A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z

A

Abandon - The act of an option holder electing not to exercise his or her option.

Account Sale - A statement by a broker to a commodity customer when a futures transaction is closed out. Sometimes referred to as a P&S (Purchase and Sale Statement), it shows the net profit or loss on the transaction, with commissions and other charges enumerated and taken into account.

Accumulate - Traders are said to accumulate contracts when they add to their original market positions.

Across the Board - All the months of a particular futures contract or futures option contract, for example, if all the copper contracts open limit up, they were limit up "across the board."

Actuals - The physical or cash commodity, as distinguished from futures contracts.

Afloat - Commodities imported or exported are "afloat" when they are on board ship en route to their destination.

Allowances - The discounts (premiums) allowed for grades or locations of a commodity lower (higher) than the par or basis grade or location specified in a futures contract.

American Option - An option that can be exercised on any business day before it expires.

Approved Delivery Facility - Any bank, stockyard, warehouse, plant, elevator, depository or other facility that is authorized by an exchange for the delivery of commodities tendered on futures contracts.

Arbitrage - Simultaneous purchase of cash commodities or futures in one market against the sale of cash commodities or futures in the same or a different market, to profit from a discrepancy in prices. In some definitions, arbitrage refers only to riskless transactions that do not involve equity - e.g., all investment is made with borrowed funds.

Associated Person (AP) - See Broker, Customer's Man.

At-the-Market - See Market Order.

At-the-Money - An option whose strike price equals the current price of the underlying commodity, security, futures contract, etc.

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B

Backwardation - Market situation in which futures prices are progressively lower in the distant delivery months. The opposite of a contango, or carrying-charge market.

Bar Chart - A graphic representation of price movement disclosing the high, low, close, and sometimes the opening prices for the day. A vertical line is drawn to correspond with the price range for the day, while a horizontal "tick" pointing to the left reveals the opening price, and a tick to the right indicates the closing price.

Basis - The difference between the spot or cash price of a commodity and the futures price of the same or a related commodity. Basis is usually computed to the nearby future and may represent different time periods, product forms, qualities and locations depending upon the cash and futures prices used.

Basis Grade - The grade of a commodity used as the standard of the futures contract.

Basis Point - 1/100 of one percent. Used in quoting yield movements in debt securities and futures contracts based on them.

Bear - One who expects a decline in prices. The opposite of a "bull." A news item is considered bearish if it is expected to bring lower prices.

Bear Market - A market in which prices are declining.

Bear Spread - Short the nearby future and long the deferred, in expectation of a decline in the general level of prices, with the nearby future declining more than the deferred contract.

Beta (or Beta Coefficient) - A statistical measure of the relationship between the risk of an individual stock or stock portfolio and the risk of the overall market. The beta of a stock or portfolio measures the price volatility of that stock or portfolio relative to the price volatility of the overall market. Beta is often used in computing hedge ratios for stock index futures positions.

Bid - An offer to buy a specific quantity of a commodity at a stated price.

Board of Trade - A futures exchange.

Book Transfer - Transfer of title from seller to buyer without physical movement of product.

Booking the Basis - A forward pricing sales arrangement in which the cash price is determined, either by the buyer or seller, within a specified time at a previously agreed-upon basis applied to the then-current futures price.

Break - A rapid and sharp price decline.

Broad Tape - Term commonly applied to news wires carrying price and background information on securities and futures markets, in contrast to the exchanges' own price transmission wires.

Broker - A person who is paid a fee or commission for executing buy or sell orders for a customer. In futures trading, the term may refer to: (1) a floor broker - an exchange member who executes orders on the trading floor of an exchange; (2) an account executive, associated person or customer's man - the person who deals with customers in the offices of futures commission merchants; and (3) a futures commission merchant.
Brokerage - The fee charged by a broker for execution of a transaction. The fee may be a flat amount or a percentage of the transaction.

Bucketing - Directly or indirectly taking the opposite side of a customer's order into the handling broker's own account or into an account in which he has an interest, without execution on an exchange.

Bulge - A rapid advance in prices.

Bull - One who expects a rise in prices. The opposite of a "bear." A news item is considered bullish if it portends higher prices.

Bull Market - A market in which prices are rising.

Bull Spread - Long the nearby future and short the deferred, in expectation of an increase in the general level of prices, with the nearby future increasing more than the deferred contract.

Bullion - Gold or silver in bars or ingots assaying at least .995 fine.

Buoyant - A market in which prices have a tendency to rise easily.

Buy In - Making a purchase to cover a previous sale, often called covering.

Buy on Close - To buy at the end of the trading session within the closing price range. (Also may be "Sell on Close.")

Buy on Opening - To buy at the beginning of a trading session within the opening price range. (Also may be "Sell on Opening.")

