A credit default swap (CDS) is a financial derivative that allows an investor to swap or offset their credit risk with that of another investor. The buyer of a CDS makes periodic payments to the seller and, in return, receives a payoff if the underlying financial instrument defaults.
A financial instrument that derives its value from the performance of an underlying asset, commodity, currency, economic variable, or financial instrument. Derivatives can be used for hedging, speculation, or arbitrage purposes.
A foreign-exchange dealer is an individual or entity engaged in the buying and selling of foreign currency, often working at a commercial bank or financial institution. Their role includes executing currency trades on behalf of clients, managing foreign exchange risks, and sometimes speculating on future currency movements.
A futures contract is a standardized legal agreement to buy or sell a particular commodity, currency, or financial instrument at a predetermined price at a specified time in the future. Unlike options, futures contracts entail a mandatory obligation to execute the transaction.
A futures market is a financial exchange where futures contracts, which are agreements to buy or sell specific commodities or financial instruments at a predetermined future date and price, are traded.
A futures option is a derivatives contract that grants the holder the right, but not the obligation, to buy or sell a futures contract at a predetermined price before the option expires.
A futures transaction refers to the buying and selling of futures contracts on commodities or financial instruments, which obligate the buyer to purchase or the seller to sell an asset at a predetermined future date and price.
Going long refers to the practice of purchasing a stock, bond, or commodity for investment or speculation purposes. The purchased security is held with the expectation that its value will increase over time, thereby providing profits to the investor.
The Greater Fool Theory posits that one can make money through the purchase of overvalued assets by selling them to someone even less informed or more optimistic.
The grey market comprises markets for legal trading of goods that are in short supply or shares that are not yet issued but will be issued shortly, offering price anticipation and the potential for losses if allocations do not match expectations.
Hammering the market refers to intense selling of stocks by speculators who believe that prices are inflated and the market is about to drop.
Investment refers to the purchase of assets such as stocks, bonds, mutual fund shares, real property, collectibles, or annuities, with the expectation of obtaining income, capital gain, or both in the future. Investment tends to be longer term and less risky than speculation.
Market risk is the potential financial loss arising from fluctuations in market prices. This can include risks from buying in a falling market or selling in a rising market. Hedging with futures contracts or options can mitigate, but not eliminate, these risks.
An option is a financial instrument that gives the holder the right, but not the obligation, to buy or sell an asset at a predetermined price before or at the expiration date.
A scalper is a speculator who enters into quasi-legal or illegal transactions to turn a quick and sometimes unreasonable profit by reselling items at a higher price.
Speculation is the purchase of any property or security with the expectation of obtaining a quick profit as a result of price change, possibly without adequate research. It is often compared to gambling but is different from investment.
A market participant who seeks to profit from buying and selling financial instruments, generally taking on substantial risk and adding liquidity and capital to the markets.
A stock option is a financial instrument that gives the holder the right to buy or sell a company's stock at a predetermined price within a specified timeframe. It can be used both as an investment tool and as an employee incentive.
The term refers to suffering a large loss on a product, speculation, or investment.
To speculate, usually with the knowledge that the investment is highly risky, often in the context of buying securities.
