at the stock exchange.

Equity

The funds, which are raised by the shareholder of a company to finance the company or which remain as earned profits in the company. The book equity in the balance sheet is made up of the difference between the asset items (assets, accruals, financial support) and the obligations (reserves and deferred income).

Equity Ratio

The equity ratio is the share of equity in the total assets in percent.

Equity Rentabiity

Equity rentability shows how a company’s invested equity has paid interest on the earned profit.

Equity Return

The equity return gives information on the interest calculation of a company’s equity. For the calculation, the annual profit is divided by the used capital. Example: with an equity of one million Euros and an annual profit of €80,000, the equity return amounts to eight percent.

Estimate Rate

G (Geld) [M (Money)]: At this price, there was demand for the share, however there were no offers of sale.
B (Brief) [L (Letter)]: Shares were offered at this price, there were no buyers.
b (bezahlt) [p (paid)]: supply and demand were equal. Synonymous to no price supplement.
exD (ohne Dividende) [WD (Without Dividends)]: Opening price after reduction of the dividend.
bB (bezahlt Brief) [PL (Paid Letter)]: All purchase orders were completed at this rate, however there was yet another offer.
bG (bezahlt Geld) [PM (Paid Money)]: All purchase orders were completed at this rate, however there was yet another demand.
T (Taxkurs) [E (Estimated Rate)]: A price could not be set and so was estimated.

European Option

An option, which can only be exercised at a certain point of time, generally on the day of expiry.

Ex-Pit Transaction

A deal, which is concluded outside the ring yet which is conducted via the stock exchange’s clearing system.

Exercise Limit

Maximum number of option agreements of the same class, which a market participant may exercise within a set period.

Exercise Price

The price at which the basic security can be bought or sold when exercising the option.

Expiry

The point of time when an option expires.

Expiry Cycle

A series of four calendar months, which can be considered for options as expiry months. The expiry cycle of the DTB [German Futures Market] share options consists of the four end-of-quarter months (March, June, September, December).

Expiry Date

A date after which an option can no longer be exercised. This is also the date when the option to exercise a short position is drawn.

Expiry Month

The month in which an option series expires.

F

Federal Obligations

Fixed interest securities, which are issued with a five-year maturity and annual interest rate payout of the bond as a continuous issue.

Federal Treasury Obligations

Fixed interest securities, which are issued as continuous issues of the Federation in two versions. Type A has a maturity of six years with an increasing interest rate and an annual payout. Repayment is the nominal sum. Type B has a maturity of seven years. The interest rates are accumulated during maturity and paid in a lump sum with the capital when due. Federal treasury obligations are absolutely safe, which means the bond is liable with its assets and internal revenue.

Fill-or-Kill Order

Fill-or-Kill orders are either completely used or cancelled.

Final Accounting Price

The official accounting price set at last trading day of a contract.

Financial Future

An obligation, which binds both contracting partners, on the delivery or cancellation of a financial product of a certain quality and quantity at an agreed price and at a set time. Financial Futures is a collective term for standardised financial futures contracts, which are traded on the stock exchange.

Financial Futures Contracts

An obligation, which binds both contracting partners, on the delivery or cancellation of a financial product of a certain quality and quantity at an agreed price and at a set time. Financial Futures is a collective term for standardised financial futures contracts, which are traded on the stock exchange.

First Advice of Delivery Date

The earliest point of time when the futures contracts seller can inform the purchaser through the clearing house that upon maturity of the contract, he intends the physical delivery of the basic security.

Fixed Hedge

A hedging strategy whereby the entire amount of the basic security with options is hedged and the hedge is only cancelled when the underlying risk no longer exists. The hedging position remains unaltered through the duration of the hedge.

Floater

Floating rate notes or floaters are loans with variable interest rates whereby the interest rate is regularly adjusted (e.g. every six months) to a certain benchmark interest rate. This benchmark interest rate is mostly oriented towards the short-term investment rate, for example the 6-month LIBOR, the daily set average interest rate in London. This means: with floaters, the investor takes part in continuous changes to the respective benchmark interest rate. This then is a particular benefit if the corresponding rate increases sharply throughout the duration of the loan. This however also means that through the constant adjustment of the interest at the time of purchase, it cannot be seen exactly what return the loan will bring by maturity. Some issuers simply agree a minimum interest rate, but then also often limit the upper interest calculation with a maximum value, the so-called cap. “Reverse floaters” are a conversion of classic floaters. Even with this type of loan the interest rate is regularly adjusted to a benchmark interest rate. The difference between the floaters: this adjustment appears in an inverse ratio. Here a constant basic interest rate is determined from which the benchmark interest rate is deducted – for example 12 percent minus LIBOR. Result: the stronger the decline of the respective benchmark interest rate, the higher the interest calculation of the loan.

