Stock Market Glossary letter C
Call and Put Options – Call and Put Options are a class of financial derivatives that take some of the risk out of options trading. By automatically exercising the options contract at set price points, the trader can limit their possible loss or balance out a foreseen loss on another options contract.
Chicago Board of Trade (CBOT) – The Chicago Board of Trade is an archetypical commodity exchange where futures and options are briskly traded on the floor of the exchange in an All-Outcry Marketplace. In 2006, the Chicago Board of Trade merged with the larger Chicago Mercantile Exchange (CME).
Commodities – Commodities are products that are produced in a standardized format and are traded on the basis of their price. Typically commodities are divided into “soft” and “hard” commodities. Soft Commodities mainly describe agricultural products like grain, orange juice and pork bellies while examples of Hard Commodities include metals, oil and diamonds.
Commodities Exchanges – Commodities exchanges are similar to stock exchanges but specialize in the trading of commodities contracts and commodities futures. Some commodities exchanges like the New York Mercantile Exchange (NYMEX) are broad based while others, for example the London Metal Exchange (LME), are focused on the trade in base and precious metals.
Commodities Trading – Commodities trading occurs at the world’s major stock exchanges and at specialized commodities exchanges. The trading units are known as Contracts and they describe a certain amount of a particular commodity, with a set delivery date.
Compound Interest Bonds – Compound interest bonds add each year’s earned interest amount to the principal amount and then calculate the next year’s interest payment based on the increased total amount, and so on until the redemption date. Compound interest bonds are popular gifts to young children as annual interest payments are not required by the child.
Coupons – Coupons are small interest rate certificates that are usually attached to a bond that pays annual interest on the principal. By redeeming these coupons, small annual payments can be realized by the bond holder. On these types of bonds, only the principal amount is redeemed at the end of the term, making them a convenient way for people on fixed incomes to supplement their incomes.
Creation Unit – A creation unit is formed when an index fund is created. Since index funds are based on a particular stock market index but do not actually contain actual shares of stock, a creation unit is formed based on the index in question. The shares, typically 50,000, are then sold as shares in the new index fund.