Trading Terms Starting With F

  • FHLMC

    commonly referred to as "Freddie Mac." See Federal Home Loan
  • FNMA

    commonly referred to as "Fannie Mae." See Federal National Mortgage Association.
  • FOK

    see Fill-or-kill order.
  • FTSE 100

    a capitalization-weighted index that represents the 100 largest UK companies traded on the London Stock Exchange.
  • Face value (bond)

    the amount the bond's issuer is actually borrowing, and the amount due the bondholder when it's redeemed at maturity. Widely referred to as it "par" value, if the bond is purchased directly from the issuer this is commonly the price paid for the bond. In the secondary market, however, a bond's price is set by supply and demand, and will fluctuate with changing interest rates. If current interest rates are higher than the coupon rate on a bond, the bond may trade below face value (at a "discount"). If current interest rates have fallen, the price may be above face value (a "premium"). In either case the bond will be redeemed for par value at maturity.
  • Fair market value

    the price a buyer is willing to pay, and that a seller is willing to accept, for a security in the marketplace, assuming no undue pressure on either part to make the transaction in terms of price or time. Current bid and ask prices disseminated from an actively traded market are generally accepted as the best measure of fair value.
  • Fair value (futures)

    in the case of a futures contract, the value of the underlying security or basket of securities represented by the contract, summed with the cost of carry (interest that would be paid less dividends that would be received if securities were owned) until the contract's expiration. This amount is often considered the futures contract's theoretical value. Futures trading is not currently available at TradeKing.
  • Falling knife

    a stock whose price is declining rapidly, generally after a devastating announcement, rumors in the marketplace, or an impending bankruptcy (liquidation or not). Those investors who buy a stock in a freefalling price trend are generally taking great risk in trying to "pick the bottom" . It is often said these investors are trying to "catch a falling knife."
  • Far month

    a month that is farther away in time relative to another month. Also termed Back month.
  • Federal debt

    the current dollar sum the United States Government owes to its creditors as a result of deficit spending over time. These creditors include all individuals, businesses, governments and other organizations that own U.S. government debt securities in the form of Treasury bills, Treasury notes, Treasury bonds and other debt obligations, but the federal debt does not include any debts in the name of individuals, corporationsÊand state or municipal governments. Interest on the national debt is a major item in the federal budget, but the national debt is not the same as the federal budget deficit. The deficit is the amount by which federal spending exceeds federal revenue in any fiscal year. Also termed National debt.
  • Federal deficit

    the amount of money in any given fiscal year by which the federal government's expenditures exceeds its revenues. The government covers this deficit by issuing Treasury bills, Treasury notes, Treasury bonds and other debt obligations.
  • Federal Deposit Insurance Corporation (FDIC)

    an independent agency of the federal government that insures deposits in member banks and thrifts with a standard insurance amount per depositor. Insured deposits are backed by the full faith and credit of the United States.
  • Federal funds / fed funds

    commercial banks keep funds on deposit in Federal Reserve Banks to meet their daily reserve requirements, a pool of funds called federal funds. If a commercial bank is deficient in its reserve balance on any given day, it may borrow the needed funds from another commercial bank with a balance in excess of its current requirement on an "overnight" basis. The rate paid by one bank to the other for such transactions is called the federal funds rate. Through its Federal Open Market Committee, the Fed sets a target for this rate at each meeting.
  • Federal funds rate / fed funds rate

    the interest rate that banks pay one another for the use of federal funds. The rate can change daily, and serves as an indicator of general interest rate trends.
  • Federal Home Loan Mortgage Corporation (FHLMC)

    a government-sponsored enterprise, chartered by congress, and commonly referred to as "Freddie Mac." Rather than making home loans directly to consumers, FHLMC purchases mortgages in the secondary market primarily from savings banks or savings and loan institutions to help ensure they have funds to lend to home buyers at affordable rates. FHLMC funds its mortgage investments primarily by issuing debt securities in the domestic and international capital markets. These securities are backed only by the assets of the corporation, not by the full faith and credit of the Federal government.
  • Federal National Mortgage Association (FNMA)