Floating Averages

Floating averages are the simplest trend lines. The individual points are displayed through mathematical images of the last daily rates in a certain period. Depending on the size of the period to be considered, the most different type of floating averages can as a result be generated. Therefore included in the most significant mathematical means are the 38-, 100-, and 200-day lines for short, medium and long-term considerations. The 200-day line (here the average of the last 200 daily rates is generated each day) counts as the most important, most reliable, floating average. It shows the long-term trend of a security. With the short-term averages, the reliability of the trend statements is essentially less. We would recommend our investors to use the corresponding floating averages when inspecting a limited commitment in the CCR share.

Floor

A contractually tradable right to a previously defined minimum interest rate.

Floor Trading

A trading method on the stock exchange whereby the floor traders shout out their supplies and demand or use hand signals for this.

Fluctuation Margin Option

The simultaneous purchase of a cap and the sale of a floor. If the cap premium can be partly or fully financed through the sale of a floor, free hedging is achieved.

Foreign Currency Futures

A contractual agreement to deliver a standardised amount of a certain currency at a previously negotiated price at a later agreed maturity date.

Foreign Currency Futures Contract

A contractual agreement to deliver a standardised amount of a certain currency at a previously negotiated price at a later agreed maturity date.

Foreign Currency Option

An agreement to buy or sell a set amount of foreign currency at an agreed price.

Foreign Currency Swap

A forward spot sale of a currency against another currency and simultaneous buyback or vice versa.

Forward Contract

An agreement between two parties to buy or sell a certain amount of specified goods at previously agreed terms, whereby delivery and payment occur at a later date. The terms of each contract are to be set by the individual parties. In contrast to the futures, forward deals are not conducted on the stock exchange but instead on the OTC trade.

Forward Market

A market where purchasing and selling agreements are concluded for the delivery and payment at a future date, where all details of the agreement have already been settled when concluding the business transaction.

Forward Rate Agreement

An agreement between two parties whereby one party obliges the other party, against receipt of premium at a future time, to pay the difference between the set interest rate and the market interest rate at an agreed amount.

FRA

An agreement between two parties whereby one party obliges the other party, against receipt of premium at a future time, to pay the difference between the set interest rate and the market interest rate at an agreed amount.

Future

A contractual agreement to buy or sell a standardised amount of certain goods at a previously agreed price at a set future date.

Future Rate Agreement

A contractual agreement to accept or deliver an interest rate tool, which is correspondingly similar to the contact regarding the validity period and interest calculation, at a previously negotiated price at an agreed later maturity date.

Futures Contract

A contractual agreement to buy or sell a standardised amount of certain goods at a previously agreed price at a set future date.

Futures Market

The opposite to the spot market, a market on which standardised contracts are traded, which are to be fulfilled at a later date.

G

Gamma

An absolute-viewed change in the delta with a price change of the underlying value. Gamma values of bought options are always positive while written options have a negative gamma value.

Gamma-Faktor

An absolute-viewed change in the delta with a price change of the underlying value. Gamma values of bought options are always positive while written options have a negative gamma value.

Gap

A distinctive price jump between two stock exchange sessions. The new stock exchange price is essentially lower than the lowest or higher than the highest price set in the previous session.

GCM

A stock exchange member who is authorised to clear the private deals as well as the deals of stock exchange participants without a clearing licence.

General Clearing Member

A stock exchange member who is authorised to clear the private deals as well as the deals of stock exchange participants without a clearing licence.

Good-for-date Order

Order, which is only valid up to the given date.

Good-for-day Order

Good-for-day orders only apply for the trading day on which they are issued.

Good-for-day Orders

Good-for-day orders only apply for the trading day on which they are issued.

Good-till-canceled Order

Open-ended (good-till-cancelled) orders are kept in the order book until they are used or manually cancelled, or are deleted after 90 days.

Good-till-cancelled Order

Orders, which stay in the system until they are either used or cancelled.

Good-till-cancelled Orders

Open-ended (good-till-cancelled) orders are kept in the order book until they are used or manually cancelled, or are deleted after 90 days.

Good-till-date Order

Good-till-date orders are valid up to the given date.

GTD Order

Order, which is only valid up to the given date.

H

hedge

To protect a position or an entire portfolio against an adverse market development.

Hedge

This means to limit. A hedge transaction is a hedging activity to reduce losses, which can arise through adverse rate or price developments. Anyone who has a position in the spot market and who hedges an opposed futures position against adverse prise or rate development is described as a hedger.
The option to hedge against risks is the actual reason of origin and the authorisation of existence of futures financial tools such as a hedge transaction. Because with option certificates, options and futures can be set at declining prices, it is, for example, possible to hedge an existing share portfolio against a price loss.

Hedge Funds

Hedge funds are highly speculative funds, which mainly invest their plan assets in financial derivatives such as options, futures or futures transactions. Through the leverage of such investment tools, which is frequently further reinforced through credit financing, an above-average profit should be produced in the short-term.

