Jump to terms: A B C D E F G H I L M N O P Q R S T U V W

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

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

Arbitrage: The 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.

Asked price: The price at which a trader will sell a contract.

Assignable option (or contract): One which allows the holder to convey his rights to a third party.

[ Back to Top ]

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 futures contract, and may represent different time periods, product forms, qualities and locations.

Basis risk: Risk attributable to uncertain movements in the spread between a futures price and a spot price.

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

Bear covering: The act of buying back a speculative short position on a steady or rising market, despite the original intention to await a market drop.

Bear market: A market in which prices are declining.

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

Break: A rapid and sharp price decline.

Broker: A person paid a fee or commission for executing buy or sell orders for a customer. In commodity futures trading, the term may refer to floor broker (person who actually executes orders on the trading floor of an exchange), account executive, associated person, registered commodity representative or futures commission merchant.

Brokerage: The fee charged by a broker for the execution of a transaction. The fee may be a flat amount or a percentage.

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

Bull market: A market in which prices are rising.

Buoyant: A market in which prices have a tendency to rise easily with a considerable show of strength.

Buyer's market: A condition of the market in which there is an abundance of goods available and hence buyers can afford to be selective and may be able to buy at less than the price that had previously prevailed.

Buy on close: To buy at the end of a trading session within the closing price range.

Buy on opening: To buy at the beginning of a trading session within the opening price range.

Buying hedge (long hedge): Hedging transaction in which futures contracts are bought to protect against a possible increase in cost of commodities.

[ Back to Top ]

CFO: Cancel former order or more commonly called cancel replace.

CCC or 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.

Call option: The right to buy an asset at a specified exercise price on or before a specified expiration date.

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.

Cash commodity: The physical or actual commodity as distinguished from the "futures." Sometimes referred to as "actuals."

Cash delivery: The provision of some futures contracts that requires not delivery of the underlying assets (as in agricultural futures), but settlement according to the cash value of the asset.

Cash market: Market for immediate delivery of and payment for commodities.

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

Charting: The use of graphs and charts in the technical analysis of futures markets to plot trends of price movements and volume and open interest.

Clearing: The procedure through which the clearinghouse or association becomes buyer to each seller of a futures contract, and seller to each buyer, and assumes responsibility for protecting buyers and sellers from financial loss by assuring performance on each contract.

Clearinghouse: An adjunct to a commodity exchange through which transactions executed on the floor of the exchange are settled. Also charged with assuring the proper conduct of the exchange's delivery procedures and the adequate financing of the trading.

Clearing member: A member of the clearinghouse or association. All trades of a non-clearing member must be registered and eventually settled through a clearing member.

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

Closing price: See settlement price.

Commercial: A company that merchandises or processes cash grain and other commodities.

Commission: The charge made by a commission house for buying and selling commodities.

Commission broker: A broker on the floor of the exchange who executes orders for other members.

Commission house: A concern that buys and sells actual commodities or futures contracts for the accounts of customers. Its income is generated by the commission-charged customers.

Commitment or open interest: The number of contracts in existence at any period of time which have not as yet been satisfied by an offsetting sale or purchase or by actual contract delivery.

Commodity: An article of commerce or a product that can be used for commerce. Traded on an authorized commodity exchange.

Commodity Exchange Commission: A commission consisting of the secretary of agriculture, secretary of commerce and the attorney general, charged with certain responsibilities under the Commodity Exchange Act, prior to 1975.

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

Commodity pool operator (CPO): Individuals or firms in businesses similar to investment trusts or syndicates that solicit or accept funds, securities or property for trading commodity futures contracts.

Commodity trading advisor (CTA): Individuals or firms that, for pay, issue analyses or reports concerning commodities, advise others of commodities or of the advisability of trading in commodity futures or options.

Contract: A term of reference describing a unit of trading for a commodity future. Also an actual bilateral agreement between buyer and seller.

Contract market: A board of trade designated by the Commodity Futures Trading Commission as a contract market under the Commodity Exchange Act for a specific commodity.

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 commodity or commodity delivery month during a specified period of time (day, week, etc.).

Contract unit: The actual amount of a commodity designated in a given futures contract.

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

Covariance: A measure of the degree to which returns on two risky assets move in tandem. A positive covariance means that asset returns move together. A negative covariance means they vary inversely.

Cover: Purchasing futures to offset a short position. Same as short covering, offset, liquidation, evening up.

Crop year: The time period from one harvest to the next, varying according to the commodity - July 1 to June 30 for wheat.

Cross hedge: Hedging a cash market risk in a futures contract for a different but priced-related commodity.

