Futures

http://en.wikipedia.org/wiki/Futures_exchange

A standardized, transferable, 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. The risk to the holder is unlimited, and because the payoff pattern is symmetrical, the risk to the seller is unlimited as well. Dollars lost and gained by each party on a futures contract are equal and opposite. In other words, futures trading is a zero-sum game. Futures contracts are forward contracts, meaning they represent a pledge to make a certain transaction at a future date. The exchange of assets occurs on the date specified in the contract. Futures are distinguished from generic forward contracts in that they contain standardized terms, trade on a formal exchange, are regulated by overseeing agencies, and are guaranteed by clearinghouses. Also, in order to insure that payment will occur, futures have a margin requirement that must be settled daily. Finally, by making an offsetting trade, taking delivery of goods, or arranging for an exchange of goods, futures contracts can be closed. Hedgers often trade futures for the purpose of keeping price risk in check. also called futures contract.

Hedge

http://en.wikipedia.org/wiki/Hedge_(finance)

An investment made in order to reduce the risk of adverse price movements in a security, by taking an offsetting position in a related security, such as an option or a short sale.

Short

http://en.wikipedia.org/wiki/Short_(finance)
http://langasset.com/ishort.htm

Borrowing a security (or commodity futures contract) from a broker and selling it, with the understanding that it must later be bought back (hopefully at a lower price) and returned to the broker. Short selling (or “selling short”) is a technique used by investors who try to profit from the falling price of a stock. For example, consider an investor who wants to sell short 100 shares of a company, believing it is overpriced and will fall. The investor’s broker will borrow the shares from someone who owns them with the promise that the investor will return them later. The investor immediately sells the borrowed shares at the current market price. If the price of the shares drops, he/she “covers the short position” by buying back the shares, and his/her broker returns them to the lender. The profit is the difference between the price at which the stock was sold and the cost to buy it back, minus commissions and expenses for borrowing the stock. But if the price of the shares increase, the potential losses are unlimited. The company’s shares may go up and up, but at some point the investor has to replace the 100 shares he/she sold. In that case, the losses can mount without limit until the short position is covered. For this reason, short selling is a very risky technique. SEC rules allow investors to sell short only on an uptick or a zero-plus tick, to prevent “pool operators” from driving down a stock price through heavy short-selling, then buying the shares for a large profit.

Uptick Rule

http://en.wikipedia.org/wiki/Uptick_rule

‘Uptick’ is the name generally given to Rule 10a-1, under the Securities Exchange Act of 1934, which states that short selling is only permitted following a trade where the traded price was higher than the previously traded price (uptick). The Uptick rule is a former financial regulations rule, relating to the trading of securities in the United States. The rule was eliminated by the U.S. Securities and Exchange Commission (SEC), effective July 6, 2007.

Security

http://en.wikipedia.org/wiki/Security_(finance)

A security is a fungible, negotiable instrument representing financial value. Securities are broadly categorized into debt securities, such as banknotes, bonds and debentures, and equity securities, e.g. common stocks. The company or other entity issuing the security is called the issuer. What specifically qualifies as a security is dependent on the regulatory structure in a country. For example private investment pools may have some features of securities, but they may not be registered or regulated as such if they meet various restrictions.

Security Lending

http://en.wikipedia.org/wiki/Securities_lending

In finance, securities lending or stock lending refers to the lending of securities by one party to another. The terms of the loan will be governed by a “Securities Lending Agreement”, which, under U.S. law, requires that the borrower provides the lender with collateral, in the form of cash, government securities, or a Letter of Credit of value equal to or greater than the loaned securities. As payment for the loan, the parties negotiate a fee, quoted as an annualized percentage of the value of the loaned securities. If the agreed form of collateral is cash, then the fee may be quoted as a “rebate”, meaning that the lender will earn all of the interest which accrues on the cash collateral, and will “rebate” an agreed rate of interest to the borrower.

Commodity Markets

http://en.wikipedia.org/wiki/Commodity_markets

Commodity markets are markets where raw or primary products are exchanged. These raw commodities are traded on regulated commodities exchanges, in which they are bought and sold in standardized contracts.

This article focuses on the history and current debates regarding global commodity markets. It covers physical product (food, metals, electricity) markets but not the ways that services, including those of governments, nor investment, nor debt, can be seen as a commodity. Articles on reinsurance markets, stock markets, bond markets and currency markets cover those concerns separately and in more depth. One focus of this article is the relationship between simple commodity money and the more complex instruments offered in the commodity markets.

Underwriting

http://en.wikipedia.org/wiki/Underwriting

Underwriting refers to the process that a large financial service provider (bank, insurer, investment house) uses to assess the eligibility of a customer to receive their products like equity capital, insurance, mortgage or credit. The name derives from the Lloyd’s of London insurance market in London, United Kingdom. Financial bankers, who would accept some of the risk on a given venture (historically a sea voyage with associated risks of shipwreck) in exchange for a premium, would literally write their names under the risk information which was written on a Lloyd’s slip created for this purpose.