Hedge Ratio

The number of contracts, which are necessary to hedge a position.

Hedge Transaction

A futures transaction, which is concluded to protect against potential losses through price changes in the trade of goods, foreign currency and securities.

Hedger

A market participant, who looks to hedge against market risks using futures and options.

Hedging

A futures transaction, which is concluded to protect against potential losses through price changes in the trade of goods, foreign currency and securities.

Historical Volatility

Volatility, which is based on the historical price fluctuations.

Horizontal Spread

An options strategy comprising calls or puts with the same exercise price whereby the options which expiry soon are written and the options with a later expiry date are bought.

I

Immediate-or-cancel Order

Best or limited order, which must be fully or partly settled as soon as it comes on the market, whereby non-settled parts are cancelled.

Immediate-or-Cancel Order

Immediate-or-cancel orders are fully or partly settled as soon as they come onto the market, non-settled parts are deleted.

Implicit Returns

An implicit financial rate, which is produced from the acquisition of a spot tool and its sale on the futures market.

Implicit Volatility

A measure for the expected price fluctuation of the basic security, which is calculated based on the current market prices and not based on historical information on the price fluctuations of the basic securities.

In-the-money Option

An option, whose exercise price is clearly above or below the daily rate of the basic security. A call is in the money if the market value of the basic security is higher than the exercise price; a put is in the money if the market value of the basic security is lower than the exercise price.

In-the-money-Option

An option, whose exercise price is clearly above or below the daily rate of the basic security. A call is in the money if the market value of the basic security is higher than the exercise price; a put is in the money if the market value of the basic security is lower than the exercise price.

Industrial Obligations

Loans: a collective term for interest-bearing obligations with a fixed agreed duration. Both civil adjustments (e.g. federation, states and communities) and private companies (industrial obligations, industrial loans) emerge as issuers. Loans are a beneficial financial alternative to investment projects compared to conventional bank financing. A loan securitises a creditor’s claim, that is to say, pays a certain amount, which the security issuer owes the investor. This sum of money, also called nominal value, can for example be €100.00 or another amount and/or another currency. It is to be paid back to the investor at a previously agreed time. The period of time between starting to pay interest on an issue and repayment (redemption) is described as the duration of a security. If part of the duration has already expired then the remaining period until redemption is described as maturity. Loans include, for example, mortgage bonds, industrial obligations, community obligations and civil loans.

Inflation

Inflation means that the prices within a national economy increase faster than the goods volume and mostly because the amount of money is too heavily inflated. This is the case, for example if the state actuates its printing presses and circulates more bank notes than is justified by economic growth. Result: the buying power of money falls. With high inflation, the companies delay their investments because they do not know how the wages and prices for raw materials, for example for energy, will develop. The normal economic activity becomes more and more unstable. In such cases, the issuing banks apply the brakes on the interest rate and stem the growth in the money supply, if the price increase rates climb above the critical value of 2.0 percent. The issuing banks can also apply the brakes too hard with the result that the price spiral spins in the other direction. This means, goods and services can be obtained for the same, however often even for less money than for example the previous year. A sustained economic slump in the general price level, called deflation by specialists, has far more unpleasant consequences than inflation. The companies cannot mark down the prices as preferred for their products since fixed wage and capital costs are also putting pressure on the prices. At some point, production becomes unprofitable. Result: jobs are cut, production plants are shut down or moved to a foreign country, where it is cheaper to operate and wages, if possible, are reduced. The result: many firms face closure. At this stage, new investments are not initially though of based on the strength of the bad business outlook. Fatal effect: higher unemployment as a result of curbed production, hardly any investments and lower wages continue to reduce the available buying power of private households. The pressure on prices continues and a vicious circle commences. Incidentally, deflation must not be confused with regressing price increase rates for individual goods or on individual sub-segments. This is described as disinflation.

Initial Margin

A margin, which must be provided as cash or securities before the settlement of an order on the margin account.

Interest Rate

The interest calculation of the capital, expressed as a percent, which is normally calculated on an annual basis.

Interest Rate Swap

The exchange of fixed and variable interest rate obligations to, generally, identical and currency-compatible capital sums.

Internal Value

The positive difference between the current daily rate of the basic security and the lower exercise price with a call or the higher exercise price with a put. The value of an option is made up of its internal value and its current market value.

Inverse Conversion

An arbitration strategy, which consists of a combination of a short future with a synthetic long future (long call and short put with the same exercise prise).

Inverse Market

The market situation in which the futures contracts, which mature soon, are traded at higher prices than the contracts with a later maturity date. This situation often emerges if the supply does not satisfy the demand.

Invoice Total

The amount to be paid by the buyer of an interest rate-futures contract to the seller, calculated from the official final accounting price multiplied by a price factor ascertained from the stock exchange for the respective delivered loan plus accumulated interests.