Buyer's Call - See Call.

Buying Hedge (or Long Hedge) - Hedging transaction in which futures contracts are bought to protect against possible increases in the prices of commodities, securities, indexes, etc.

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C

Calendar Spread - The sale of an option with a nearby expiration against the purchase of an option with the same strike price, but a more distant expiration. The loss is limited to the net premium paid, while the maximum profit possible depends on the time value of the distant option when the nearby expires. The strategy takes advantage of time value differentials during periods of relatively flat prices.

Call - (1) A period at the opening and close of some futures markets in which the price for each futures contract is established by auction; (2) Buyer's Call - generally applies to cotton. A purchase of a specified quantity of a specific grade of commodity at a fixed number of points above or below a specified delivery month futures price with the buyer allowed a period of time to fix the price either by purchasing a futures position for the account of the seller or by telling the seller when he wishes to fix the price; (3) Seller's Call - same as the buyer's call except that the seller has the right to determine the time to fix the price; (4) the requirement that a financial instrument be returned to the issuer prior to maturity, with principal and accrued interest paid upon the return.

Call Option - An option contract that gives the buyer (holder) the right, but not the obligation, to purchase a specific asset or obtain a long futures position at a fixed price within a specified period of time.

Candlestick Chart - A charting technique in technical analysis that, among other things, indicates the range of a day's prices, the opening and closing prices and whether the market moved up or down during the trading session.

Carload or Car - The load of a railroad freight car.

Carrying Broker - A member of a commodity exchange, usually a commission house broker, through whom another broker or customer elects to clear all or part of his trades.

Carrying Charges - Cost of storing a physical commodity over a period of time. Includes insurance, storage and interest on the invested funds as well as other incidental costs.

Carryover - Part of the current crop production that will be carried to the next crop year, or that part of the current supply of a commodity that comprises stocks from the previous year's production.

Cash Commodity - The physical or actual commodity as distinguished from the "futures." Sometimes called spot commodity or actuals.

Cash Forward Sale - See Forward Contract.

Cash Market - Market for merchandising and delivery of actual commodities or securities.

Cash Price - The price in the marketplace for actual cash or spot commodities to be delivered via customary market channels.

Cash Settlement - Instead of having the actuals delivered, cash in transferred upon settlement.

CCC - Commodity Credit Corporation. A government-owned corporation established in 1933 to assist American agriculture. Major operations include price-support programs, supply control and foreign sales programs for agricultural commodities.

Certificate of Deposit (CD) - A large time deposit with a bank, having a specific maturity date and yield stated on the certificate. CD's usually are issued with $100,000 to $1,000,000 face values.

Certificated or Certified Stocks - Stocks of a commodity that have been inspected and found to be of a quality deliverable against a futures contract, stored at the delivery points designated as regular or acceptable for delivery by the commodity exchange. In grain, these are called stocks in deliverable position.

CFO - Cancel former order.

CFTC - See Commodity Futures Trading Commission.

Charting - The use of graphs and charts in the technical analysis of futures markets to plot trends of price movements, average movements of prices, volume and open interest. See also Technical Analysis.

Clearing - The procedure through which the clearing house or association becomes the buyer to each seller of a futures contract and the seller to each buyer and assumes responsibility for protecting buyers and sellers from loss by assuring the financial integrity of each contract open on its books.

Clearing Member - A member of a clearinghouse or clearing association. All trades of non-clearing members must be settled through a clearing member.

Clearinghouse - An adjunct to a futures exchange through which transactions executed on the floor of the exchange are matched, settled and guaranteed. Also charged with assuring the proper conduct of the exchange's delivery procedures and the adequate financing of trading through collection and payment of margin.

Close - The period at the end of the trading session officially designated by the exchange during which all transactions are considered to be made "at the close."

Closing Price (or Range) - The price (or price range) recorded in the ring or pit in the final moments of a day's trading that is officially designated as the "close."

Commercial - A company that produces, merchandises or processes cash grain, metals, livestock, soft commodities or other products or securities.

Commercial Grain Stocks - Domestic grain in store in public and private elevators at important markets and grain afloat in port.

Commercial Paper - Short-term promissory notes issued in bearer form by large corporations, with maturities ranging to 270 days. Since the notes are unsecured, the commercial paper market generally is dominated by large corporations with strong credit ratings.

Commission - (1) The charge made by a commission house for handling futures and options orders; (2) the Commodity Futures Trading Commission.

Commission House - A firm that buys and sells actual commodities or futures and options contracts for the accounts of customers. Its income is generated by commissions charged to customers.

Commodity Futures Trading Commission (CFTC) - The federal regulatory agency established by the CFTC Act of 1974 to administer the Commodity Exchange Act.