    a government-sponsored enterprise, chartered by congress, and commonly referred to as "Fannie Mae." Rather than making home loans directly to consumers, FNMA purchases mortgages in the secondary market from mortgage bankers, brokers and other primary mortgage market partners to help ensure they have funds to lend to home buyers at affordable rates. FNMA funds its mortgage investments primarily by issuing debt securities in the domestic and international capital markets. These securities are backed only by the assets of the corporation, not by the full faith and credit of the Federal government.
  • Federal Open Market Committee (FOMC)

    the most important monetary policymaking body of the Federal Reserve System, that generally meets eight times a year. It is responsible for formulation of a policy designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments. The FOMC makes key decisions regarding the conduct of open market operationsÑpurchases and sales of U.S. government and federal agency securitiesÑwhich affect the provision of reserves to depository institutions and, in turn, the cost and availability of money and credit in the U.S. economy. The FOMC also directs System operations in foreign currencies. The twelve-voting-member committee is made up of the seven members of the Board of Governors; the president of the Federal Reserve Bank of New York; and, on a rotating basis, the presidents of four other Reserve Banks. Nonvoting Reserve Bank presidents also participate in Committee deliberations and discussion.
  • Federal Reserve / Federal Reserve System

    created by an act of Congress in 1913, the Federal Reserve System, or "the Fed," serves as the central bank of the United States. The System consists of a seven member Board of Governors (presidentially appointed) with headquarters in Washington, D.C., the Federal Open Market Committee and twelve Reserve Banks located in major cities throughout the United States. Its overall responsibilities include: managing the nation's money supply through monetary policy to achieve the sometimes-conflicting goals of maximum employment, stable prices and moderate long-term interest rates; supervising and regulating banking institutions to maintain the stability of the financial system and contain systemic risk in financial markets; providing financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation's payments system; strengthening U.S. standing in the world economy.
  • Federal Reserve Banks

    the operating arms of the Federal Reserve System. Many of the services provided by this network to depository institutions and the government are similar to services provided by banks and thrift institutions to business customers and individuals. Reserve Banks hold the cash reserves of depository institutions and make loans to them. They move currency and coin into and out of circulation, and collect and process millions of checks each day. They provide checking accounts for the Treasury, issue and redeem government securities, and act in other ways as fiscal agent for the U.S. government. They supervise and examine member banks for safety and soundness. The Reserve Banks also participate in the activity that is the primary responsibility of the Federal Reserve System, the setting of monetary policy. For the purpose of carrying out the day-to-day operations of the Federal Reserve System, the nation has been divided into twelve Federal Reserve Districts, with Banks in Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco. Twenty-five Branches of these Banks serve particular areas within each District. Same as above
  • Federal Reserve Board

    the seven presidentially appointed members comprising the Board of Governors of the Federal Board System, whose primary responsibility is the formulation of the nation's monetary policy. The Board sets reserve requirements and shares the responsibility with the Reserve Banks for discount rate policy, which along with open market operations constitute the monetary policy tools of the Federal Reserve System. In addition to policy responsibilities, the Federal Reserve Board has regulatory and supervisory responsibilities over banks that are members of the System (and other entities such as bank holding companies and international banking facilities in the United States), foreign activities of member banks, and the U.S. activities of foreign-owned banks. The Board also sets margin requirements, which limit the use of credit for purchasing or carrying securities. Another area of Board responsibility is the development and administration of regulations that implement major federal laws governing consumer credit. The Board usually meets several times a week in Washington, D.C.
  • Fee-based financial planning

    a service offered to investors that provides financial planning for a flat fee, or on an hourly basis, in order to avoid potential conflicts of interest with the customer. This fee is not related to the value of the customer's assets.
  • Fiat money

    money that a government prints, issues and authorizes as legal tender. It has no intrinsic value through convertibility into a commodity like gold or silver, but instead derives it value from the strength and confidence in the issuing nation's economy. Most currencies in the form of paper certificates or coins are fiat money.
  • Fidelity bond