IOC Order

Best or limited order, which must be fully or partly settled as soon as it comes on the market, whereby non-settled parts are cancelled.

K

Unfortunately there is no concept for this letter available.

L

Last Trading Day

The last trading day on which an open futures position can be offset. At the DTB, the last trading day is also the Notification Day, which means the latest time at which the holder of a short position must notify the clearing house, which titles he will deliver on the day of delivery.

Letter

G (Geld) [M (Money)]: At this price, there was demand for the share, however there were no offers of sale.
B (Brief) [L (Letter)]: Shares were offered at this price, there were no buyers.
b (bezahlt) [p (paid)]: supply and demand were equal. Synonymous to no price supplement.
exD (ohne Dividende) [WD (Without Dividends)]: Opening price after reduction of the dividend.
bB (bezahlt Brief) [PL (Paid Letter)]: All purchase orders were completed at this rate, however there was yet another offer.
bG (bezahlt Geld) [PM (Paid Money)]: All purchase orders were completed at this rate, however there was yet another demand.
T (Taxkurs) [E (Estimated Rate)]: A price could not be set and so was estimated.

Leverage

A phenomenon, which enables the futures, market participants to enter comparatively large positions in the basic security with low means. This however also means that the percentage change of profits and losses on futures contracts and options is larger than the corresponding change to the basic security.

Leverage Effect

A phenomenon, which enables the futures, market participants to enter comparatively large positions in the basic security with low means. This however also means that the percentage change of profits and losses on futures contracts and options is larger than the corresponding change to the basic security.

Limit Order

Limited orders, which are performed at the given time or better.

Line Graph

The line graph is the simplest form of price representation. Here the closing prices following each other are joined by a line. The main trend is the easiest to recognise with this chart illustration.

Loans

Loans: a collective term for interest-bearing obligations with a fixed agreed duration. Both civil adjustments (e.g. federation, states and communities) and private companies (industrial obligations, industrial loans) emerge as issuers. Loans are a beneficial financial alternative to investment projects compared to conventional bank financing. A loan securitises a creditor’s claim, that is to say, pays a certain amount, which the security issuer owes the investor. This sum of money, also called nominal value, can for example be €100.00 or another amount and/or another currency. It is to be paid back to the investor at a previously agreed time. The period of time between starting to pay interest on an issue and repayment (redemption) is described as the duration of a security. If part of the duration has already expired then the remaining period until redemption is described as maturity. Loans include, for example, mortgage bonds, industrial obligations, community obligations and civil loans.

Local

A stock trader, who only deals for himself. NB: the individual categories of the market participants are named differently by the various stock exchanges.

long

The description for a purchasing position, which has not yet been offset through an opposed position.

Long-Call

The position, which is produced from the purchase of a call and which entitles the purchaser to buy the basic security at a fixed price.

Long-Hedge

To enter a long position on the futures market in order to hedge a short position on the spot market.

Long-Put

The position, which is produced from the purchase of a put and which entitles the purchase to sell the basic security at a fixed price.

M

Maintenance Margin

The minimum amount on the margin account, which must never be underwritten during the term of a position.

Margin

A margin, which must be provided as cash or securities before the settlement of an order on the margin account.

Margin

A security, which must be provided to hold a short position in options or a futures position in order to cover a loss resulting from adverse price fluctuations.

Margin Call

The request of a stock exchange participant, whose margin account has fallen below the Maintenance Margin, to pick the deficit.

Mark-to-market

The daily assessment of open positions to determine profits and losses based on the price development of contracts.

Market Maker

A market participant, authorised specially by the clearing house, to enquire about contractual purchase and sales prices for the contracts assigned to him at any time.

Market Order

Unlimited purchase or sales orders, which are settled at the next available price after entering the trading system.

Market-if-touched Order

An order, whereby a certain price is set and at which the order must be settled.

Maturity Cycle

A series of calendar months set by the stock exchange, which are considered as delivery months for a futures contract. The cycle serves to determine the furthest away delivery month.

Maturity Date

The date when the delivery of a basic security is due, which underlies a futures contract. Futures positions rarely reach maturity since they are, in most cases, squared beforehand.

Maturity Month

The month during which the basic security is delivered on a set day.

Modern Portfolio Theory

A theory, which says that the optimum composition of a portfolio is then achieved when the highest possible returns are achieved at the highest possible risk, which appears reasonable for a certain investor. The MPT was developed in 1952 by the American, H. M. Markowitz.

Money

G (Geld) [M (Money)]: At this price, there was demand for the share, however there were no offers of sale.
B (Brief) [L (Letter)]: Shares were offered at this price, there were no buyers.
b (bezahlt) [p (paid)]: supply and demand were equal. Synonymous to no price supplement.
exD (ohne Dividende) [WD (Without Dividends)]: Opening price after reduction of the dividend.
bB (bezahlt Brief) [PL (Paid Letter)]: All purchase orders were completed at this rate, however there was yet another offer.
bG (bezahlt Geld) [PM (Paid Money)]: All purchase orders were completed at this rate, however there was yet another demand.
T (Taxkurs) [E (Estimated Rate)]: A price could not be set and so was estimated.