Commodity Option - See Option, Put and Call.

Commodity Pool - An enterprise in which funds contributed by a number of persons are combined for the purpose of trading futures or options on futures. The CPO generally hires Commodity Trading Advisors to trade for a commodity pool.

Commodity Pool Operator (CPO) - Individuals or firms who are required to be registered under the Commodity Exchange Act and who solicit funds, securities or property for a commodity pool.

Commodity Trading Advisor - Individuals or firms that, for pay, issue analyses or reports or provide advice concerning the trading in commodity futures or options and/or who trade accounts for individual clients or for commodity pools.

Congestion - A charting term used to describe an area of sideways price movement. Such a range is thought to provide support or resistance to price movement.

Contango - Market situation in which prices are progressively higher in the succeeding delivery months than in the nearest delivery month. Also termed carrying charge. Opposite of backwardation.

Contract Grades - Those grades of a commodity that have been officially approved by an exchanges deliverable in settlement of a futures contract.

Contract Market - A board of trade designated by the Commodity Futures Trading Commission under the Commodity Exchange Act to offer for trading a specific futures or futures option contract.

Contract Month - The month in which delivery is to be made in accordance with a futures contract.

Contract Trading Volume - The total number of contracts traded in a futures or options contract or a particular delivery month of a contract during a specified period of time.

Contract Unit - The amount of a commodity, currency, security or index designated in or underlying a given futures contract -e.g., 5,000 bushels of wheat, $1 million face value of 13-week U.S. Treasury bills.

Controlled Account - Any account for which trading is directed by someone other than the owner.

Corner - (1) Securing such control of cash and/or futures positions that a commodity's or security's price can be manipulated; (2) in the extreme situation, obtaining or holding contracts requiring delivery of more commodities or securities than are available for delivery.

Coupon - The annual interest, at a specified rate, that a bond is guaranteed to pay for its lifetime.

Cover - (1) To offset an existing futures position; (2) to have in hand the physical commodity or other asset underlying a futures contract when a short futures position is taken; or (3) to acquire the commodity that might be delivered on a short futures position.

Covered Call Writing - To grant or write a call option while holding or having a long position in the underlying security, commodity or futures contract.

Crop Year - The time period from one harvest to the next, varying according to the commodity and the country in which it is grown.

Cross-Hedge - Hedging a cash market risk in a futures contract for a different but price-related commodity, security, foreign currency, index, etc.

Cross-Trading - Offsetting or non-competitive matching of the buying order of one customer against the selling order of another, a practice that is permissible only when executed in accord with the Commodity Exchange Act, CFTC regulations and exchange rules.

Current Delivery (Month) - The futures contract that matures and becomes deliverable during the current month; also called the Spot Month.

Current Yield - A bond's annual interest payment divided by that bond's current market price.

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D

Day Order - An order that expires automatically at the end of each day's trading session.

Day Traders - Futures and options traders, generally members of the exchange active on the trading floor, who take positions in the futures and options markets and then offset them prior to the close of trading on the same day.

Day Trading - Establishing and offsetting the same futures market position(s) within the same day.

Dealer Option - A put or call on a physical commodity, not originating on or subject to the rules of an exchange, in which the obligation for performance rests with the writer of the option.

Deck - All orders in a floor broker's possession that have not yet been executed.

Default - Failure to perform on a futures or short options contract as required by exchange rules, such as failure to meet a margin call or to make or to take delivery.

Deferred Futures - The futures delivery months, of those currently trading, that expire during the most distant months; also called forward months.

Deliverable Grades - See Contract Grades.

Deliverable Stocks - Commodities located in exchange-approved storage, for which receipts may be used in making delivery on futures contracts.

Delivery - The tender and receipt of the actual commodity or security, or of a delivery instrument covering such commodity or security, in settlement of a futures contract.

Delivery Instrument - A document used to effect delivery on a futures contract, such as a warehouse receipt or shipping certificate.

Delivery Month - The specified month within which a futures contract matures and can be settled by delivery.

Delivery Notice - The written notice given by the holder of a short futures position of his intention to make delivery against an open short futures position on a particular date. This notice, delivered through the clearinghouse, is separate and distinct from the warehouse receipt or other instrument used to transfer title.

Delivery Points - Those locations designated by futures exchanges at which stocks of a commodity represented by a futures contract may be delivered in fulfillment of the contract.

Delivery Price - The price fixed by the clearinghouse at which deliveries on futures are invoiced and the futures contract is settled when deliveries are made.

Delta - The change of an option's price or theoretical value for a one-unit change in the price of the underlying security, commodity, foreign currency or futures contract.

Depository or Warehouse Receipt - A document issued by a bank, warehouse or other depository indicating ownership of a stored commodity. In the case of many commodities deliverable against futures contracts, transfer of ownership of an appropriate depository receipt may effect contract delivery.

