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A
Aim
The Alternative Investment Market, an official Stock Exchange market for investors seeking investment opportunities in smaller, and usually, higher risk entities. Not available as a CFD.
Arbitrage
Basically this is the art of buying something cheap in one place and selling it at a profit somewhere else. The rise of global electronic trading has made this process much faster and easier, enabling arbitrageurs - as they're called - to switch huge sums of money across continents in seconds in an attempt to exploit small differences in the quoted prices of investments in different markets - foreign currency, for example.
In share trading, so-called risk arbitrageurs attempt to make profits from the usual share price movements of companies that are in takeover situations. These investors will simultaneously buy stock in the target company, whose share price normally rises, while selling that of the bidder, whose share price normally falls. They will also invest in the target company if they think there's a chance the bidder will have to raise the offer price.
Ask
The lowest price at which someone will sell an investment at a given moment.
B
Bargain
Stockbroker jargon for a share transaction.
Bear
An investor who is negative towards shares, believing prices will fall. A Bear market is one where share prices across the entire market are generally, and consistently, falling.
Bid / Offer Spread
The difference between the buying price (bid), and the selling price (offer).
Blue Chip
The term used to define a company regarded as being a solid, and consequently safe, investment. The company will almost certainly be large, well established and profitable, but be conservatively managed.
Bull
An investor who is positive towards shares, believing prices will rise. A Bull market is one where share prices across the entire market are generally, and consistently, rising.
Bullion
Gold, silver, platinum, or palladium, in the form of bars or ingots.
C
CAC 40
An index of the largest 40 companies listed on the French CAC market. The CAC index is published by the Societe des Bourse Francaises.
Closed Position
An equal and opposite transaction, i.e. buying 1000 BT shares then selling 1000 BT shares, the position will be automatically closed.
Closing Price
The closing price is the last price for a tradable instrument at the time the market closes.
Commodity
A physical substance, such as food, grains, and metals, which is interchangeable with another product of the same type, and which investors buy or sell, usually through futures contracts.
Contingent Order
An order which is to be executed only if another order is executed first. An example of a contingent order would be to sell one specific security if another specific security has been bought.
Contracts for Difference (CFDs)
CFD means Contract for Difference. They were developed to allow clients to receive all the benefits of owning a stock without having to physically own the stock. In other words you cannot take delivery of a CFD so you have to settle the difference between where you bought the contract and where you sold it. The difference is either profit or loss.
Corporate Action
Any event initiated by a corporation which impacts its shareholders. For some such events, shareholders may or must respond to the corporate action or select from a list of possible actions. Examples of corporate actions include dividend payments, mergers, rights issues and stock splits.
(See: Dividend, Stock Split, Rights Issue and Consolidation)
Controlled Risk Bet (CRB)
A Controlled Risk Bet (CRB) is sometimes known as a guaranteed Stop loss order and can be placed on a range of instruments that we offer. A CRB allows you to open a specific bet and attach to it a guaranteed Stop loss order at a price you are prepared to be stopped out. Therefore you have a known ‘worse case scenario' should the market move against you, and you have a defined loss you are prepared to accept on that trade.
D
DAX 30 Index
The index of the biggest 30 companies listed on the Frankfurt Stock Exchange in Germany. The DAX is a 'total return' index in that it measures the returns from dividends as well as share price performance.
Day Order
The order placed will be active, i.e. pending, until the end of the day, or until it has been executed.
Dividends
That part of a company's profit after tax which is distributed to shareholders.
Dow Jones Industrial Average
'The Dow' is the oldest stock market index in the US, measuring the performance of a representative selection of 30 blue-chip companies. The 30 companies are selected by Dow Jones & Co and the Wall Street Journal.
E
Execution Only Stockbrokers
Those stockbrokers who offer clients, usually, an inexpensive trading facility with no advice, research or recommendations as to investment style or policy.
F
Financing Costs
CFD Share positions carried overnight will incur financing costs for the full consideration of the position. If a client opens a position with a 5% margin, finance overnight will be on the 100% balance. Clients who are long a CFD will pay interest to CMC Markets, clients who are short may receive interest from CMC Markets.
FSA
The Financial Services Authority. The regulatory authority responsible for the conduct of brokers and dealers in securities, options share CFDs and futures.
Future
A standardized, exchange-traded contract that requires delivery of a commodity, bond, currency, or stock index, at a specified price, on a specified future date. Unlike options, futures convey an obligation to buy.
FTSE Index
Three indices comprise the FTSE All Share index - FTSE100, FTSE Mid 250 & FTSE Small Cap.
G
GTC - Good Till Cancelled
An instruction to a broker that unlike normal practice the order does not expire at the end of the trading day. The order placed will remain active until it is either executed or cancelled.
H
Hedging
A way of reducing the risk of losses that may occur if interest rates, share prices or foreign exchange rates move in the wrong direction. This usually involves the use of CFD or futures contracts.
I
Illiquidity
The difficulty of changing your assets in cash because of a lack of demand for whatever it is you're trying to sell. See Liquidity. As a market maker CMC Markets provide liquidity by constantly quoting a bid and offer spread.
