EURO.uz -The Forex quick guide for beginners and private traders

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The Forex quick guide for beginners and private traders

OECD

Organization for Economic Cooperation and Development,

an international organization helping governments tackle

the economic, social and governance challenges of a

globalized economy.

Offer The rate at which a dealer is willing to sell the base

currency.

Offered Market Temporary situation where offers exceed bid.

Official Settlements

Account

A US balance of payments measure based on movement of

dollars in foreign official holdings and US reserves. Also

referred to as reserve transaction account.

Offset The closing-out or liquidation of a futures position.

page 97 of 110

Value Definition

Off-Shore

The operations of a financial institution which although

physically located in a country, has little connection with

that country's financial systems. In certain countries a bank

is not permitted to do business in the domestic market, but

can do business with other foreign banks. This is known as

an off-shore banking unit.

Old Lady Old lady of Threadneedle Street, a term for the Bank of

England.

One Cancels Other Order

Where the execution of one order automatically cancels a

previous order - also referred to as OCO or "One cancels the

other".

Open Interest

The total number of outstanding option or futures contracts

that have not been closed out by offset or fulfilled by

delivery.

Open Market Committee See Federal Open Market Committee.

Open Market Operations Central bank operations in the markets to influence

exchange and interest rates.

Open Position

Any deal which has not been settled by physical payment or

reversed by an equal and opposite deal for the same value

date. It can be termed as a high risk, high return

proposition.

Option

A contract conferring the right but not the obligation to buy

(call) or to sell (put) a specified amount of an instrument at

a specified price within a predetermined time period.

Option Class All options of the same type - calls or puts -listed on the

same underlying instrument.

Option Series All options of the same class having the same

exercise/strike price and expiration date.

Original Margin See Initial Margin.

OTC See - "Over the Counter".

Out-of-the-Money

A put option is out-of-the-money if the exercise/strike price

is below the price of the underlying instrument. A call

option is out-of-the money if the exercise/strike price is

higher than the price of the underlying instrument.

Outright Deal A forward deal that is not part of a swap operation.

Outright Forward

A foreign exchange transaction involving either the

purchase or the sale of a currency for settlement at a

future date.

Outright Rate The forward rate of a foreign exchange deal based on spot

price plus forward discount/premium.

Over Bought or Over Sold See long and short.

page 98 of 110

Value Definition

Over The Counter (OTC)

A market conducted directly between dealers and principals

via a telephone and computer network rather than a

regulated exchange trading floor. These markets have not

been very popular because of the risks both the parties face

in case the other party fails to honor the contract. They

have never been part of the Stock Exchange since they were

seen as "unofficial".

Overheated (Economy)

Is an economy on a high growth rate trajectory placing

pressure on the production capacity, resulting in increased

inflationary pressures and higher interest rates.

Overnight A deal from today until the next business day.

Overnight Limit

Net long or short position in one or more currencies that a

dealer can carry over into the next dealing day. Passing the

book to other bank dealing rooms in the next trading time

zone reduces the need for dealers to maintain these

unmonitored exposures.

Package Deal When a number of exchange and /or deposit orders have to

be fulfilled simultaneously.

Par (1) The nominal value of a security or instrument. (2) The

official value of a currency.

Parities The value of one currency in terms of another.

Parity

(1) Foreign exchange dealer's slang for "your price is the

correct market price". (2) Official rates in terms of SDR or

other pegging currency.

Payment Date The date on which a dividend or bond interest payment is

scheduled to be delivered.

Payroll Employment

Payroll employment is a measure of the number of people

being paid as employees by non-farm business

establishments and units of government. Monthly changes in

payroll employment reflect the number of net new jobs

created or lost during the month. Changes are widely

followed as an important indicator of economic activity.

Large increases in payroll employment are seen as signs of

strong economic activity that could eventually lead to

higher interest rates that are supportive of the currency at

least in the short term.

Permitted Currency

It means a foreign currency which is freely convertible, i.e.

a currency which is permitted by the rules and regulations

of the country concerned to be converted into major

reserve currencies, and for which a fairly active and liquid

market exists for dealing against the major currencies.

Petrodollars Foreign exchange reserves of oil producing nations arising

from oil sales.

PIBOR Paris Inter-bank Offered Rate.

Pip See point. (0.0001 of a unit).

Plaza Accord The 1985 Plaza Hotel agreement by the G5 to lower the

dollar.

Value Definition

Point

(1) 100th part of a per cent, normally 10,000 of any spot

rate. Movements of exchange rates are usually in terms of

points. (2) One percent of an interest rate, e.g. from 8-9%.

(3) Minimum fluctuation or smallest increment of price

movement.

Political Risk

The potential for losses arising from a change in government

policy or due to the risk of expropriation (nationalization by

the government).

Position

The netted total exposure in a given currency. A position

can be either flat or square (no exposure), long, (more

currency bought than sold), or short (more currency sold

than bought).

Position Limit

The maximum position, either net long or net short, in one

future or in all futures of one currency or instrument one

person is permitted to hold or control.

PPI Producer Price Indices. See Wholesale Price Indices.

Premium

(1) The amount by which a forward rate exceeds a spot

rate. (2) The amount by which the market price of a bond

exceeds its par value. (3) In regard to options, the price a

put or call buyer must pay to a put or call seller for an

option contract. (4) The margin paid above the normal price

level.

Prime Rate

(1) The rate from which lending rates by banks are

calculated in the US. (2) The rate of discount of prime bank

bills in the UK.

Principal A dealer who buys or sells stock for his/her own account.

Producer Price Index (PPI)

PPI is a measure of the average level of prices of a fixed

basket of goods received in primary markets by producers. A

rising PPI is normally expected to lead to higher CPI, and

thereby to potentially higher short term interest rates.

Profit Taking The unwinding of a position to realize profits.

Purchasing Power Parity

Model of exchange rate determination stating that the price

of a good in one country should equal the price of the same

good in another country after adjusting for the changes in

the price due to the change in exchange rate. Also known as

the law of one price.

Put Call Parity The equilibrium relationship between premiums of call and

put options of the same strike and expiry.

Put Option

A put option confers the right but not the obligation to sell

currencies, instruments or futures at the option exercise

price within a predetermined time period.

 


 

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