Rally: An upward price movement. See Recovery.
Range: The difference between the highest and lowest prices recorded during a specified time period, usually one trading session, for a given futures contract or commodity option.
Ratio spread: A term most commonly used to describe the purchase of an option(s), call or put, and the writing of a greater number of the same type of options that are out-of-the-money with respect to those purchased. All options involved have the same expiration date. For example, buying 5 XYZ May 60 calls and writing 6 XYZ May 65 calls. See also Ratio write
Ratio write: An investment strategy in which stock is purchased and call options are written on a greater than one-for-one basis; i.e., more calls written than the equivalent number of shares purchased. For example, buying 500 shares of XYZ stock, and writing 6 XYZ May 60 calls. See also Ratio spread
Ratio writing: When an investor writes more than one option to hedge an underlying futures contract. These options usually are written for different delivery months. Ratio writing expands the profit potential of the investor’s option position. Example: an investor would be ratio writing if he is long one August gold contract and he sells (writes) two gold calls, one for February delivery, the other for August.
Reaction: The tendency for prices to decline after a price rise.
Realized gains and losses: The net amount received or paid when a closing transaction is made and matched together with an opening transaction.
Recovery: Rising prices following a decline.
Registered Commodity Representative (RCR): A person who is registered with the exchanges and the CFTC and is responsible for soliciting business, “knowing” his/her customers, collecting margin, submitting orders, and recommending and/or executing trades for customers. A registered commodity representative is sometimes called a “broker” or “account executive.”
Regulations (CFTC): The guidelines, rules, and regulations adopted and enforced by the Commodity Futures Trading Commission(the CFTC is a federal regulatory agency established in 1974) in administration of the Commodity Exchange Act.
Reparations: Parties that are wronged during a futures or options transaction may be awarded compensation through the CFTC’s claims procedure. This compensation is known as reparations because it “repairs” the wronged party.
Reportable positions: Positions where the reporting level has been exceeded. See also Reporting level.
Reporting level: An arbitrary number of contracts held by a trader that must be reported to the CFTC and the exchange. Reporting levels apply to all traders; hedgers, speculators, and spreaders alike. Once a trader has enough contracts to exceed the reporting level, he has a “special account,” and must report any changes in his positions.
Resistance: A term used in technical analysis to describe a price area at which rising prices are expected to stop or meet increased selling activity. This analysis is based on historic price behavior of the stock.
Resistance: A horizontal price range where price hovers due to selling pressure before attempting a downward move.
Retender: The right of a futures contract holder, who has received a notice of intention to deliver from the clearinghouse, to offer the notice for sale on the open market, thus offsetting his obligation to take delivery under the contract. This opportunity is only available for some commodities and only within a certain period of time.
Reversal / reverse conversion: An investment strategy used by professional option traders in which a short put and long call with the same strike price and expiration are combined with short stock to lock in a nearly riskless profit. For example, selling short 100 shares of XYZ stock, buying 1 XYZ May 60 call, and writing 1 XYZ May 60 put at favorable prices. The process of executing these three-sided trades is sometimes called ‘reversal arbitrage.’ See also Conversion
RHO: A measure of the expected change in an option’s theoretical value for a 1 percent change in interest rates.
Ring: A designated area on the exchange floor where traders and brokers stand while executing trades. Instead of rings, some exchanges use pits.
Risk disclosure document: A document outlining the risks involved in futures trading. The document includes statements to the effect that: you may lose your entire investment; you may find it impossible to liquidate a position under certain market conditions; spread positions may not be less risky than simple “long” or “short” positions; the use of leverage can lead to large losses as well as large profits; stop-loss orders may not limit your losses; managed commodity accounts are subject to substantial management and advisory charges.
There is a separate risk disclosure document for options which warns of the risks of loss in options trading. This statement includes a description of commodity options, margin requirements, commissions, profit potential, definitions of various terms, and a statement of the elements of the purchase price.
Rolling: A trading action in which the trader simultaneously closes an open option position and creates a new option position at a different strike price, different expiration, or both. Variations of this include rolling up, rolling down, rolling out and diagonal rolling.
Rolling hedge: Changing a futures hedge from one contract month to another. Rolling a short hedge may be advisable when more time is needed to complete the cash transaction to avoid delivery on the futures contract. Hedge rolling may also be considered to keep the hedge in the less active, more distant months, thus reducing the likelihood of swift price movements and the resulting margin calls.
Round turn: A complete futures transaction (both entry and exit); for example, a sale and covering purchase, or a purchase and liquidating sale. Commissions are usually charged on a “round-turn” basis.