Mortgage Bonds

Loans: a collective term for interest-bearing obligations with a fixed agreed duration. Both civil adjustments (e.g. federation, states and communities) and private companies (industrial obligations, industrial loans) emerge as issuers. Loans are a beneficial financial alternative to investment projects compared to conventional bank financing. A loan securitises a creditor’s claim, that is to say, pays a certain amount, which the security issuer owes the investor. This sum of money, also called nominal value, can for example be €100.00 or another amount and/or another currency. It is to be paid back to the investor at a previously agreed time. The period of time between starting to pay interest on an issue and repayment (redemption) is described as the duration of a security. If part of the duration has already expired then the remaining period until redemption is described as maturity. Loans include, for example, mortgage bonds, industrial obligations, community obligations and civil loans.

Moving Averages

A Moving Average is an indicator that shows the average value of a security's price over a period of time. When calculating a moving average, a mathematical analysis of the security's average value over a predetermined time period is made. As the security's price changes, its average price moves up or down. The most popular method of interpreting a moving average is to compare the relationship between a moving average of the security's price with the security's price itself. A buy signal is generated when the security's price rises above its moving average and a sell signal is generated when the security's price falls below its moving average. The most popular moving average is the 200-day moving average. This moving average has an excellent track record in timing the major (long-term) market cycles. We would like to suggest to our investors to consider using the appropriate moving average in accordance to the period of investment in CCR's stocks they are aiming at.

N

Net Position

The total position of a market participant, which is produced by offsetting the purchase positions against the sales position in a contract.

New Highs-Lows cumulative (NH-NL)

This long-term indicator describes the difference between the number of shares, which have reached an annual high and the number of shares, which have reached an annual low. By means of this indicator, the current market trend should be confirmed using a chart. Most of the time, this indicator runs parallel to the overall market. If it deviates heavily from this, then a reversal of the market is to be assumed. Strong deviations of this indicator from the trend during a bull market show potential weaknesses. If in contrast the indicator deviates with a falling market, then the market is showing relative strengths.

Normal Market

The market situation where the prices for contracts with a later maturity date are higher than contracts, which mature sooner.

Notice of Allocation

Notification to the option writer that his exercising option was allotted.

Notice of Exercise

Notification of the option holder that he has the intention to make use of his warrant, that is to say, to exercise his agreement. For the holder of calls (puts), this means that he informs the clearing house of his intention to buy (sell) the basic value.

Notification Day

The latest point in time at which the seller of futures contracts can inform the buyer, through the clearing house, about the properties of the basic securities delivered to him at the maturity of the contract and the delivery time.

O

Off-exchange Traded Option

Non-standardised options contract, the details of which are mutually agreed by both parties and which is not traded on a stock exchange.

Offsetting

The cancellation of a position by entering a converse position.

Offsetting Transaction

A transaction where a short or long position is offset by the purchase or sale of the same number of contracts with the same maturity date.

Open Interest

The number of non-offset contracts following a stock exchange session.

Open Outcry System

A trading method on the stock exchange whereby the floor traders shout out their supplies and demand or use hand signals for this.

Open Outcry Trading

A trading method on the stock exchange whereby the floor traders shout out their supplies and demand or use hand signals for this.

Open Position

The position, which was entered through the purchase or sale of a contract and has not yet been offset by an opposed position.

Opening Trade

The purchase or sale of contracts through which a new position is entered.

Option

An agreement, which entitle a contracting partner the unilateral right to buy (call) or sell (put) a previously agreed amount of goods or security at an agreed price within a defined time.

Option Holder

An investor with a long position in option from which the right – but not the obligation – results to buy or sell the basic value at the exercise price.

Option traded on the stock exchange

Standardised option contract, which is approved for trade on a stock exchange.

Options Buyer

A market participant, who buys options contracts.

Options Class

All options of the same type with the same basic security.

Options Premium

The price, which the options buyer pays the options writer for the right to buy (call) or sell (put) the basic security.

Options Price

The price, which the options buyer pays the options writer for the right to buy (call) or sell (put) the basic security.

Options Price Model

A mathematical model to calculate the theoretical options price and the implicit volatility of an option. The Black&Scholes, Cox, Ross and Rubinstein options price models are among the most famous models.

Options Series

The total of all options of the same type (puts or calls) with the same basic security, basic price and expiry date.

Options Writer

A seller of an options contract, who enters the obligation to buy or sell the basic security if the options buyer decides to exercise his option.