Devaluation - A formal, "official" decrease in a currency's exchange rate.

Differentials - The discounts (premiums) allowed for grades or locations of a commodity lower (higher) than the par or basis grade or location specified in the futures contract.

Discount - (1) The amount a price would be reduced to purchase a commodity of lesser grade; (2) sometimes used to refer to the price differences between futures of different delivery months, as in the phrase "July is at a discount to May," indicating that the price of the July future is lower than that of the May future; (3) applied to cash grain prices that are below the futures price.

Discount Rate - The interest rate that member banks pay when they borrow from the Federal Reserve System.

Discretionary Account - An arrangement by which the holder of the account gives written power of attorney to someone else, often his or her broker, to buy and sell without prior approval of the holder.

Double Option - The simultaneous purchase of both a put and a call on the same underlying asset or futures contract.

Downtrend - A channel of downward price movement.

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E

ECU - European Currency Unit, a basket of the currencies, in specified proportions, of the members of the European Community.

EFP - An exchange for physicals, a transaction in which one party buys the physical commodity and simultaneously sells futures and the other party does the opposite - sells the physical commodity and simulataneously obtains a long futures position.

Equity - The residual dollar value of a futures trading account assuming it were liquidated at current prices.

Erratic - A market that moves rapidly, changes direction quickly and is irregular in its action.

Eurodollar - U.S. dollar deposits placed with banks outside the U.S.

European Option - An option that can be exercised only at the time of the option's expiration.

Evening Up - Buying or selling to offset an existing market position.

Exchange Rate Futures - Futures contracts on foreign currencies.

Exercise - To take advantage of the right conferred by the option contract to the buyer or holder of a long option position.

Exercise (or Strike or Striking) Price - The price at which the buyer of a call can purchase the underlying commodity, security, index, foreign currency or futures contract during the life of the option or the price at which the buyer of a put can sell the underlying commodity, security, index, foreign currency or futures contract during the life of the option.

Expiration Date - The date on which an option contract expires; the last day on which an option can be exercised.

Ex-Pit Transaction - Trades executed in a location other than the regular exchange trading pit or ring.

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F

Federal Reserve System - The central bank of the United States, with responsibility for implementing the country's monetary policy and regulating member banks of the System. The Fed was created in 1913 and is composed of 12 regional Federal Reserve Banks and a national Board of Governors.

Fictitious Trading - Wash trading, bucketing, cross trading, or other device, scheme or artifice to give the appearance of trading where no competitive trade has occurred.

Fill-or-Kill Order - A commodity order that demands immediate execution or cancellation.

Financial Instruments - Currencies, securities, and indices of their value. Examples include shares, mortgages, commercial paper and Treasury bills and bonds.

First Notice Day - The first day on which notices of intention to deliver actual commodities against futures market positions can be received. First notice day varies with each futures contract and exchange.

Floor Broker - A person who buys or sells futures contracts for others on the exchange trading floor.

Floor Trader - An exchange member, sometimes called a local, who usually executes trades for his or her own account by being personally present in the futures pit or ring.

Foreign Exchange - Foreign currency. On the foreign exchange market, foreign currency is bought and sold for immediate (spot) or forward delivery.

Forward Contract - A cash transaction common in many industries, including commodity and merchandising, in which the buyer and seller agree upon delivery of a specified quality and quantity of goods at a specified future date. A price may be agreed upon in advance, or there may be agreement that the price will be determined between the seller and buyer at a later date.

Forward Market - Trading of commodities or other assets to be delivered at a future date outside of an exchange market. Contracts for forward delivery are "personalized," i.e., delivery time and amount are determined between each seller and customer and generally involve marketing, merchandising and delivery.

Forward Months - Futures expiration months, of those currently listed for trading, calling for later or distant delivery. Also known as deferred futures.

Forward Purchase or Sale - A purchase or sale of an actual commodity for deferred delivery.

Free Supply - Stocks of a commodity available for commercial sale, as distinguished from government-owned or government-controlled stocks.

Fundamental Analysis - Study of the basic factors affecting the supply and demand for the commodity, security, currency or index underlying a futures contract.

Fungibility - The characteristic of interchangeability. Futures contracts for the same commodity and delivery month are fungible due to their standardized specifications for quality, quantity, delivery date and delivery locations.

Futures - A term used to designate the standardized contracts covering the sale of commodities, financial instruments, indexes, etc. for future delivery on a futures exchange.

Futures Commission Merchant - Individuals, associations, partnerships, corporations and trusts that solicit or accept orders for the purchase or sale of any commodity for future delivery on or subject to the rules of any contract market, and that accept payment from or extend credit to those whose orders are accepted.

