General Market Making Definitions

📓 General Market Making Definitions: Bid: Highest price for which someone is willing to buy something Ask/Offer: Lowest price for which someone is willing to sell something Size/Lots: # of contracts one is willing to trade at a price Make a market: To provide a bid ask price and sizes for each e.g. 60 bid for 4 and have 10 at 68 (notice, giving a bid follows PRICE for SIZE and showing an ask follows SIZE at PRICE) Spread: Ask - Bid Hedge: A trade to reduce the risk of price movement in an asset. Paper: The interested parties trading against you Broker: A perosn or company that acts as an intermediary between buyers and sellers Tick Size: Smallest increment between one level and the next level (e.g. 1 cent or 1/8th of a cent) Queue Priority: A structure used to determine the right of precedence between those in a list e.g.: Price-Time Priority - Exchange orders the order book by price and then by whoever entered their order earliest Bid: Highest price for which someone is willing to buy something Ask/Offer: Lowest price for which someone is willing to sell something Size/Lots: # of contracts one is willing to trade at a price Make a market: To provide a bid ask price and sizes for each e.g. 60 bid for 4 and have 10 at 68 (notice, giving a bid follows PRICE for SIZE and showing an ask follows SIZE at PRICE) Spread: Ask - Bid Hedge: A trade to reduce the risk of price movement in an asset. Paper: The interested parties trading against you Broker: A perosn or company that acts as an intermediry between buyers and sellers Tick Size: Smalles increment between one level and the next level (e.g. 1 cent or 1/8th of a cent) Queue Priority: A structure used to determine the right of precedence between those in a list e.g.: Price-Time Priority - Exchange orders the order book by price and then by whoever entered their order earliest e.g. 60 bid for 4 and have 10 at 68 (notice, giving a bid follows PRICE for SIZE and showing an ask follows SIZE at PRICE) e.g.: Price-Time Priority - Exchange orders the order book by price and then by whoever entered their order earliest 📚 Order Types Immediate or Cancel (IOC)/Fill-and-Kill (FAK): A type of order that requires all or part of the order to be executed immediately. Unfilled parts of the order are cancelled Good for Day (GFD): A type of order that will reamin active until executed (in part or full) or until the end of the trading day. Then cancelled. Good-Til-Cancelled (GTC): A type of order that will remain active until completed or cancelled. All-or-None (AON): A type of order that must be executed in its entirety, or not executed at all. Fill-or-Kill (FOK): A type of order that must be executed immediate in its entirety or is otherwise cancelled. One-cancels-the-other (OCO): When one order or market is executed, the other order is automatically cancelled. Immediate or Cancel (IOC)/Fill-and-Kill (FAK): A type of order that requires all or part of te order to be executed immediately. Unfilled parts of the order are cancelled Good for Day (GFD): A type of order that will reamin active until executed (in part or full) or until the end of the trading day. Then cancelled. Good-Til-Cancelled (GTC): A type of order that will remain active until completed or cancelled. All-or-None (AON): A type of order that must be executed in its entirety, or not executed at all. Fill-or-Kill (FOK): A type of order that must be executed immediate in its entirety or is otherwise cancelled. One-cancels-the-other (OCO): When one order or market is executed, the other order is automatically cancelled.