[ Back to Top ]

Day order: A buy order or a sell order expiring at the close of the trading day.

Day trading: Establishing and offsetting the same futures market position within one day.

Day traders: Commodity traders (generally members of the exchange active on the trading floor) who take positions in commodities and then offset them prior to the close of the same trading day.

Deck: The orders a floor broker holds in his hand.

Declaration date: The last day on which the buyer has the right to exercise his option. If the buyer fails to declare by such date, the option automatically expires. The declaration date is on the contract.

Default: Failure to perform on a futures contract as required by exchange rules, such as failure to meet a margin call, or to make or take delivery. In the futures market, the theoretical failure of a party to a futures contract to either make or take delivery of the physical commodity as required under the contract.

Delivery: The tender and receipt of the actual commodity, or of a delivery instrument covering such commodity, 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, nearby: The nearest traded month.

Delivery notice: The written notice given by the seller 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 that will be used to transfer title.

Delivery points: Those locations designated by commodity 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 price at which the futures contract is settled when deliveries are made.

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.

Discretionary account: An arrangement by which the holder of the account gives written power of attorney to someone else, often his broker, to buy and sell without prior approval of the holder; often referred to as the "managed account" or "controlled account."

Distant or deferred delivery: Usually means one of the more distant months in which futures trading is taking place.

Dominant future: That future having the largest number of open contracts.

Double option: The purchase of both a put and a call at the same strike price.

Dow theory: A technique that attempts to discern long- and short-term trends in stock market prices.

[ Back to Top ]

Ease off: A minor and/or slow decline in the prices of a market.

Elasticity: A characteristic that describes the interaction of the supply, demand and price of a commodity.

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

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

Evening up: Buying or selling to offset an existing market position. Also known as liquidation and covering.

Excess: The dollar amount by which the equity exceeds the margin requirements in a trader's commodity futures account.

Exchange of futures for cash (XCFO): A transaction in which the buyer of a cash commodity transfers to the seller a corresponding amount of long futures contracts, or receives from the seller a corresponding amount of short futures, at a price difference mutually agreed upon. In this way the opposite hedges in futures of both parties are closed out simultaneously.

Exchange: A facility for members to trade futures. A seat is a membership on an exchange.

Execution by outcry: The practice on many exchanges of executing orders verbally and publicly.

Exercise or strike price: Price set for calling (buying) an asset or putting (selling) an asset.

Expiration date: The date on which a futures contract expires. The last day on which an option can be exercised.

[ Back to Top ]

Fast market: When transactions in the pit take place in such volume and with such rapidity that price reporters are behind with price quotations.

Fill or kill order: A commodity order which demands immediate execution or cancellation.

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 will vary with each commodity.

Floor broker: A member of the exchange who can execute for another any orders for the purchase or sale of any commodity.

Floor clerk: A person assigned to a telephone on the floor of the exchange by a member firm to receive and transmit orders to the firm's floor broker.

Floor trader: An exchange member who usually executes his own trades by being personally present in the pit or place for futures trading. Sometimes called a local or speculator.

Fundamental analysis: Study of basic, underlying factors which will affect the supply and demand of the commodity being traded in futures contracts.

Futures commission merchant (FCM): 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.

Futures contract: Obliges traders to purchase or sell an asset at an agreed-upon price on a specified future date. The long position is held by the trader who commits to purchase. The short position is held by the trader who commits to sell. Futures differ from forward contracts in their standardization, exchange trading, margin requirements and daily settling.

Futures option: The right to enter a specified futures contract at a futures price equal to the stipulated exercise price.

Futures price: The price of a given commodity unit determined by public auction on a futures exchange.

[ Back to Top ]

Give-up: (1) At the request of the customer, a brokerage house that has not performed the service is credited with the execution of an order (2) In trading in the pit, a broker "gives up" the name of the firm for which he was acting to another member with whom a transaction has just been completed.

G.T.C.: Good until canceled. Also known as an open order.

[ Back to Top ]

Hardening: Describes a price which is gradually stabilizing; term indicating a slowly advancing market.

Heavy: A market in which prices are demonstrating either an ability to advance or a slight tendency to decline.

Hedge ratio (for an option): The number of futures required to hedge against the price risk of holding one option. Also called the option's "delta."

Hedging: The sale of futures against the purchase of a cash commodity to protect against a decline in the commodity's value; conversely, the purchase of futures against forward sales of or anticipated need for a commodity to protect against an increase in the commodity's value.

