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MARKETS

Nikkei

DJ, NASDAQ, S&P

CURRENCY

euro/$, $/yen, euro/yen

$/yen

euro/yen

euro/$

$/CAD

euro/sterling

AUS/$

NZ/$

OIL

Light Crude/Brent/Gas

Light, Sweet Crude

Brent

DEFINITIONS

Current Account -- The current account measures trade in goods, services, tourism and investment. It is calculated by determining the difference between Japan's income from foreign sources against payments on foreign obligations and excludes net capital investment.

Triple Witching -- The simultaneous quarterly expiry of stock options, stock index options and stock index futures.

Terms of Trade -- What a country gets for exports compared to what it pays for imports.

Margin Call -- A margin call is when brokers demand additional deposits of money from investors when the value of their shares bought with borrowed money drops, often forcing the investor to sell his share holding to cover payments.

Carry Trade -- A currency carry trade is a strategy in which an investor sells a particular currency with a low interest rate and then uses the funds to buy a different currency, capturing the difference between the rates. The big risk in a carry trade--is the uncertainty of exchange rates.

Here's a yen carry trade lesson in a nutshell:

Step 1: Borrow $900 of yen at a low interest rate (example: 0.5%) and turn the yen into U.S. dollars.

Step 2: With $900 from Japan and $100 of your own money, invest the $1,000 in U.S. treasuries at 4.5%.

Step 3: How do the returns work? Collect $45 in interest from your $1,000 and pay $5 to Japan equals net of $40 or a 40% return on the original $100.

Step 4: Convert the money back to yen (hopefully at the same rate).

STOCKS/DERIVATIVES

Warrants -- A warrant gives the holder the opportunity to buy or sell a share at a future date for a fixed price. The two basic types of Warrants are "Call Warrants" and "Put Warrants". Call Warrants allow investors to profit from share price rises. Put Warrants allow investors to profit from share price falls.

Call Warrant -- Gives the holder the right, but not the obligation, to buy the underlying share for a fixed price known as the "exercise price" at a future date. Taking up this right is know as "exercising" the warrant.

Put Warrant -- Gives the holder the right, but not the obligation, to sell the underlying share to the Warrant Issuer for the exercise price (also known as "exercising" the warrant)

Options -- A privilege sold by one party to another that offers the buyer the right, but not the obligation, to buy (call) or sell (put) a security at an agreed-upon price during a certain period of time or on a specific date.

Call Option -- An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument at a specified price within a specific time period.

Put Option -- An option contract giving the owner the right (but not the obligation), to sell a specified amount of an underlying security at a specified price within a specified time.

 

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