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G

Gap - A term used by technicians to describe a jump or drop in prices, for example, prices skipped a trading range. Gaps are usually filled at a later date.

Good-Till-Cancelled (GTC) - A futures or option order that is good until cancelled.

Grades - Various qualities of a commodity.

Grantor - The market, writer, or seller of an option contract.

Gross Processing Margin (GPM) - Refers to the difference between the costs of soybeans and the combined sales income from the soybean oil and meal that result from processing soybeans. Other industries have similar formulas to express the relationship of raw material costs to sales income from finished products.

Growths - Description of cotton, coffee or sugar according to the area in which it is produced.

Guarantee Fund - One of two funds established for the protection of customer's monies; the clearing members contribute a percentage of their gross revenues to the guarantee fund.

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H

Heating Oil - Synonymous with No. 2 Fuel Oil, a distillate fuel oil for domestic heating use that underlies a futures contract.

Heavy - A market in which current prices are demonstrating a tendency to decline.

Hedge Ratio - The number of futures contracts needed to hedge a cash market position.

Hedging - Taking a position in a futures market opposite to a position held in the cash market to minimize the risk of financial loss from an adverse price change; a purchase or sale of futures as a temporary substitute for a cash transaction that will occur later.

High - The top price paid for a commodity or its option in a given time period, usually a day or the life of a contract.

Hog-Corn Ratio - The number of bushels of corn equal in value to 100 lbs. of live hog.

Holder - One who takes or buys an option.

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I

In-the-Money - A call option with a strike price lower, or a put option with a strike price higher, than the current market price of the underlying asset or futures contract.

Initial Margin - Customer's funds put up as security to guarantee contract fulfillment at the time a futures or options position is established.

International Monetary Fund - An organization created by the Bretton Woods Agreement in 1944 to (1) promote international cooperation; (2) facilitate expansion and balanced growth of international trade; (3) promote exchange rate stability; (4) avoid competitive exchange-rate depreciation; (5) assist in the establishment of a multinational system of payments and elimination of foreign-exchange restrictions; and (6) provide members with resources to correct short-term imbalances of payments.

Intrinsic Value - For a call, the excess of the current market price fo the asset or futures contract underlying the option over the strike price of the option; for a put, the excess of the strike price over the current price of the asset or futures contract underlying the option.

Introducing Broker - Any person, other than someone registered as an associate person (AP) of a futures commission merchant, who solicits or accepts futures and related options orders but does not accept money from customers.

Inverted Market - A futures market in which the nearer months are selling at prices higher than the more distant months; characteristic of markets in which supplies are currently in shortage. Also termed backwardation.

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J

Japanese Candlestick - See Candlestick Chart.

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K

Sorry, no terms are available that match the letter "K".

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L

Last Notice Day - The final day on which notices of intent to deliver on futures contracts may be issued.

Last Trading Day - Day on which trading ceases for the maturing (current) delivery month.

Licensed Warehouse - A warehouse approved by an exchange from which a commodity may be delivered on a futures contract.

Life of Contract - Period between the beginning of trading in a particular future and the current day or the expiration of trading.

Limit (Up or Down) - The maximum price advance or decline from the previous day's settlement price permitted in one trading session for a particular futures or options contract by the rules of the exchange on which it is trading.

Limit Move - A price that has advanced or declined the permissable amount during one trading session, as fixed by the rules of a contract market.

Limit Order - An order in which the customer sets a limit on the price or other condition.

Liquid Market - An active market where selling and buying can be accomplished with minimal price concessions.

Liquidation - (1) Offsetting or closing out a futures position; (2) a market in which open interest is declining.

Loan Price - The price at which growers may obtain loans under government price-support programs.

Long - (1) One who has bought a futures or options contract to establish a market position; (2) a market position that obligates the holder to take delivery; (3) one who owns an inventory of commodities.

Long the Basis - A person or firm that owns the spot commodity and has hedged with a sales of futures.

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M

Margin - The amount of money or collateral deposited by a client with his broker, or by a broker with the clearinghouse, for the purpose of insuring the broker or clearinghouse against loss on open futures or options contracts. The margin is not a down payment on a purchase. (1) Initial margin is the total amount of margin per contract required by the broker when a futures position is opened by a customer; (2) maintenance margin is the minimum amount of money per contract that must be maintained on deposit at all times the customer's position is open. If a customer's equity in any futures or options position drops below the maintenance level because of adverse price action, the broker must issue a margin call to restore the initial margin level.

Margin Call - (1) A request from a brokerage firm to a customer to bring margin deposits up to initial levels; (2) a request by the clearinghouse to a clearing member to make payments or increase deposits to the clearinghouse.

