Quota (1) A limit on imports or exports. (2) A country's
subscription to the IMF.
Quote An indicative price. The price quoted for information
purposes but not to deal.
Rally A recovery in price after a period of decline.
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Range The difference between the highest and lowest price of a
future recorded during a given trading session.
Rate The price of one currency in terms of another. It has the
same meaning as the term parities.
Ratio Calendar Spread Selling more near-term options than longer maturity options
at the same strike price.
Ratio Spread Buying a specific quantity of options and selling a larger
quantity of out-of-the-money options.
Reaction A decline in prices following an advance.
Real A price, interest rate or statistic that has been adjusted to
eliminate the effect of inflation.
Recession A decline in business activity. Often defined as two
consecutive quarters with a real fall in GNP.
The rate at which interest earned on a loan can be
reinvested. The rate may not attract the same level of
interest as the principal amount.
Repo Rate See "Repurchase Agreement".
Report French term for premium.
Agreements by a borrower where they sell securities with a
commitment to repurchase them at the same rate with a
specified interest rate.
A currency held by a central bank on a permanent basis as a
store of international liquidity. Reserve currencies are
typically Dollar, Deutschemark, and sterling.
Reserve Requirement The ratio of reserves to deposits, expressed as a fraction
prescribed by national banking authorities, including US.
(French) The 25% of its quota to which a member of the IMF
has unconditional access, and for which there is no
obligation to repay.
Funds held against future contingencies, normally a
combination of convertible foreign currency, gold, and
SDRs. Official reserves are to ensure that a government can
meet near term obligations. They are an asset in the
balance of payments.
Resistance A price level at which the selling is expected to take place.
Resistance Point or Level
A price recognized by technical analysts as a price which is
likely to result in a rebound but if broken through is likely
to result in a significant price movement.
Retail Price Index Measurement of the monthly change in the average level of
prices at retail, normally of a defined group of goods.
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Retail Sales are a measure of the total receipts of retail
stores. Monthly percentage changes reflect the rate of
change of such sales and are widely followed as an indicator
of consumer spending. Rises in Retail Sales are often
associated with a strong economy, and therefore an
expectation of higher short term interest rates that are
often supportive to a currency in at least the short term.
A system for screen based trading that has been in
operation since the early 1980s. Reuter Dealing now has a
matching optional enhancement known as Dealing 2000-2.
Revaluation Increase in the exchange rate of a currency as a result of
Revaluation Rate The rate for any period or currency which is used to revalue
a position or book.
Reversal Process of changing a call into a put.
The identification and acceptance, or offsetting of the risks
threatening the profitability or existence of an
organization. With respect to foreign exchange, involves
among others consideration of market, sovereign, country,
transfer, delivery, credit, and counterparty risk.
Risk Position An asset or liability, which is exposed to fluctuations in
value through changes in exchange rates or interest rates.
Risk Premium Additional sum payable, or return, to compensate a party
for adopting a particular risk.
A combination of purchasing put options with the sale of
call options. The put limits downside, while the call limits
There are risks associated with any market. It means
variance of the returns and the possibility that the actual
return might not be in line with the expected returns. The
risks associated with trading foreign currencies are: market,
exchange, interest rate, yield curve, volatility, liquidity,
forced sale, counter party, credit, and country risk.
Rolling over The substituting of a far option for a near option of the
same underlying stock at the same strike/exercise price.
(1) Where the settlement of a deal is carried forward to
another value date, based on the interest rate differential
of the two currencies example: next day. (2) An overnight
swap, specifically the next business day against the
following business day (also called Tomorrow Next,
abbreviated to Tom-Next).
Running a Position Keeping open positions in the hope of a speculative gain.
Same Day Transaction A transaction that matures on the day the transaction takes
Sandwich Spread Same as a butterfly spread.
Scalping A strategy of buying at the bid and selling at the offer as
soon as possible.
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SDR Special Drawing Right. A standard basket of five major
currencies in fixed amounts as defined by the IMF.
Selling Rate Rate at which a bank is willing to sell foreign currency.
Series All options of the same class which share a common strike
price and expiration date.
Settlement Actual physical exchange of one currency for another.
Settlement Date It means the business day specified for delivery of the
currencies bought and sold under a Forex contract.
