Financial Glossary - E to H

The Financial Glossary has been developed to give quick access to definitions of terms and concepts used in the foreign exchange, money, equity, commodity and debt markets.

Earnings Per Share (EPS)

The EPS is the company's profit divided by the number of its outstanding shares.

If a company earning USD 10 million in one year had USD 10 million shares of stock outstanding, its EPS would be USD 1 per share.

Companies often use a weighted average of shares outstanding over the reporting term when calculating EPS.


A financial instrument that represents partial ownership of a company. Known as Stocks, equities, or shares.

European option

An option that can be exercised by the buyer only on the contract expiration date.


A market where securities, Options, Futures and/or commodities are traded.

Exchange rate

What one currency is worth in terms of another. For example, one Argentine dollar might be worth 58 US cents or 70 Japanese yen. Currencies traded freely in foreign-exchange markets have a spot rate (applying to trades settled 'spot', that is, two working days hence) and a forward rate (which is the spot rate adjusted for the interest rate differential between the two currencies until maturity). Countries can determine their exchange rates in several ways:

  • A floating exchange rate system, where the currency finds its own level in the market.
  • A crawling or flexible peg system, which is a combination of an officially fixed rate and frequent small adjustments that in theory work against a build-up of speculation about a revaluation or devaluation.
  • A fixed exchange-rate system, where the value of the currency is set by the government and/or the central bank.


A decision, reserved for the option holder, to request execution of the contract.

Expiration date

The day on which an option contract expires, or the last trading day for a futures contract.


Being subject to risk, such as an exposure to foreign currency exchange-rate fluctuations.

Exposure coverage

The percentage of the exposure covered by funds available for margin.

Fibonacci technical study

The Fibonacci Fans and Bands are three-line guides drawn on charts derived from the Fibonacci number series.

Some traders believe they help identify successive areas of support and resistance in a market.


A device typically used to protect private networks against malicious attacks from the Internet. A firewall restricts the type of network traffic that is allowed to pass to/from the Internet, and can sometimes cause problems with the operation of Client Station.


A chart style that takes the current close price as the base-line, and plots each data point relative to this base-line.

Forward outright

An order to trade a Forex instrument at a fixed price on a fixed date. The price of the forward outright is the spot rate adjusted for the interest rate differential between the two currencies until maturity. Forward Outright orders are often used to hedge exposure risks when dealing in foreign markets.

Forward-forward contract

An order to trade (for example, buy) a Forex instrument at a fixed price on a future date, or to conduct the opposite transaction (for example, sell) at a later date at a fixed price.

Foreign exchange trading

Foreign Exchange trading is an alternative term for Forex trading, FX trading and currency trading. Saxo is the provider of an online Foreign Exchange trading platforms and software.

Futures/Futures contract

A legally binding agreement between a buyer and a seller on a market for derivative financial instruments. Contract specifications are standardized. They include a firm and final price for payment – and, where appropriate, delivery of the underlying asset – at a fixed date in future.


An approximation of the change in the delta of an Option relative to a change in the price of the underlying stock when all other factors are held constant. Gamma is accurate for small changes in the price of the underlying stock, but is expressed in terms of a change in delta for a one-point move in the stock.

For example, if a call has a delta of .49 and a gamma of .03, if the stock moves down one point, the call delta would be .46 (.49 + (.03 x –USD 1.00)). Generated by a mathematical model, Delta depends on the stock price, strike price, volatility, interest rates, dividends, and time to expiration.


The ability to hold an investment position of greater value than that of your equity (collateral). When gearing (also called leveraging) your investment, you need only deposit a fraction of the current value of the instrument you are investing in.

For example if the commodity you are trading in requires a margin of 5%, this allows you to leverage (or gear) your investment 20 times. In other words, a deposit of USD 10,000 can hold a position of USD 200,000.

Good till Cancelled (GTC)

A type of limit order that is active until it is filled or cancelled. As opposed to a day order, a GTC order can remain active for an indefinite number of trading sessions.

Good till Date (GTD)

An order that is good until a date specified by the trader. If the order is not executed by the date the trader specifies, the order will be cancelled.

Half turn

The commission is charged per trade (for both buy and sell). The alternative is a round-turn commission, which includes both opening and closing positions.


A hedge is a tool used to limit exposure to investment losses. For example, an investor who has large, unrealised profits in a physical stock or stock Options position might sell a CFD for the same stock to prevent any loss of the profits. While the hedge ensures profit in this case, it also ensures that the profit cannot grow. In other words, when you hedge you limit your profits as well as your losses.

Hedge ratio

The change in the Option price or the change in the underlying spot price.