Word of the Day
Futures Terms that begin "P"
P&S (Purchase and Sale Statement)
A statement sent by a futures commission merchant to a customer when any part of a futures position is offset, showing the number of contracts involved, the prices at which the contracts were bought or sold, the gross profit or loss, the commission charges, the net profit or loss on the transactions, and the balance. FCMs also send P&S Statements whenever any other event occurs that alters the account balance including when the customer deposits or withdraws margin and when the FCM places excess margin in interest bearing instruments for the customer's benefit.
Performance Bond
Another way to describe margin payments for futures contracts, which are good faith deposits to ensure performance of person's obligations under the futures contract rather than a down payment for the underlying security.
Performance Fee
Often referred to as an incentive fee, this is the fee earned by a manager on profits that surpass the previous high watermark - the peak level in the net asset value of an investment since inception. The calculation of performance fees is sometimes based on that portion of the new highs which exceeds a hurdle rate such as the risk-free interest rate.
Physical Delivery
The tender or receipt of the actual security underlying the security futures contract in exchange for payment of the final settlement price.
Pip
The smallest price unit of a commodity or currency.
Point-and-Figure
A method of charting that uses prices to form patterns of movement without regard to time. It defines a price trend as a continued movement in one direction until a reversal of a predetermined criterion is met.
Pork Bellies
One of the major cuts of the hog carcass that, when cured, becomes bacon.
Portfolio Efficient Frontier
By plotting the intersection of risk and reward for different investments or weightings of assets, one can generate a risk/reward curve or 'frontier' for those investments. The efficient frontier is the point on such curve where an investment combination delivers the most favorable balance of risk and reward.
Position
A person's net long or short open contracts.
Principal Protection
An arrangement or mechanism built into an investment product whereby investors are assured that their initial or investment is secure and that this amount will at the very least be returned to them when such a product reaches its maturity date. Principal protection features can take a variety of forms, including capital guarantees provided by banks.
Proforma
A representation of a track record that is developed to show the effect on actual performance of intended or potential adjustments for different fee structures, portfolio allocations or other variations in the investment structure upon which the original track record is based. It is important to note that a proforma is based on actual trading results and differs from a simulation, which models the hypothetical performance of a portfolio or investment approach that has yet to be applied or implemented in actual trading.
Program Trading
The purchase (or sale) of a large number of stocks contained in or comprising a portfolio. Originally called program trading when index funds and other institutional investors began to embark on large-scale buying or selling campaigns or programs to invest in a manner that replicates a target stock index, the term now also commonly includes computer-aided stock market buying or selling programs, and index arbitrage.
Pyramiding
The use of profits on existing positions as margin to increase the size of the position, normally in successively smaller increments.
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