Market-if-Touched (MIT) - An order that becomes a market order when a particular price is reached. A sell MIT is placed above the market; a buy MIT is placed below the market.

Market-on-Close (MOC) - An order to buy or sell at the end of the trading session at a price within the closing range of prices.

Market-on-Opening (MOO) - An order to buy or sell at the beginning of the trading session at a price within the opening range of prices.

Market Order - An order to buy or sell a futures or options contract at whatever price is obtainable at the time the order is received in the ring or pit.

Maturity - Period within which a futures contract can be settled by delivery of the actual commodity.

Minimum Price Fluctuation - Smallest increment of market price movement possible in a given futures or options contract.

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N

Nearby Delivery (Month) - The futures contract closest to maturity.

Nearbys - The nearest delivery months of a futures or options market.

Negotiable Warehouse Receipt - A legal document issued by a warehouse describing an guaranteeing the existence of a specific quantity (and sometimes a specific grade) of a commodity stored in the warehouse.

No. 2 Fuel Oil - A distillate fuel oil for heating upon which a futures contract is based.

Nominal Price (or Nominal Quotation) - Computed price quotations on futures or options for a period in which no actual trading took place, usually an average of bid and offer prices.

Non-Member Traders - Speculators and hedgers who trade on an exchange through a member and do not hold exchange memberships.

Notice Day - Any day on which notices of intent to deliver on futures contracts may be issued.

Notice of Delivery - A notice given through the clearinghouse expressing intention to deliver the commodity.

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O

Offer - An indication of willingness to sell at a given price; opposite of bid.

Offset - (1) Liquidating a purchase of futures or options through the sale of an equal number of contracts of the same delivery month, or the covering of a sale of futures or options through the purchase of an equal number of contracts of the same delivery month; (2) matching total long with total short contracts for the purpose of determining a net long or net short position; (3) non-competitively matching one customer's order with another, a practice that is permissible only when executed as required by the Commodity Exchange Act, CFTC regulations and rules of the futures exchange.

Open Interest - The sum of futures contracts in one delivery month or one futures or options market that have been entered inot and not yet liquidated by an offsetting transaction or by delivery.

Open Order - An order that remains in force until the customer explicitly cancels it or until the futures or options contract expires.

Opening - The period at the beginnning of the trading session, officially designated by the exchange, during which all transactions are considered as made "at the opening."

Opening Price (or Call) - The price (or price range) recorded during the period designated by the exchange as the official opening.

Option - A contract that gives the buyer the right but not the obligation to buy or sell a specified quantity of a commodity at a specific price within a specified period of time, regardless of the market price of the commodity.

Original Margin - Term applied to the initial deposit of margin money required of clearing member firms by clearinghouse rules; parallel to the initial margin or security deposit required of customers by exchanges.

Out-of-the-Money - A call option with a strike price higher or a put option with a strike price lower than the current market price of the underlying asset or futures contract.

Overbought - A technical opinion that the market price has risen too steeply and too fast in relation to underlying fundamental or other factors.

Oversold - A technical opinion that the market price has declined too steeply and too fast in relation to underlying fundamental or other factors.

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P

P&S (Purchase-and-Sale) Statement - A statement sent by a commission house to a customer when any part of a futures position is offset, showing the number of contracts involved, the prices at which the contracts were bought and sold, the gross profit or loss, the commission charges, the net profit or loss on the transactions and the balance.

Paper Profit - The profit that would be realized if open contracts were liquidated.

Parity - A theoretically equal relationship between farm products' prices and all other prices. In farm program legislation, parity provides a yardstick to measure the purchasing power of farmers.

Parity Value - See Intrinsic Value.

Pit - A specially constructed arena on the trading floor where trading in futures and options is conducted.

Pit Broker - See Floor Broker.

Point - The smallest unit in a futures or options price. May be less than the minimum market price fluctuation.

Pork Bellies - One of the major cuts of the hog carcass that, when cured, becomes bacon.

Position - An interest in the market, either long or short, in the form of one or more open contracts. "In position" refers to a commodity located where it can readily be moved to another point or delivered on a futures contract. Commodities not so situated are "out of position."

Position Limit - The maximum position, either net long or net short, in a futures market, an options market or in a futures and its related options market combined, that may be held or controlled by one person as prescribed by an exchange or by the CFTC. Such limits can be set for individual expiration months, such as the spot month, and for all listed expiration months combined. Since hedgers are often exempt from such limits, position limits are often termed "speculative limits."

Position Trader - A futures trader who buys or sells contracts and holds them for an extended period of time - as distinguished from a day trader, who will normally initiate and offset a futures position within a single trading session.

Premium - (1) The amount a price would be increased to purchase a better quality commodity; (2) a futures delivery month selling at a higher price than another, e.g., "July is at a premium over May"; (3) cash prices that are above the futures; (4) the money an option buyer pays to a writer for granting an option.

