Akuna 101 Section 1 Review

VOCABULARY flashcards covering trading terminology, order types, market participants, and regulatory entities as described in the Akuna 101 Section 1 lecture notes.

Fill and Kill (FAK)

An order type that is the same as an Immediate or Cancel (IOC) order.

Paper

The interested parties trading against Akuna or other market makers; the people you are trading against.

Size

The number of contracts one is willing to trade at a given price; your bid-ask may be $10$-$12$, but you may be willing to buy $4$ contracts at $10$ and only sell $2$ contracts at $12$.

Make a market

To provide a bid and ask price and a quantity/size for the bid and ask; for example, "$60$ bid for $4$, and $10$ at $68$" means willing to buy $4$ contracts at $60$ and sell $10$ contracts at $68$.

Spread

The difference calculated as the offer price minus the bid price

Queue Priority

A structure used to determine the right of precedence between those listed in the order book.

Price-time priority

A method of Queue Priority that organizes orders by price first (highest bids and lowest asks get priority) and then by the time the orders were placed.

Immediate or Cancel (IOC)

A type of order that requires all or part of the order to be executed immediately, where any unfilled parts of the order are cancelled.

Good for Day order (GFD)

An order that remains active until executed in part or full or until the end of the trading day, at which point it is cancelled if not filled.

Good-Til-Canceled Order (GTC)

An order that will remain active until it is either completed or cancelled.

All-or-None (AON)

An order type that must be executed in its entirety or not executed at all.

Fill or Kill (FOK)

An order type that must be executed in its entirety (like AON) and will be cancelled if not filled immediately or within a few seconds.

One cancels the other (OCO)

A scenario in which the execution of one order or market automatically cancels another.

Vol

A trading term referring to volume.

vol up

vol bid, catching a bid, or ripping/exploding.

vol going down

vol offered, vol smashed, or vol smoked.

Teenie

The lowest priced options, which are generally traded for movement risk purposes.

Theoretical Value (Theo)

The current value a market maker believes an option is worth based on all inputs.

Sheets (or fair value)

The same as the theoretical value (theo), but generally used when referring to where a trade occurred.

Liquidity

A measure of how easy or hard it is to trade close to fair value, generally determined by the number of contracts on the bid/offer and the width of the market.

Retail Client

Smaller "paper" customers, such as an individual trading from home.

Local

An exchange-licensed, floor-based proprietary trader who trades for their own account—posting two-sided bids and offers to provide market liquidity—without formal quoting obligations or privileges.

Index

An instrument that tracks the performance of a market.

ETF

A marketable security that tracks an index, a commodity, bonds, or a basket of assets, and behaves and trades much like a stock.

Co-location

When a firm leases or purchases a Web server and locates it within a vendor's physical facility near the exchange's matching engine to increase speed.

Matching-engine

The system used by an electronic exchange to match orders.

Over-the-counter (OTC)

Trades that happen off-floor and are transacted directly from one party to another, involving higher counterparty risk.

CME and ICE

The two main options exchanges mentioned in the text.

Commodity Futures Trading Commission (CFTC)

The regulatory body that governs and regulates options on futures.

Securities Exchange Commission (SEC)

The regulatory body that governs and regulates options on equities.

Settlement types

The three common types are $1.$ cash, $2.$ stock, and $3.$ futures.

Field Programmable Gate Array (FPGAs)

Chips that Akuna builds to interact with the exchange to increase trading speed.

Clearing Firm

An entity that holds trades, performs accounting and margin functions, and is a member of/communicates with the clearing house.

Clearing House

An entity that matches trades between different clearing firms.

Disseminate

To send bid/ask markets and sizes to an exchange.

Counterparty risk

The main risk to trading OTC, where there is no insurance that the opposing firm will honor their contract if the deal goes bad.

Corn Call Option (at expiration)

Provides the owner the right to buy the corn future at the specified strike price.

Tick increment (tick size)

The minimum price movement of a product; for instance, a market $6$ ticks wide at $1.060$-$1.075$ has a ______ of $0.0025$.

IBM P&L example

If you sell $400$ shares of IBM and the stock price moves from $123.85$ to $124.50$, the resulting P&L is $-260$.