Index
A statistical indicator providing a representation of the value of the securities which constitute it. Indices often serve as barometers for a given market or industry and benchmarks against which financial or economic performance is measured.
L
LIBOR
The London Interbank Offered Rate, the rate charged by one bank to another for lending money.
Limit Order
An order to buy or sell a share at a specific price. The order will only be carried out by the broker at that price, or a better one. If the broker can't fulfil the limit order, it lapses.
Liquidity
The level of continual buy and sell activity making up the market demand for the shares and indicating the ease with which investors can undertake transactions.
Long
Buying an investment with a view of the investment going up (opposite of short)
M
Margin Requirements
Investors are asked to deposit a small percentage of the overall cost that would be required if they were to purchase the equivalent shares in the physical market. Even though the CFD investor's outlay is small in comparison to the equivalent physical trade, the investor will still be exposed to the same potential profit and loss. This means that your potential Return on Investment is magnified.
Mark-to-market
The daily adjustment of an account to reflect accrued profits and losses often required to calculate variations of margins.
Market Capitalisation / Mkt Cap
Market capitalisation is the number of shares in issue multiplied by the share price at the time the market capitalisation was calculated.
Mid Price
The mid point of the bid / offer spread quoted by the market makers. The price shown in the share price pages and market reports within the financial media, but not the price at which you could necessarily expect to conclude a deal to buy or sell. The price at which you buy will be higher and the price at which you sell will be lower than the mid price in almost all circumstances.
N
NASDAQ - National Association of Securities
Dealers Automated Quotations System
The second largest stock exchange in the US, specialising in high-tech and internet-related companies, such as Microsoft. The movements of the NASDAQ can have a significant effect on the UK markets, particularly the recently-launched techMARK index of technology, media and telephony companies.
New Issue
A company that is floated on the stock market for the first time. Offering shares to the investment public is a way of raising capital for further expansion. Also known as the Initial Public Offering (IPO).
NYSE - New York Stock Exchange
The largest and oldest US stock exchange
O
OCO - One Cancels the Other
If you place a sell limit and a sell stop order in the same stock at the same time. When either order is executed the other will automatically be cancelled. Also applies to a buy limit and buy stop order.
Option
The right, but not the obligation, to buy (call option) or sell (put option ) a specific amount of a given stock, commodity , currency, index, or debt, at a specified price (the strike price) during a specified period of time.
For the holder, the potential loss is limited to the price paid to acquire the option. When an option is not exercised, it expires. No shares change hands and the money spent to purchase the option is lost. For the buyer, the upside is unlimited. For the writer, the potential loss is unlimited unless the contract is covered, meaning that the writer already owns the security underlying the option.
There are two types of options: American style and European style. American options can be exercised at any time between the purchase date and the expiry date and European options can only exercised on a single day, usually its expiry date.
Out of Hours Trading
CMC Markets will allow clients to trade selected major stocks and indices outside the normal trading hours.
Order Book
Introduced on 20 October 1997. FTSE 100 stocks are traded on an electronic order book (inside the SEAQ quote system). When bid and offer prices match, new incoming orders are automatically against orders on the book.
Open Position
A long or short position which has not been closed out by an equal and opposite position.
OTC (Over The Counter)
A market conducted directly between dealers and principals via a telephone and computer network rather than a regulated exchange trading floor.
P
Portfolio
A collection of securities owned by an investor.
R
Rights Issue
An additional issue of shares by the company to existing share holders and at an advantageous, discounted, price. A means for the company to raise new funds for further development or to finance a new acquisition for cash. A two for five rights at 145p means that the existing share holder has the right to acquire a further two shares for every five currently held at a new cost of 145p per share acquired.
S
Sector
A distinct subset of a market whose components share similar characteristics. Stocks are often grouped into different sectors depending upon the company's business. For example the FTSE 100 has banking, oil and gas and pharmaceutical sectors.
Selling Short
This is practice of selling shares that you do not own in the hope that the share price falls before you have to settle the contract. If the price does fall you can then buy the shares at the lower price and pocket the difference.
Spread Betting
A type of bet that gives investors the chance of making unlimited winnings (and losses), in contrast to the conventional fixed-odds type of bet, where the potential winnings and losses are known before the event. They generally quote spreads wider than the market. Share CFDs are a more sophisticated way of trading.
S & P - Standard and Poor's Stock
Index
US performance index of the country's top 500 companies.
Stockbroker
An exchange member firm which provides advice and dealing services to the public as well as trading on its own account.
Stop order
An order to sell at a limit for which the specified price is below the current market price.
T
techMARK
This market groups together technology companies from across the market. It has its own indices, the FTSE techMARK 100 and the FTSE techMARK All Share.
Treasury
A bond issued by Government. Bonds issued by the UK government are called gilt edged stock , commonly referred to as gilts.
U
Underlying
Is the security or commodity that is delivered or being traded when dealing in futures or options.
V
Volatility
How quickly the price of a security rises and falls over time. A highly volatile share can be risky for short-term investors who stand a greater chance of buying at a peak and selling in a trough at a loss.
Y
Yield
The return earned on an investment taking into account the annual income
and its present value. There are a number of different types of yield,
and in some cases different methods of calculating each type.
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