    SEC-required insurance that brokerage firms are required to carry for the purpose of protecting customers from either dishonesty or careless activities of the firm's employees and officers. Also termed Blanket fidelity bond or Blanket bond.
  • Fiduciary

    an individual, company, or association entrusted to hold and manage the assets and interests of another, the beneficiary, and not for personal gain of the fiduciary. Examples would include executors in a will, trustees, guardians, agents with powers of attorney and firms known as registered investment advisors.
  • Fill

    to execute an order to buy or sell securities in its entirety.
  • Fill-or-kill order (FOK)

    a type of option order with instructions the entire order must be executed immediately or cancelled (killed) if not.
  • Financial Industry Regulatory Authority (FINRA)

    created in 2007 through a merger of the enforcement arms of the NASD (National Association of Securities Dealers) and NYSE (New York Stock Exchange). It acts as the largest, non-governmental regulatory body in the U.S. that oversees compliance issues for the benefit of investor protection.
  • Financial statement

    a summary report of basic accounting data that reflects a company's financial health and business activities, generally including a balance sheet, an income statement and a cash flow statement. Such statements are usually compiled on a quarterly or annual basis, and included in a company's annual report.
  • Firm order

    an order to buy or sell a security that is
    1. from a customer's account and not subject to cancellation.
    2. from a broker-dealer's proprietary account.
  • Firm price

    a bid or ask price that is
    1. not negotiable.
    2. disseminated from an exchange as tradable up to its published size or volume.
  • First call date

    the earliest date a callable security may be either partially or completely redeemed by its issuer, as stated in the security's indenture (agreement between borrower and lender).
  • First-in, first out

    when a security position from a pool of similar positions is closed, that position first established is considered closed first for accounting and/or tax purposes. Also termed FIFO.
  • Fiscal policy

    spending and taxation by the federal government in order to stabilize, stimulate or slow the nation's economic growth.
  • Fiscal year

    an accounting period of any 12 consecutive months over which a company will plan its budget as well as determine its profits (or losses). This period may or may not correspond to the calendar year.
  • Fitch Ratings

    a company whose business is assigning credit ratings for debt securities as well as for the issuers of those securities. Among other such agencies are Moody's Investors Service and Standard & Poor's (S&P).
  • Fixed annuity

    an annuity, or an investment vehicle purchased from an insurance company, which guarantees retirement payments in a fixed amount for the remainder of the buyer's lifetime, or for a specific period.
  • Fixed income security

    a security such as a bond or preferred stock that provides a return, or income, in the form of fixed periodic payments, as well as repayment of its face value at maturity. Its market price is ultimately determined by supply and demand in the marketplace, but is heavily influenced by changing long term interest rates. The price also tends to move in an opposite direction to that of an interest rate change.
  • Fixed interest rate

    with respect to a fixed income security, a return that is a constant percentage of its face value, regardless of changes in market interest rates. See also Face Value.
  • Fixed term

    describes a security (e.g., bond or preferred stock) or a deposit (e.g., CD) that has a fixed lifetime. Periodic interest payments may be paid, but the investment's face value will be returned only at the end of the investment period, its maturity date.
  • Flexible spending account

    a plan in which an employee allows a fixed amount of pre-tax wages to be set aside for certain qualified, personal expenses such as child care or uncovered medical costs. The funds set aside must be determined in advance, with any unused funds in the account at year's end forfeited.
  • Flight to quality

    a tendency of investors in times of market or general economic uncertainty to invest, or reinvest, funds in investments considered "safer," such as Treasury bonds.
  • Flipping

    buying shares in an initial public offering (IPO) then selling them immediately after public trading begins, with the intention of making a profit.
  • Float

    the number of a company's shares outstanding that are available for trading by the public, excluding large insider positions, shares that are part of the company's strategic holdings, or restricted stock.
  • Floor (exchange)

    the physical facility of an exchange where active trading takes place. Also termed Trading floor.
  • Floor broker

    an approved exchange member who as agent executes clients' orders on the trading floor of that exchange.
  • Floor trader

    an approved exchange member who trades only for his or her account (not as an agent for customers) on the trading floor of that exchange
  • Foreign exchange

