Forex Terms I

Implied volatility. Method of measuring volatility by considering the premiums currently trading in the market and calculating the figure based on the level of the option premium.

In-the-money (ITM) call. A call whose present currency price is higher than the strike price.

In-the-money (ITM) put. A put whose present currency price is lower than the strike price.

Industrial Production. An economic indicator that consists of the total output of a nation's plants, utilities, and mines.

Initiation margin. A margin paid by the trading party in order to trade currency futures. A trader's daily loss cannot exceed the size of this margin.

Interest rate risk. Amount of mismatches and maturity gaps among transactions in the foreign exchange book.

International Fisher effect. Theory stating that investors will hold assets denominated in depreciating currencies only to the extent that interest rates are sufficiently high to balance the expected currency losses.

International Monetary Market. The major currency futures and options on currency futures market in the world. It is a division of the Chicago Mercantile Exchange in Chicago.

Intrinsic value. The amount by which an option is in-the-money. In the case of a call, the intrinsic value equals the difference between the underlying currency price and the strike price. In the case of the put, the intrinsic value equals the difference between the strike price and the present currency price, when beneficial.

Inverse head-and-shoulders. A bullish reversal pattern that consists of a series of three consecutive sell-offs. Among the three consecutive sell-offs, the shoulders have approximately the same amplitude, and the head is the lowest. The formation is based on a resistance line called the neckline. After the neckline is penetrated, the target is approximately equal in amplitude to the distance between the top of the head and the neckline.

Irikubi. A bearish two-day candlestick combination. It consists of a modified atekubi bar. All the characteristics are the same, except that the second day's closing high is marginally higher than the original day's low.

Island reversal. An isolated range or ranges that occur at the tip of a V-formation.

ISO codes. Standardized currency codes developed by the International Organization for Standardization (ISO).

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