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Glossary - C

 

Call Option

A contract that gives option buyer the right but not the obligation to take delivery of the underlying security at a specific price within a specified time.

 Callable Bond

A bond that may be terminated prior to maturity by its issuer.

Cap

A derivative instrument that is linked to interest rates.

Capital Asset Pricing Model

A model for valuing financial assets based upon their systematic risk.

Capital Market Line

A line that describes the optimal relationship between risk and reward for an investment portfolio.

Candlestick Charts

A Japanese charting method, in which the price range between the open and the close is plotted as a narrow rectangle known as a real body. If the close is above the open, the body is white. If the close is below the open, the body is black When the high and/or low for the session are extraneous to the open and close the difference is plotted as a thin line, known as a shadow.  In candlestick charting greater significance is given to the opening and closing prices rather than the high and low.

Carrying Charge

For physical commodities such as grains and metals, the cost of storage space, insurance, and finance charges incurred by holding a physical commodity. In interest rate futures markets, it refers to the differential between the yield on a cash instrument and the cost of funds necessary to buy the instrument. Also referred to as cost of carry or carry.

Carryover

Grain and oilseed commodities not consumed during the marketing year and remaining in storage at year's end. These stocks are "carried over" into the next marketing year and added to the stocks produced during that crop year.

Cash Commodity

An actual physical commodity someone is buying or selling, e.g., soybeans, corn, gold, silver, Treasury bonds, etc. Also referred to as "actuals".

Cash Settlement

Transactions generally involving index-based futures contracts that are settled in cash based on the actual value of the index on the last trading day, in contrast to those that specify the delivery of a commodity or financial instrument.

Certificate of Deposit (CD)

A time deposit with a specific maturity evidenced by a certificate.

Chaikin Oscillator

An oscillator created by subtracting a 10-day EMA from a three-day EMA of the accumulation /distribution line. 

Channel

A price channel is constructed from two parallel lines. One joins a series of rally highs; the other a series of reaction lows.

Chaos Theory

Describes the behavior of nonlinear systems. A subset of nonlinear dynamics analysis, chaos theory is a branch of mathematics focusing on irregular and complex behavior that has an underlying order. In market analysis chaos theory seeks to forecast the future prices, including sudden changes that occur during periods of intense market activity.

Charting

The use of charts to analyze market behavior and anticipate future price movements. Those who use charting as a trading method plot such factors as high, low, and settlement prices; average price movements; volume; and open interest. Two basic price charts are bar charts and point-and-figure charts.

Closeout Netting

A type of netting frequently used with OTC derivative instruments.

Closing Range

A range of prices at which buy and sell transactions took place during the market close.  

Chande Momentum Oscillator (CMO)

The Chande Momentum Oscillator (CMO) was developed by Tushar Chande, a scientist, inventor, and a respected trading system developer. Tushar Chande developed the CMO to capture what he calls "pure momentum." It is closely related to, although unique from, other momentum oriented indicators such as the RSI, Stochastic, Rate-of-Change, etc. It is most closely related to Welles Wilder's RSI (see Relative Strength Index)

Collateral

Assets held to secure an obligation.

Commission Fee

A fee charged by a broker for executing a transaction. Also referred to as brokerage fee.

Commodity

An article of commerce or a product that can be used for commerce. In a narrow sense, products traded on an authorized commodity exchange. The types of commodities include agricultural products, metals, petroleum, foreign currencies, and financial instruments and index, to name a few.

Commodity Futures Trading Commission (CFTC)

A federal regulatory agency established under the Commodity Futures Trading Commission Act, as amended in 1974 that oversees futures trading in the United States. The commission is comprised of five commissioners, one of who is designated as chairman, all appointed by the President subject to Senate confirmation, and is independent of all cabinet departments.

Comparative Relative Strength

Compares the price movement one security with another. It is most normally used to compare a stock or industry group with the market as a whole. This is distinct from the RSI indicator that compares current price movement to previous price movement of the same instrument.  Trends in relative strength can be analyzed in the same way as any other price trend.

Confirmation

An indication that tow or more price series or indicators are in agreement. Originally used in Dow theory where the Dow Jones Industrials confirmed trend movements in the Rails (now Dow Jones Transportation Average).

Congestion Area or Pattern

A period in which there is no visible progress in price.

Consolidation

Is a congestion area that follows a strong trend, either up or down. In a rising market a consolidation represents a temporary battle between buyers and sellers prior to the resumption of the uptrend. In declining markets a consolidation is followed by a resumption of falling prices.

Consumer Price Index (CPI)

A major inflation measure computed by the U.S. Department of Commerce. It measures the change in prices of a fixed market basket of some 385 goods and services in the previous month.

Contango

A condition where forward prices exceed spot prices.

Continuation Chart

A chart base on futures data in which the price for the data for the end of a given contract and that for the beginning of the next contract are merged in order avoid a sharp transition from one contract to the next.

Continuation Pattern

A price pattern in which prices trade in a sideways range prior to resuming the prevailing trend.

Contrary Opinion

The idea that when everyone thinks alike such expectations are fully discounted in the market place and a trend reversal is therefore imminent.

Convergence

When futures prices and spot prices come together at the futures expiration.

Correction

A contra trend price movement, which typically retraces between one-third to two-thirds of the previous price trend.

Corrective Wave

A wave or cycle of waves moving against the current impulse trend's direction.

Cost of Funds Index

A yield index.

Covered Write

Writing a call against a long position in the underlying stock. By receiving the premium from the call, the writer realizes additional return on the underlying security or gains an element of protection from a decline in the value of the underlying security.

Crop (Marketing) Year

The time span from harvest to harvest for agricultural commodities. The crop marketing year varies slightly with each ag commodity, but it tends to begin at harvest and end before the next year's harvest, e.g., the marketing year for soybeans begins September 1 and ends August 31. The futures contract month of November represents the first major new-crop marketing month, and the contract month of July represents the last major old-crop marketing month for soybeans.

Crop Reports

Reports compiled by the U.S. Department of Agriculture on various ag commodities that are released throughout the year. Information in the reports includes estimates on planted acreage, yield, and expected production, as well as comparison of production from previous years.

Cup and Handle

An accumulation pattern observed on bar charts. The pattern lasts from seven to 65 weeks; the cup is in the shape of a "U" and the handle is usually more than one or two weeks in duration. The handle is a slight downward drift with low trading volume from the right-hand side of the formation. The breakout should be accompanied with relatively heavy volume.

Curve-Fitting

Developing complicated rules that map known conditions.

Customer Free Balances

The total amount of unused money on deposit in brokerage accounts. These are “free” funds representing cash that can be employed in the purchase of securities.

Current Yield

The ratio of the coupon to the current market price of the debt instrument.

Cycle

A variation where a point of observation returns to its origin.

Cyclical Investing

The process of buying and selling stocks based on a longer-term or primary market move. The cycle approximates to the 4-year business cycle, where primary movements in stock prices are normally related.

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