    the practice of trading and/or converting the currency of one country into the currency of another. Often abbreviated as Forex or FX. The major currency pairs are AUD/USD, CAD/USD, CHF/USD, EUR/USD, GBP/USD, JPY/USD.
  • Form 10-K

    an audited report the SEC requires annually from all exchange-listed companies that provides disclosure of certain financial information. It may be included in or accompany the company's annual report.
  • Form 10-Q

    an unaudited report the SEC requires on a quarterly basis from all exchange-listed companies that provides disclosure of certain financial information.
  • Fortune 500

    a list compiled and published annually by Fortune magazine of the 500 largest U.S. corporations ranked by their gross revenue.
  • Forward contract

    an agreement, arranged privately between a buyer and a seller, for the delivery of a specific quantity of an underlying asset, at a specified price on a future delivery date. Unlike a futures contract, a forward contract is neither standardized nor transferrable. Futures trading is not currently available at TradeKing.
  • Forward P/E

    the price/earnings (P/E) ratio of a company's common stock calculated with estimated earnings per share for the coming year. See also Price/earnings ratio.
  • Fourth market

    the practice of large institutional investors trading large blocks of securities directly, without the services of a broker-dealer, rather than on an exchange.
  • Free riding

    to open and close a position before paying for it. If liquidation occurs before funds are settled, the client will have committed a Reg-T violation requiring the account to be put on a 90-day restriction. See also Cash Account.
  • Friendly takeover

    a merger in which the target company's management and board of directors are in favor of the transaction terms. Opposite of Hostile takeover.
  • Front month

    a month that is nearer in time relative to another month.
  • Front running

    the practice of a trader taking a position in a security (or its derivative product) with prior knowledge of a customer order that will predictably affect the price of that security. This practice is illegal.
  • Front-end load

    a commission charged to an investor by some mutual funds at the time of purchase. Opposite of Back-end load.
  • Front spread with calls

    an option strategy established by buying one call with a given strike price and writing two calls with a higher strike price. All calls have the same underlying and expiration month. Loss potential is unlimited and profit potential is limited. Also termed Ratio call spread or Call ratio write.
  • Front spread with puts

    an option strategy established by buying one put with a given strike price and writing two puts with a lower strike price. All puts have the same underlying and expiration month. Loss potential is substantial and profit potential is limited. Also termed Ratio put spread or Put ratio write.
  • Fully diluted basis

    the procedure of calculating hypothetical earnings and book value per share ratios for existing common stock based on the assumption it was fully diluted, or that all convertible securities had been converted into common shares and all employee stock options exercised. For the benefit of both existing and prospective stockholders, companies with a substantial amount of convertible issues and options outstanding are required to report earnings on a fully diluted basis.
  • Fund

    an investment company, investment trust or mutual fund that invests money on behalf of its shareholders who in turn participate in any profits or losses.
  • Fund manager

    the individual whose responsibility is making decisions related to the allocation of a fund's investment capital in accordance with its stated goals.
  • Fund of funds

    a collective investment vehicle (hedge fund or mutual fund) that invests in other funds that may or may not be directly available to retail investors.
  • Fundamental analysis

    analysis of an individual company made on the basis of factors contributing to its present or future financial health: balance sheet, prospect for future earnings, competitive position of its goods and services, management, etc.
  • Fungibility

    interchangeability of a financial instrument based primarily on standardization. Listed options are considered fungible securities because of their standardized contract terms, and the ability to open a position on one exchange and to close that position by an offsetting trade on another exchange where the same contract is traded. Many over-the-counter derivative products with unique terms are not fungible.
  • Future value

    the value to which either an investment or cash amount today will grow by a given date in the future, when compounded at a given interest rate.
  • Futures / futures contract

    a contract to buy or sell a specific underlying commodity or financial instrument on a delivery date in the future, with the price determined by supply and demand in the marketplace at the time the contract is entered into. Futures contracts are standardized according to the quantity, delivery time and location for each underlying. Unlike options which carry rights for the buyer and writer, futures convey an obligation to buy for the contract buyer, and an obligation to sell for the contract seller.