The premium (or discount) of a futures contract against its underlying spot/cash instrument that normally consists of an interest and dividend component. The fair value represents the rational pricing of a futures contract such that no arbitrage opportunity exists between the futures and cash.
Technical analysis ratios used in trading to identify future price movements – named after mathematician Leonardo Fibonacci. The most popular Fibonacci tools are retracements and extensions.
The execution of an order.
Fill or kill order
A limit order that will only be executed if it can be filled entirely to your specified order level. Otherwise it will be cancelled.
Financial Conduct Authority (FCA)
The authority responsible for supervising financial services firms in the UK. One of the FCA’s roles is to regulate the conduct of brokers and dealers in securities, options, shares, spread bets and CFDs so clients get a fair deal.
CFD and spread betting share positions carried overnight will incur financing costs for the full consideration of the position. If you open a position with a 5% margin, overnight finance will be based on 100% of the balance. Clients who hold a long position will pay interest; clients who are short may receive interest.
Fiscal policy refers to governments’ spending policies, which have a significant impact on the overall economy. The policy affects government revenue and spending. When a government runs a deficit (spends more than it earns), it is putting more into the economy than it is taking out, adding to gross domestic product (GDP).
The difference between the bid and offer price that a broker can adjust according to market conditions. Also known as dynamic spread, floating spread or variable spread.
Floating profit/ loss
Current profit/loss on open positions calculated at current prices.
The forex market is made up of banks, commercial companies, central banks, investment management firms, hedge funds, retail forex brokers and investors. It’s a financial market for trading international currencies. Investors speculate on the relative strength of one currency against another by buying the currency of one country and selling it against another.
A contract which locks in the price at which you can ‘buy’ or ‘sell’ an asset (such as a currency pair or commodity) on a future date.
Dividend paid by a company out of profits on which the company has already paid tax. The investor is entitled to an imputation credit, or reduction in the amount of income tax that must be paid, up to the amount of tax already paid by the company.
Tax rate at which the dividend is franked.
Funds on the trading account which may be used to open a position. It’s calculated as account value less necessary margin.
A market capitalisation weighted index of the top 100 companies listed on the London Stock Exchange. This is often used as an indicator to assess the broader UK market.
This involves analysing and valuing financial assets based on factors such as news, financial statements and earnings forecasts, company strategy and risk assessments, demand and supply forecasts, projections of future economic growth, industry developments and government policy. In fundamental analysis, an investor uses real data to evaluate a stock’s value rather than using charts and technical analysis to make trading decisions.
A future rate is notionally an agreement to conduct a transaction at some specified time in the future, with the price agreed now. A futures CFD will automatically expire at a specified time in the future, whereas a spot or cash CFD has no such expiry time. Often the price of a future contract will differ from the cash price. Also see Fair value, Expiration/expiry.