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An actual physical commodity which is delivered at the completion of a contract, as opposed to a futures contract on that commodity. A futures contract will specify the number of units of the cash commodity that must be delivered, and also the specific features of the cash commodity. See cash commodity.
A method of paying interest where the interest is added onto the principal at maturity or interest payment dates.
Adjusted Futures Price
The cash-price equivalent reflected in the current futures price. This is calculated by taking the futures price times the conversion factor for the particular financial instrument (e.g., bond or note) being delivered.
See Exchange for Physical
All or None Order
An order which must be filled for the full size of the order before it can be executed.
An option contract that may be exercised at any time between the date of purchase and the expiration date.
The purchase of a commodity against the simultaneous sale of a commodity to profit from unequal prices. The two transactions may take place on different exchanges, between
two different commodities, in different delivery months, or between the cash and futures markets.
Ask: The price at which a seller will sell a futures contract.
To make an option seller perform his obligation to assume a short futures position (as a seller of a call option) or a long futures position (as a seller of a put option).
An option with a strike price that is equal, or approximately equal, to the current market price of the underlying futures contract.
Balance of Payment
A summary of the international transactions of a country over a period of time including commodity and service transactions, capital transactions, and gold movements.
A chart that graphs the high, low, and settlement prices for a specific trading session over a given period of time.
The difference between the current cash price and the futures price of the same commodity. Unless otherwise specified, the price of the nearby futures contract month is generally used to calculate the basis.
Bear Market (bear/bearish)
When prices are declining, the market is said to be a "bear market"; individuals who anticipate lower prices are "bears." A traders that expects falling prices is said to be "bearish."
In most commodities and financial instruments, the term refers to selling the nearby contract month, and buying the deferred contract, to profit from a change in the price relationship.
An expression indicating a desire to buy a futures contract at a given price; opposite of offer. Or the price at which a product can be sold immediately without dispute or negotiation.
Board of Trade Clearing Corporation
An independent corporation that settles all trades made at the Chicago Board of Trade acting as a guarantor for all trades cleared by it, reconciles all clearing member firm accounts each day to ensure that all gains have been credited and all losses have been collected, and sets and adjusts clearing member firm margins for changing market conditions.
A swift downward move in price.
A company or individual that executes futures and options orders on behalf of financial and commercial institutions and/or the general public.
See Commission Fee.
See Futures Commission Merchant.
Bull Market (bull/bullish)
When prices are rising, the market is said to be in a "bull market"; individuals who anticipate higher prices are considered "bulls. "A trader that expects rising prices is said to be "bullish".
This spread is achieved when buying the nearby month, and selling the deferred month, to profit from the change in the price relationship. I.e. Buy one June'07 Crude Oil contract & Sell one September'07 Crude Oil Contract in March'07. Why? Summer driving season should increase demand for near term oil, while demand at summers end will begin to dwindle.
Typically used as a low risk, limited reward options strategy that is built with 4 trades with one common expiration and three different strike prices. When done in the correct way, potential upside is greater than potential downside. I.e. Buy one Oct07 60 Call & one Oct07 70 call, while selling two Oct07 65 calls. Maximum profit is achieved if the underlying market is trading around the middle price at expiration of these options (mid-October 2007). Maximum loss is realized if the underlying is trading below the lowest strike or above the highest strike at expiration.