Options Writer Option

A share option, which is hedged through the provision and pledging of a corresponding number of prescribed titles by the options writer.

Order valid until cancelled

Orders, which stay in the system until they are either used or cancelled.

OTC Market

Off-exchange market for securities, which takes place directly via telecommunications systems between the traders.

OTC Option

Non-standardised options contract, the details of which are mutually agreed by both parties and which is not traded on a stock exchange.

Out-of-the-money Option

An option, whose exercise price is clearly above or below the price of the basic security. A call is out of the money if the market value of the basic security is lower than the exercise price; a put is out of the money if the market value of the basic security is higher than the exercise price.

Out-of-the-money-Option

An option, whose exercise price is clearly above or below the price of the basic security. A call is out of the money if the market value of the basic security is lower than the exercise price; a put is out of the money if the market value of the basic security is higher than the exercise price.

P

PER

It is the most established indicator in stock analysis. In order to calculate the PER, the stock price is divided by the net profit (after tax) per share. In principle, the PER is an amortization calculation. How many years does the company need in order to have “earned” the price through the profit? As a rule of thumb: the lower the PER, the more favourably a share is assessed. The PER analysis does have weaknesses: what happens when there is no profit? Then the price-sales ratio of the turnover multiple must be drawn on. Comparisons between the different branches are also difficult. The automotive industry traditionally has really low PERs while the software sector is very high. The increases in profit are the benchmarks for this. If the surpluses of a sector grow with about 50 percent a year then a PER of the same amount is also justifiable.

Perfect Hedge

A hedge where the profit or loss at the spot position and the profit or loss at the hedge position cancel each other.

Physical Delivery

The delivery of the effective basic security to fulfil a futures contract. Contracts, which do not refer to deliverable goods or financial tools, will be settled by cash at maturity.

Pit

A term for the areas dedicated to trading activities and the trade of a certain tool. These areas are mostly octagonal and set up in stages on the exchange floor. In German, Pits are called Börsenringe [Rings].

Point & Figure Chart

With this type of chart, increasing prices are represented by an “X“ and falling prices by an “O“. A new equal symbol is then only added if the price has increased/fallen to a previously set percentage rate. A limit value is also set for the beginning of a new column with the opposed symbol (trend reversal). Depending on which limit values were chosen, smaller short-term price fluctuations are not taken into account – therefore it is easier to identify longer-term trends. Because, compared to all other chart representations, P&F charts have no timeline, the overall picture remains unaffected even with longer lateral trends.

Portfolio Immunisation

A portfolio strategy, which aims at protecting the returns of a loan portfolio against losses from changes in the interest rate.

Portfolio Insurance

A strategy, which aims at ensuring a minimum portfolio return, while simultaneously retaining the option to benefit from a higher market return.

Position

The state of the obligations of a market participant concerning a certain financial tool. This can be a long or a short position.

Position Limit

The maximum number of contracts at the same basic security, which an individual or a group of people can hold at a given time.

Position Trading

A trading strategy where open positions are maintained for a longer period, generally at least six months to a year.

Premium

In stock exchange trading: the difference between a security’s nominal value and higher market value, expressed in % of the nominal value.
In foreign exchange trading: the difference between the spot price and the higher forward price.

Premium

The price, which the options buyer pays the options writer for the right to buy (call) or sell (put) the basic security.

Price-Earnings Ratio

It is the most established indicator in stock analysis. In order to calculate the PER, the stock price is divided by the net profit (after tax) per share. In principle, the PER is an amortization calculation. How many years does the company need in order to have “earned” the price through the profit? As a rule of thumb: the lower the PER, the more favourably a share is assessed. The PER analysis does have weaknesses: what happens when there is no profit? Then the price-sales ratio of the turnover multiple must be drawn on. Comparisons between the different branches are also difficult. The automotive industry traditionally has really low PERs while the software sector is very high. The increases in profit are the benchmarks for this. If the surpluses of a sector grow with about 50 percent a year then a PER of the same amount is also justifiable.

Price-Earnings-Ratio

It is the most established indicator in stock analysis. In order to calculate the PER, the stock price is divided by the net profit (after tax) per share. In principle, the PER is an amortization calculation. How many years does the company need in order to have “earned” the price through the profit? As a rule of thumb: the lower the PER, the more favourably a share is assessed. The PER analysis does have weaknesses: what happens when there is no profit? Then the price-sales ratio of the turnover multiple must be drawn on. Comparisons between the different branches are also difficult. The automotive industry traditionally has really low PERs while the software sector is very high. The increases in profit are the benchmarks for this. If the surpluses of a sector grow with about 50 percent a year then a PER of the same amount is also justifiable.

Price-Sales Ratio

The price-sales ration (PSR) is an indicator of the fundamental stock analysis. It shows the percentage share of the stock price on the sales. The PSR is calculated whereby the current market capitalisation of a company is divided by the revenue of the last twelve months.