Price Basing - The convention of setting forward contract prices on the basis of the futures price.

Price Manipulation - Any planned operation, transaction or practice calculated to cause or maintain an artificial price in a futures or options market.

Prime Rate - The interest rate charged by banks to their largest and most creditworthy customers. Many interest rates are scaled up from the prime rate.

Public Elevators - Grain elevators in which bulk storage of grain in provided for the public for a fee.

Purchase-and-Sale Statement - See P&S.

Put - An option to sell a specified amount of commodity or futures contracts at an agreed-upon price within a specified period of time.

Put-Call Parity - The relationship between the prices (premiums) of a put and a call with the same strike prices and expiration dates on the same underlying asset or futures contract.

Pyramiding - The use of profits on existing futures positions as margin to increase the size of the position.

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Q

Quotation - Often referred to as a "quote." The actual, bid, or asked price of futures, options, or cash commodities at a certain time.

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R

Rally - An upward movement of prices.

Recovery - An upward movement of prices after a decline.

Registered Commodity Representative (RCR) - A broker, associated person, account executive or customer's man.

Regulated Commodities - Commodities traded on futures exchanges that were subject to Commodity Exchange Authority regulation prior to the Commodity Futures Trading Commission Act of 1974; presently, any commodity, security, index, foreign currency, etc. traded on a designated contract market in the United States.

Reporting Level or Limit - Sizes of positions set by the exchanges or the CFTC at or above which commodity traders and brokers who carry their accounts must make daily reports as to the size of the position by futures or options contract, delivery month and whether the position is speculative or hedging.

Resting Order - An order to buy at a price below or to sell at a price above the prevailing market price that is being held by a floor broker.

Re-tender - In specific circumstances, some contract markets permit those with long futures positions who have received a delivery notice through the clearinghouse to sell a futures contract and return the notice to the clearinghouse for reissuance to another long; other exchanges permit transfer of notices to another buyer.

Revaluation - A formal, "official" increase in the exchange rate of a currency.

Riding the Yield Curve - Trading in interest rate futures according to expectations of changes in the yield curve.

Ring - A circular area on the trading floor of an exchange where traders and brokers stand while executing futures trades.

Rollover - A trading procedure involving the shift of one month of a spread into another future month while holding the other contract month. The shift can take place in either the long or short month. The term also applies to lifting a near futures position and re-establishing it in a more deferred delivery month.

Round Turn - A completed transaction involving both a purchase and a sale.

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S

Scale Down (or Up) - To purchase or sell on scale down means to buy or sell at regular price intervals in a declining market. To buy or sell on scale up means to buy or sell at regular price intervals as the market advances.

Scalper - A speculator on the trading floor of an exchange who buys and sells frequently, holding his positions for only a short time during a trading session. Typically, a scalper will stand ready to buy at a fraction below the last transaction price and to sell at a fraction above, thus creating market liquidity.

Scalping - The practice of trading in and out of the market on small price fluctuations.

Selling Hedge (or Short Hedge) - Selling futures contracts against a long cash market position to protect against a decrease in the price of a commodity.

Settlement Price - The daily price at which the clearinghouse settles all accounts between clearing members for each open position in each contract month. Settlement prices are used to determine both margin calls and invoice prices for deliveries.

Short - (1) The selling side of an open futures contract; (2) a trader whose net position in the futures market shows an excess of open sales over open purchases; (3) selling (granting) an options contract.

Short Covering - Buying to offset an existing short position.

Short Hedge - Same as selling hedge, to protect against price declines.

Short Squeeze - A situation in which the lack of supplies tends to force shorts to cover their positions by offsetting at higher prices.

Short the Basis - A person or firm who has sold or is short the spot commodity and who has hedged with a purchase of futures.

Small Traders - Traders who are not required to file reports of their futures transactions or positions with an exchange or the CFTC because their positions are smaller than the reporting levels of the exchange of the CFTC.

Soft - A weak market.

Softs - A term used to describe certain commodities, in particular coffee, sugar and cocoa.

Sold-Out Market - When liquidation has been completed and offerings become scarce, the market is said to be "sold out."

Speculative (Position) Limit - See Position Limit.

Speculator - An individual who trades or takes a position in a market with the objective of achieving profits through the successful anticipation of price movements.

Spot - Market for immediate delivery and payment of the product. Also refers to the nearest delivery month on a futures contract.

Spot Commodity - The actual commodity as distinguished from futures. Same as Actuals or Cash Commodity.

Spot Price - The price at which a physical commodity is selling at a given time and place. Same as Cash Price.

Spread - The purchase of one futures or options contract against the sale of another futures or options contract of the same or related commodity, security, currency or index.

