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Federal Reserve Board: The functions of the board include formulating and executing monetary policy, overseeing the Federal Reserve Banks, and regulating and supervising member banks. Monetary policy is implemented through the purchase or sale of securities, and by raising or lowering the discount rate-the interest rate at which banks borrow from the Federal Reserve. A board of Directors comprised of seven members which directs the federal banking system, is appointed by the President of the United States and confirmed by the Senate.

Fence: A protective strategy in which a written call and a long put are taken against a previously owned long stock position. The options may have the same strike price or different strike prices and the expiration months may or may not be the same. For example, if the investor previously purchased XYZ Corporation at $46 and it rose to $62, a ‘collar’ involving the purchase of a May 60 put and the writing of a May 65 call could be established as a way of protecting some of the unrealized profit in the XYZ Corporation stock position. The reverse — a long call combined with a written put — might also be used if the investor has previously established a short stock position in XYZ Corporation.

Fill or Kill order (FOK): Also known as a quick order, is a limit order which, if not filled immediately, is canceled.

Fill-or-kill order (FOK): A type of option order which requires that the order be executed completely or not at all. A fill-or-kill order is similar to an all-or-none (AON) order. The difference is that if the order cannot be completely executed (i.e., filled in its entirety) as soon as it is announced in the trading crowd, it is to be ‘killed’ (i.e., cancelled) immediately. Unlike an AON order, a FOK order cannot be used as part of a GTC order.

Financial futures: Include interest rate futures, currency futures, and index futures. The financial futures market currently is the fastest growing of all the futures markets.

First notice day: Notice of intention to deliver a commodity in fulfillment of an expiring futures contract can be given to the clearinghouse by a seller (and assigned by the clearinghouse to a buyer) no earlier than the first notice day. First notice days differ depending on the commodity.

Floor broker: A trader on an exchange floor who executes trading orders for other people.

Floor broker: A person who executes orders on the trading floor of an exchange on behalf of other people. They are also known as pit brokers because the trading area has steps down into a “pit” where the brokers stand to execute their trades.

Floor trader: An exchange member on the trading floor who buys and sells for his or her own account.

Floor trader: Exchange members present on the exchange floor to make trades on their own behalf. They may be referred to as scalpers or locals.

Forward contract: A contract entered into by two parties who agree to the future purchase or sale of a specified commodity. This differs from a futures contract in that the participants in a forward contract are contracting directly with each other, rather than through a clearing corporation. The terms of a forward contract are negotiated between the buyer and seller, while exchanges set the terms of futures contracts.

Forward pricing: The practice of locking in a price in the future, either by entering into a cash forward contract or a futures contract. In a cash forward contract, the parties usually intend to tender and accept the commodity, while futures contracts are generally offset, with a cash transaction occurring after offset.

Free market: A market place where individuals can act in their own best interest, free from outside forces (freedom means freedom from government) restricting their choices, or regulating or subsidizing product prices. Free market also refers to the political system where the means of production are owned by free, non-regulated individuals.

Full carry: When the difference between futures contract month prices equals the full cost of carrying (storing) the commodity from one delivery period to the next. Carrying charges include insurance, interest, and storage.

Fundamental analysis: A method of predicting stock prices based on the study of earnings, sales, dividends, and so on.

Fundamental analysis: The study of specific factors, such as weather, wars, discoveries, and changes in government policy, which influence supply and demand and, consequently, prices in the market place.

Fungibility: Interchangeability resulting from standardization. Options listed on national exchanges are fungible, while over-the-counter options generally are not. Classes of options listed and traded on more than one national exchange are referred to as multiple-listed / multiple-traded options.

Futures Commission Merchant (FCM): An individual or organization accepting orders to buy or sell futures contracts or futures options, and accepting payment for his services. FCMs must be registered with the CFTC and the NFA, and maintain a minimum capitalization of $300,000.

Futures contract: A standardized and binding agreement to buy or sell a predetermined quantity and quality of a specified commodity at a future date. Standardization of the contracts enhances their transferability. Futures contracts can be traded only by auction on exchanges registered with the CFTC.

Futures Industry Association (FIA): The futures industry’s national trade association.


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