Program-Trading

A computer-supported, index arbitration, where the trader looks to achieve a short-term return from price differences between a share basket or index and the futures contracts traded on this index.

PSR

The price-sales ration (PSR) is an indicator of the fundamental stock analysis. It shows the percentage share of the stock price on the sales. The PSR is calculated whereby the current market capitalisation of a company is divided by the revenue of the last twelve months.

Purchase Option

An option contract, which entitles its holder, during a certain period or at a set time, to buy a certain amount of a certain commodity at a previously determined price and which obliges the option writer to sell the basic security if the holder decides to exercise his option.

Put

An option contract, which entitles its holder to buy a certain amount of the basic security at a set price, at or before a set time, and which obliges the option writer to accept the basic security if the holder decides to exercise his option.

R

Relative Profits/Losses

With relative profits/losses, the absolute highest or lowest positions are not used to calculate the winners/losers but instead the relative highest and lowest positions. Relative because the prices are always viewed in comparison to the overall market (index in which the share is represented). Example: If Daimler-Chrysler has fallen by 12% at the annual review and the Dax by 20% in comparison, then Daimler-Chrysler has relatively increased by 8%. This tool gives investors the option to view the price development of a share in relation to the overall market.

Report

In stock exchange trading: the difference between a security’s nominal value and higher market value, expressed in % of the nominal value.
In foreign exchange trading: the difference between the spot price and the higher forward price.

Report

The market situation where the prices for contracts with a later maturity date are higher than contracts, which mature sooner.

Reverse Split

A reverse split is the reverse process to a share split. Several securities from a listed company are combined within a share. Consequently, the share appears to be more expensive. Companies consider this step especially after a strong slump in prices or capital measures in the course of spin-offs. The advantages of the share split, such as higher liquidity and therefore better tradability, are relinquished for a visually higher price.

REX

German abbreviation for: Deutscher Rentenindex [German Bond Index]. It is calculated by the German Stock Exchange and reflects the weighted average price of 30 ideal types of German bonds. The REX is calculated both as a price and a performance index.

Risk Management

Measures to monitor the risk to a position through the use of financial futures and options.

Routine-Swap

The exchange of interest rates to raise different interest-bearing capital.

S

Scalper

Speculators who use the smallest price fluctuations to make profits and who offset their open positions within the shortest time, mostly within the same exchange session.

Scalping

A trading method where positions are entered for a very short time during which the trader tries to profit from very small price differences.

Security

A security, which must be provided to hold a short position in options or a futures position in order to cover a loss resulting from adverse price fluctuations.

Selective Hedging

A hedging strategy, which is based on the market expectations of the market participant who, in certain cases, only hedges some of his position

short

The selling position, which has not yet been offset through the purchase of an opposed position.

Short Sale

The sale of financial tools or goods, which the seller does not own.

Short Selling

If a stock price dramatically branches out on the stock exchange without basic reasoning, then this is often referred to as “short selling”. This type of investment is very speculative. With such a transaction, shares are offered under the current price at a precisely set time. The problem here is that the sellers do not even own the shares. Therefore they must buy them at some point in order to be able to return them to the lender. Consequently they speculate that the share price will fall even more. Then they buy the shares themselves and still pocket a profit. If the stock price develops in the other direction, the short seller faces a high loss. So-called hedge funds regularly use this type of transaction. The effect of such transactions if they are implemented on a large scale is that in a downstream float of the stock exchange, the pressure to sell through short selling is increased. Vice versa, it can be that, with an upstream float, this trend is reinforced, because the short sellers are caught off-guard and must buy ahead. According to information from the German Shares Institute (DAI), some banks, in the last period of uncertainty, stopped lending stocks of security in general as well as shares to the hedge funds in particular. Therefore shares were then also not able to be sold short and consequently the slump is reinforced. For private investors, short selling shares is actually not an issue because of the high risk. Yet it certainly is sensible and useful to observe and note these kinds of transactions, about which is always reported. The DAI explains that this can give precise information on whether a market is oversold – through short selling – or through stocking up.

Short-Call

The position, which results from the sale of a call, and which binds the buyer to sell the basic security at the agreed price when exercising the option.

Short-Hedge

Entering a short position on the futures market to hedge a long position on the spot market.

Short-Position

The position, which results from the sale of an options contract.

Short-Put

The position, which results from the sale of a put and which binds the buyer to buy the basic security at the agreed price when exercising the option.

Shortened Fiscal Year

A shortened financial year, which emerges when the end of the financial year is offset. The shortened fiscal year covers the period between the end of the last financial year according to the old cycle and the start of the next fiscal year according to a new cycle. Example: RWE AG changed its financial year. After a financial year from 1st July to 31st December 2000, the holding’s financial year now corresponds to the calendar year.

Speculation

An activity, which is oriented towards capitalising on an expected change in the market, whereby a relatively high risk is taken.

