Repurchase Agreement

This is a form of short-term borrowing for dealers in government securities. The dealer sells the government securities to investers, usually on an overnight basis, and buys them back the following day.

For the party selling the security (and agreeing to repurchase it in the future) it is a repo; for the party on the other end of the transaction, (buying the security and agreeing to sell in the future) it is a reverse repurchase agreement.

Repos are classified as a money-market instrument. They are usually used to raise short-term capital.

The simultaneous purchase and sale of an asset in order to profit from a difference in the price. This usually takes places on different exchanges or marketplaces.

Here's an example of arbitrage: Say a domestic stock also trades on a foreign exchange in another country, where it hasn't adjusted for the constantly changing exchange rate. A trader purchases the stock where it is undervalued and short seels the stock where it is overvalued, this profiting from the difference. Arbitrage is recommended for experienced investors only.

When working at the trading floor at Cantor Fitzgerald one of the desk , Interest Rates Swaps (IRS), used to trade using hand movements. Have you ever seen the movie trading places? Well it was similar here. I was amazed at the energy and frantic hand movements when the brokers where trading. When you see pictures of the traders in the pit, here's what you're looking at:

Palms in , or "I'm a buyer"
Palms out,or "I'm a seller"

The very first financial futures contracts were based on foreign currencies. It should be noted that the spot ( or forward market) is much bigger than the futures. The forwared market , also know as the Interbank market, is dominated by currency dealers at major global banks. Traded electronically and by telephone, the spot market's volume towers over the listed Exchange volume. The average unit is $1 million, and although currencies also can be traded at retail FOREX-type outlets. CFD currency trading has now become very popular with retail customers and institions. Hedge Funds are are also using CFD to hedge positions against currency movements.

Currency Fundamentals