Glossary - P

PAIRS TRADING
This is a market neutral trading strategy enabling traders to profit from virtually any market conditions: uptrend, downtrend, or sideways movement.The strategy monitors performance of two historically correlated securities. When the correlation between the two securities temporarily weakens, i.e. when one  moves up while the other moves down, the pairs trade would be to short the outperforming security and to long the underperforming one, speculating that the "spread" between the two would eventually converge.
 
PARITY
Equality, as in amount, status, or value. As an example, in Forex, parity is when a currency pair, say EUR/USD, reaches a price of 1.0000 i.e. 1 Euro = 1  US Dollar
 
PART CLOSE
When only a fraction of the open position is closed.
 
PIP
Pip is the smallest price increment in the last digit in the rate. It is usually the fourth digit after the decimal point.
 
POSITION
A Position refers to an open bet/trade that you may have on your account.
 
PREMIUM TO CASH
The amount by which the future exceeds the actual current market price.
 
PRICE EARNINGS RATIO (P/E)
A valuation ratio of a company's current share price compared to its per-share earnings and is calculated as follows:
Market Value per Share / Earnings per Share (EPS)
For example, if a company is currently trading at 50 a share and earnings over the last 12 months were 2 per share, the P/E ratio for the stock would be 25 (50/2).
 
PRICE INDICES
Average of prices for a given class of goods or services in a given region, during a given period of time. It is a statistic designed to help to compare how these prices, taken as a whole, differ between time periods or geographical locations.
 
PRODUCER PRICE INDEX (PPI)
This index measures the change in the prices received by producers for their product.
 
PUT OPTION
A put option is a contract between two parties to exchange an asset, at a specified price, by a predetermined date. One party, the buyer of the put, has the right, but not an obligation, to sell the asset at the strike price by the future date, while the other party, the seller, has the obligation to buy the asset at the strike price if the buyer exercises the option.