Economic good
That which is scarce and useful to mankind.
Economy of scale
A lower cost per unit produced, achieved through large-scale production. The lower cost can result from better tools of production, greater discounts on purchased supplies, production of by-products, and/or equipment or labor used at production levels closer to capacity. A large cattle feeding operation may be able to benefit from economies such as lower unit feed costs, increased mechanization, and lower unit veterinary costs.
Efficiency
Because of futures contracts’ standardization of terms, large numbers of traders from all walks of life may trade futures, thus allowing prices to be determined readily (it is more likely that someone will want a contract at any given price). The more readily prices are discovered, the more efficient are the markets.
Elasticity
A term used to describe the effects price, supply, and demand have on one another for a particular commodity. A commodity is said to have elastic demand when a price change affects the demand for that commodity; it has supply elasticity when a change in price causes a change in the production of the commodity. A commodity has inelastic supply or demand when they are unaffected by a change in price.
Equity
The value of a futures trading account with all open positions valued at the going market price.
Eurodollar Time Deposits
U.S. dollars on deposit outside the United States, either with a foreign bank or a subsidiary of a U.S. bank. The interest paid for these dollar deposits generally is higher than that for funds deposited in U.S. banks because the foreign banks are riskier_they will not be supported or nationalized by the U.S. government upon default. Furthermore, they may pay higher rates of interest because they are not regulated by the U.S. government.
Even up
To close out, liquidate, or cover an open position.
Exchange
An association of persons who participate in the business of buying or selling futures contracts or futures options. A forum or place where traders gather to buy or sell economic goods. See also Board of trade or Contract market.
Exchanges in the US: International Exchanges
- Cantor Exchange (CX)
- Chicago Board of Trade (CBT)
- Chicago Mercantile Exchange (CME)
- Kansas City Board of Trade (KCBT)
- Minneapolis Grain Exchange (MGEX)
- New York Board of Trade (NYBOT)
- New York Mercantile Exchange (NYMEX)
- Bourse de Montreal (ME)
- EUREX Frankfurt (EUREX)
- Euronext Amsterdam/Brussels/Paris (ENP)
- Hong Kong Exchange and Clearing Ltd. (HKEx)
- International Petroleum Exchange of Londond (IPE)
- London International Financial Futures Exchange (LIFFE)
- Singapore Commodity Exchange Ltd. (SICOM)
- Singapore Exchange Ltd. (SGX)
- Sydney Futures Exchange Corporation Ltd. (SFE)
- The Tokyo Commodity Exchange (TOCOM)
- The Tokyo International Financial Futures Exchange (TIFFE)
- Winnipeg Commodity Exchange (WCE)
Exchange rates
The price of foreign currencies. If it costs $.42 to buy one Swiss Franc, the exchange rate is .4200. As one currency is inflated faster or slower than the other, the exchange rate will change, reflecting the change in relative value. The currency being inflated faster is said to be becoming weaker because more of it must be exchanged for the same amount of the other currency. As a currency becomes weaker, exports are encouraged because others can buy more with their relatively stronger currencies.
Exercise
When a call purchaser takes delivery of the underlying long futures position, or when a put purchaser takes delivery of the underlying short futures position. Only option buyers may “exercise” their options; option sellers have a passive position.
Expiration
An option is a wasting asset; i.e., it has a limited life, usually nine months. At the end of its life, it either becomes worthless (if it is at-the-money or out-of-the-money), or is automatically exercised for the amount by which it is in-the-money.
Expiration date
The final date when an option may be exercised. Many options expire on a specified date during the month prior to the delivery month for the underlying futures contract.
Ex-pit transactions
Occurring outside the futures exchange trading pits. This includes cash transactions, the delivery process, and the changing of brokerage firms while maintaining open positions. All other transactions involving futures contracts must occur in the trading pits through open outcry.