Squeeze - Situation in which those who are short cannot repurchase their contracts, except at a price substantially higher than the value of those contracts in relation to the rest of the market.

Stochastics - A technique of technical analysis used to help identify overbought and oversold markets.

Stop Order - An order that becomes a market order when a specified price level is reached. A sell stop is placed below the market, a buy stop is placed above the market.

Stop-Limit Order - An order that goes into force as soon as there is a trade at the specified price. The order, however, can be filled only at the limit price or better.

Straddle - A spread in the options market involving puts and calls, of equal number, with the same strike prices, expirations and underlying entities. A long straddle involves a long call and a long put; a short straddle involves a short call and a short put.

Strike Price - See Exercise Price.

Strong Hands - When used in connection with delivery of commodities on futures contracts, the term usually means that the party receiving the delivery notice probably will take delivery and retain ownership of the commodity; when used in connection with futures positions, the term usually means positions held by trade interests or well-financed speculators.

Switch - Offsetting a position in one delivery month of a commodity and simultaneously initiating a similar position in another delivery month of the same commodity. When used by hedgers, this tactic is referred to as "rolling forward" the hedge.

Synthetic Position - The combination of a futures position and borrowing or lending securities that replicates a position in the cash security. Also a combination of options or options and futures that replicates an options or futures position.

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T

Taker - The buyer of an option contract.

Technical Analysis - An approach to the analysis of futures markets and likely future price trends that examines patterns of price change, rates of change and changes in volume of trading and open interest.

Technical Position - Term used to indicate internal market conditions. When the market is sold out or is oversold, its technical position is said to be strong. Conversely, after a sharp advance, when a market may be overbought, its technical position is said to be weak.

Technical Rally (or Decline) - A price movement resulting primarily from conditions internal to the futures or options markets themselves and not dependent on external factors, such as supply and demand.

Terminal Elevator - An elevator located at a central point of accumulation in the movement of agricultural products that stores the commodity or moves it to processors.

Tender - The act of giving notice to the clearinghouse of intention to initiate delivery of the physical commodity in satisfaction of the futures contract See also Re-tender.

Tick - Minimum price fluctuation of a futures or options contract.

Time Value - The excess, if any, of an option premium's over its intrinsic value. The time value of an option cannot be less than zero.

Treasury Bill - Short-term U.S. government obligations sold at a discount from face value. Treasury bills generally are issued with 13-, 26- or 52-week maturities.

Treasury Bond - Obligations of the U.S. government that mature in 15 or more years and pay a specified coupon.

Treasury Note - Obligations of the U.S. government that mature in 2 to 10 years and pay a specified coupon.

Trend - The general direction in which prices are moving.

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U

Underlying Commodity - The commodity or futures contract on which an option is based or the commodity upon which a futures contract is based.

Uptrend - A channel of upward price movement.

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V

Variable Limits - Most exchanges set limits on the maximum daily price movement of some of the futures contracts traded on their floors. They also retain the right to expand these limits if the price moves up or down-limit for one, two, or three trading days in a row. If the limits automatically change after repeated limit moves, they are known as variable limits.

Variation Margin - Payment required of a clearing member when the clearinghouse makes a margin call.

Vertical Spreads - Also known as a price spread and is constructed with options having the same expiration months. This can be done with either calls or puts.

Visible Supply - Usually refers to supplies of a commodity in licensed warehouses. Often includes afloat and all other supplies "in sight" in producing areas.

Volatility - A measure of variability, usually of prices, and a major factor influencing the price of an option. The standard deviation of a price series is commonly used to measure price volatility.

Volume of Trading - The number of contracts traded during a specified period of time. It also may be quoted as the total of physical units, such as bushels.

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W

Warehouse Receipt - A document evidencing possession by a warehouse (licensed under the U.S. Warehouse Act, or under the laws of a state) of the commodity named in the receipt. Warehouse receipts, to be tenderable on futures contracts, must be negotiable receipts covering commodities in warehouses recognized for delivery purposes by the particular exchanges on which the futures contracts are traded.

Weak Hands - When used in connection with delivery of commodities on futures contracts, the term usually means that the party probably does not intend to retain ownership of the commodity; when used in connection with the futures positions, the term usually means positions held by small speculators.

Winter Wheat - Wheat that is planted in the fall, lies dormant during the winter and is harvested in June and July of the next year.

Wire House - Refers to a commission house with branch offices connected by telephone, teletype, telegraph or cable.

Writer - The seller, grantor or maker of an option contract.

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X

Sorry, no terms are presently available that match "X".

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Y

Yield Curve - A graphic representation of the market yields for fixed-income securities that differ only in their time to maturity.

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Z

Sorry, no terms are presently available that match "Z".

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