Financial Glossary | F

Fair value

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.

Fibonacci

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.

Fill

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.

Financial spread betting

Financial spread betting is a tax-efficient way to speculate on fluctuations in the prices of thousands of global markets (including indices, shares, currencies and commodities). Investors can bet on whether the price of a product will go up or down. You never actually own the underlying stock, you just speculate on the price movement.

Financing costs

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

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).

Flexible spread

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.

Foreign exchange

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.

Forward

A forward trade (or contract) is the price of an asset for delivery at a defined future date, which is also the date of expiry. Most forward trades can be closed prior to the expiry date, to limit any loss or take a profit, for example. FX forwards are a common example of this type of contract.

Free margin

Funds on the trading account which may be used to open a position. It’s calculated as account value less necessary margin.

FTSE 100

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.

Fundamental analysis

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.

Futures

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.

Trading Glossary: F