Settlement Price The official closing price for a future set by the clearing
house at the end of each trading day.
Settlement Risk Risk associated with the non-settlement of the transaction
by the counterparty.
A market position where the client has sold a currency he
does not already own, usually expressed in base currency
Short / Short Position A shortage of assets in a particular currency. See Short Sale.
Short Contracts Contracts with up to six months to deliver.
Short Covering Buying to unwind a shortage of a particular currency or
Short Forward Date/Rate
The term short forward refers to a period of up to two
months, although it is more commonly used with respect to
maturities of less than one month.
The sale of a currency futures not owned by the seller at
the time of the trade. Short sales are usually made in
expectation of a decline in the price.
Shorts See "Short Forward Date/Rate".
Short-Term Interest Rates Normally the 90 day rate.
SITC Standard International Trade Classification. A system for
reporting trade statistics in a common manner.
SOFFEX Swiss Options and Financial Futures Exchange, a fully
automated and integrated trading and clearing system.
Soft Market More potential sellers than buyers, which creates an
environment where rapid price falls are likely.
Split Date See Broken Date.
(1) The most common foreign exchange transaction. (2)
Spot refers to the buying and selling of the currency where
the settlement date is two business days forward.
Spot Month The contract month closest to delivery.
Spot Next The overnight swap from the spot date to the next business
Spot Price/Rate The price at which the currency is currently trading in the
Spot Week A standard period of one week swap measured from the
current value date of the currency spot rate.
(1) The difference between the bid and ask price of a
currency. (2) The difference between the prices of two
related futures contracts. (3) For options, transactions
involving two or more option series on the same underlying
Square Purchases and sales are in balance and thus the dealer has
no open position.
Squawk Box A speaker connected to a phone, often used in broker
Squeeze Action by a central bank to reduce supply in order to
increase the price of money.
An active market which can absorb large sales or purchases
of currency without having any major impact on the interest
Stagflation Recession or low growth (stagnation) in conjunction with
high inflation rates.
Standard A term referring to certain normal amounts and maturities
Standard and Poor's (S&P)
A US firm engaged in assessing the financial health of
borrowers. The firm also lends its name to the S&P 500
Central Bank activity in the domestic money market to
reduce the impact on money supply of its intervention
activities in the Forex market.
Sterling British pound, otherwise known as cable.
Stocky Market slang for Swedish Krona.
Stop Loss Order
Order given to ensure that, should a currency weaken by a
certain percentage, a short position will be covered even
though this involves taking a loss. Realize profit orders are
Stop Out Price US term for the lowest accepted price for Treasury Bills at
Straddle The simultaneous purchase/sale of both call and put options
for the same share, exercise/strike price and expiry date.
A bond with unquestioned right to repayment of principal
and interest at the specified dates with no additional
further rights or bonuses.
Straight Date See "fixed dates".
Strap A combination of two calls and one put.
Strike Price Also called exercise price. The price at which an option
holder can buy or sell the underlying instrument.
Strip A combination of two puts and one call.
Structural Unemployment Unemployment levels inherent in an economic structure.
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A price level at which the buying is expected to take place.
When an exchange rate depreciates or appreciates to a
level where (1) Technical analysis techniques suggest that
the currency will rebound, or not go below; (2) The
monetary authorities intervene to stop any further
downward movement. See Resistance Point.
The simultaneous purchase and sale of the same amount of
a given currency for two different dates, against the sale
and purchase of another. A swap can be a swap against a
forward. In essence, swapping is somewhat similar to
borrowing one currency and lending another for the same
period. However, any rate of return or cost of funds is
expressed in the price differential between the two sides of
Swap Price A price as a differential between two dates of the swap.
Swap Rate See "Forward Margin".
Swaption An option to enter into a swap contract.
Society for Worldwide Interbank Financial
Telecommunications is a Belgian based company that
provides the global electronic network for settlement of
most foreign exchange transactions.
Swissy Market slang for Swiss Franc.
Switch See Deposit Swap.
Options or futures that create a position that is able to be
achieved directly, but is generated by a combination of
options and futures in the relevant market. In foreign
exchange a SAFE combines two forward contracts into a
single transaction where settlement only involves the
difference in values.