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Finance GlossaryInterest Rate Futures
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Interest Rate Futures

Definition of Interest Rate Futures

Interest rate futures are derivative contracts whose underlying instrument is any instrument that bears interest.

Just like any other futures contract, interest rate futures also give the right and obligation to fulfil the terms of the contract on expiry.

The price of interest rate futures and the interest rate itself shares an inverse relationship. If interest rates move higher, then the futures will be less valuable.

Related Terms

52 Week High

A 52-week high is the highest closing price of a stock or ETF in the last 365 days. Say for example you’re checking the history of a stock on 01-01-2022. Then its 52 week high will be the highest price it closed at between 01-01-2021 and 01-01-2022. 52 week highs are used as technical indicators by traders.

Book Running Lead Manager

A book running lead manager is the head or lead of the underwriting process when new shares or securities are issued for their client, most commonly during an IPO.

For context, there was a time when physical ownership certificates were issued. If someone wanted to sell their shares, they’d have to present the ownership certificate and get it transferred to the buyer.

Also known as the book runner, the book running lead manager handles these crucial elements of the underwriting process:

  • Perform due diligence
  • Determine the final offering price
  • Record & track interested buyers
  • Confirm orders
  • Guarantee purchase

EBITDA MARGIN

EBITDA margin is the ratio of Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) by revenue, represented as a percentage. It is used to understand whether a company is profitable and as a valuation technique.

The formula to calculate EBITDA margin is: EBITDA Margin = (EBITDA/Revenue)*100

Just like EBITDA, the EBITDA margin also excludes non-cash expenses. That’s why a positive EBITDA margin doesn’t necessarily mean that a company is profitable.

Average Daily Trading Volume

The Average Daily Trading Volume (ADTV) is a technical indicator that indicates the number of shares that were bought and sold on average across one or more trading days.

A high ADTV means that more investors are interested in a stock while a low ADTV implies that a stock isn’t on the radar of many investors. The formula for Average Daily Trading Volume (ADTV) is:

ADTV x days = Total trading volume of stock across x days / x days

Founders Stock

The term founders stock refers to shares issued to the founders of a company. This type of stock is issued at face value and carries a vesting period, which is a lock-in period during which the shares cannot be sold.

During this period, the founders stock may not earn any returns, unless there are dividends attached to it. Founders stock is not an accounting term - it is used colloquially to denote the shares issued to founders.

Iron Condor

The Iron Condor is an options trading strategy wherein the trader will buy two calls and two puts each with different strike prices but the same expiration date. It is a version of the Butterfly Option Strategy. If the underlying asset averages out or in other words, closes between the middle strike prices, then the Iron Condor generates the maximum profit.



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