Speculator

A market participant who orients his activities to capitalise on a future-expected price difference. Speculators generally take high risks and, through their activity, they contribute to the liquidity of the market.

Spot Market

The market on which deals are concluded for immediate delivery and payment.

Spot-Futures Arbitration

The purchase of a tool on the spot market and the simultaneous sale of the same tool on the futures market.

Spread

The simultaneous purchase and sale of the same type and class of options, yet with different basic prises and/or expiry dates.

Spread Order

An order for the simultaneous purchase and sale of the same class of options specifying the price difference between the bought and sold position, which is to be adhered to.

square

To cancel an open position through a corresponding offset transaction.

squared

The description of a position, which is neither long nor short.

Stock Index Future

A contractual agreement to buy or sell a standardised stock index value at a previously negotiated stock price at a later, standardised maturity date.

Stock Option

A contractually agreed right to buy or sell a certain number of shares within a set period of time at a fixed price.

Stock Split

In a stock split, a no-par share is divided into smaller shares, corresponding to the split ratio. Through this, a PLC’s stock of shares increases and shares with a high price level become visually more beneficial. For the shareholder, his share in the PLC does not change as he holds accordingly more shares than before the split.

Stop-Limit Order

Stop-market order: order to be bought or sold as soon as a certain price is reached. Stop-limit order: as above, except a limit is planned with the settlement. The advantage of stop-order or stop-limit orders is that the investor does not have to constantly monitor the market and the performance of the respective shares.

Stop-Loss Orders

Careful investors protect themselves against an unexpected stock exchange crash whereby they issue their bank with a stop-loss order. Then the shares are automatically sold as soon as the stock exchange prices fall below the value named by the investor. Admittedly, an instinct is necessary to place the stop-limit correctly. If it is set too close below the last highest price, the share rushes from the securities account with temporary price fluctuations and the investor misses out with the subsequent price boom. As a rule of thumb: with DAX securities, the shares should be hedged with a stop-limit of 10 percent below the current price. With second-line stocks and new market securities, a margin of 20 percent is better. Furthermore it is advisable to choose bent securities as a limit instead of round prices. Because if there are lots of stop-loss orders at the same level, exceeding the limit causes a flood of sales and the share price dramatically branches out. On the floor, stop-loss orders are automatically settled “best” once the limit has been reached - therefore, is sold at the next available sales price. However this does not apply to the Xetra trade. If the price here falls below the stop-limit, the order will be cancelled as unachievable. Therefore stop-orders in the Xetra should always be monitored.

Stop-Market Order

Stop-market order: order to be bought or sold as soon as a certain price is reached. Stop-limit order: as above, except a limit is planned with the settlement. The advantage of stop-order or stop-limit orders is that the investor does not have to constantly monitor the market and the performance of the respective shares.

Straddle

A strategy whereby the same number of puts and calls are bought or sold on the same basic security and with the same exercise price and the same expiry date.

Strangle

A trading strategy whereby the same number of puts and calls are bought or sold on the same basic security and with the same expiry date but where the exercise price of the call is higher than that of the put.

Strap

An options strategy comprising two calls and a put on the same basic security and with an identical exercise price and expiry date.

Strip

An options strategy comprising two puts and a call on the same basic security and with an identical exercise price and expiry date.

Swap

The simultaneous use of relative financial costs by two contracting partners.

Synthetic

The description of a position, which results from a combination of options and/or futures and which has the same profit/loss profile as the reproduced tool. Synthetic futures positions can be constructed from a combination of calls and puts, synthetic options from a combination of options and futures.

T

THS Transactions

MATIF-specific term for acquisitions in Matif contracts, which are conducted outside the official trading time but which are settled via the clearing house.

Ticker

Part of the trading screen, which shows the current prices of the tools selected by the traders.

Time-Spread

An options strategy comprising calls or puts with the same exercise price whereby the options which expiry soon are written and the options with a later expiry date are bought.

Treasury Bonds

Treasury bonds are not Federal listed continuous issues with a minimum amount of DM1000 to be invested. They are offered with a one or two-year maturity term. The interest payment is in the form of discount of reserves, which means the interest rates are discounted and are already deducted upon issuing the security’s nominal value.

Type of Option

The options are divided into two types: calls and puts.

U

Uncovered Position

A long or short position, which is not hedged by an opposed position of the same amount.

V

Variation Margin

A change to the margin due to the change of a position on a value basis from one trading day to the next.

Vega

A standard for the price sensitivity of an option to a change or undervaluation of the volatility.

Vertical Spread

A spread strategy where the options have the same expiry date but different basic prices.

Volatility

A standard for the expected or historical fluctuation margins of a financial tool during a certain period.

W

Unfortunately there is no concept for this letter available.

Z

Unfortunately there is no concept for this letter available.

Current share price

 

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