Hedging & Speculating: Two polar uses of futures markets. A speculator uses a futures contract to profit from movement in futures prices; a hedger uses a futures contract to protect against price movement. A speculator anticipating an upward move in a market would take a long position (buying) seeking a profit. Initiating a short (selling) this position would indicate the trader thought the market might be going lower.

[ Back to Top ]

In the money: In the money describes an option whose exercise would produce profits. Out of the money describes an option whose exercise would not be profitable.

Index arbitrage: An investment strategy that exploits divergences between actual futures prices and their theoretically correct parity values to make a profit.

Index option: A call or put option based on a stock market index.

Initial margin: Customers' funds put up as a security for a guarantee of contract fulfillment at the time a futures market position is established. Also known as original margin.

Intrinsic value of an option: Futures price minus exercise price, or the profit that could be attained by immediate exercise of an in-the-money option.

In the money: A call option with a strike price lower (or a put option with strike price higher) than the current market value of the underlying commodity for delivery at the expiration time.

Inverted market: A futures market in which the nearer months are selling at prices higher than the more distant months; hence a market displaying "inverse carrying charges." Characteristic of markets in which supplies are currently in shortage.

[ Back to Top ]

Large traders: A large trader is one who holds or controls a position in any one future of a commodity on any one contract market equaling or exceeding the reporting level.

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 expiration of trading. In some cases this phrase denotes the period already passed during which trading has already occurred.

Limit order: An order specifying a price at which an investor is willing to buy or sell a contract.

Limit (up or down): The maximum price advance or decline from the previous day's settlement price permitted in one trading session.

Liquid market: A market in which selling and buying can be accomplished with minimal price change.

Liquidation: (1) Making a transaction that offsets or closes out a futures position. (2) A market in which open interest is declining.

Long position or long hedge: (1) One who has bought a futures contract to establish a market position (2) A market position which obligates the holder to take delivery (3) One who owns an inventory of commodities.

Long the basis: A person or firm that has bought the spot commodity and hedged with a sale of futures is said to be long the basis.

[ Back to Top ]

Margin: The amount of money or collateral deposited by a client with his broker, or by a broker with the clearinghouse, for purpose of ensuring the broker or clearinghouse against loss on open futures contracts. The margin is not a part payment on a purchase. (1) Original or initial margin is the total amount of margin per contract required by the broker when a futures position is opened (2) Maintenance margin is a sum which must be maintained on a deposit at all times. If a customer's equity in any futures position drops to or under the level because of adverse price action, the broker must issue a margin call to restore the customer's equity.

Margin call: (1) A request from a brokerage firm to a customer to bring margin deposits up to minimum levels (2) A request by the clearinghouse to a clearing member to bring clearing margins back to minimum levels required by clearinghouse rules.

MIT (market if touched): 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.

MOC (market on close): An order to buy or sell at the end of the trading session at a price within the closing range.

MOO (market on opening): An order to buy or sell at the beginning of the trading session at a price within the opening range.

Market order: An order to buy or sell a futures contract at whatever price is obtainable at the time it is entered in the pit.

Marking to market: Describes the daily settlement of obligations of futures positions.

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

Membership or seat on an exchange: A limited number of exchange positions that enables the holder to trade for the holder's own account and charge clients for the execution of trades for their account.

Minimum price fluctuation: Smallest increment of price movement possible in trading a given futures contract.

[ Back to Top ]

Naked option writing: Writing an option without an offsetting futures position.

Nearbys: The nearest delivery months of a commodity futures market.

Nearby delivery (month): The futures contract closest to maturity.

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

Net position: The difference between the open long contracts and the open short contracts held in any one commodity.

Non-member traders: Speculators and hedgers who trade on the exchange through a member but do not hold exchange memberships.

Nominal price: Computed price quotations of futures for a period in which no actual trading took place; usually an average of bid and asked price.

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. Notice day is the one selected as the day for issuing a notice of delivery.

[ Back to Top ]

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

Offset: (1) Liquidating a purchase of futures through the sale of an equal number of contracts of the same delivery month, or the covering of a short sale of futures 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.

Omnibus account: An account carried by one futures commission merchant with another futures commission merchant in which the transactions of two or more persons are combined and carried in the name of the origination broker rather than designated separately.

On close: A term used to specify execution of an order at the official closing price.

On opening: A term used to specify execution of an order during the opening.

Open (good-until-canceled) order: A buy or sell order remaining in force until the customer cancels the order or the expiration of that contract or option.

Open interest: The sum of futures contracts in one delivery month or market that has been entered into and not yet liquidated by an offsetting transaction or fulfilled by delivery.

Open outcry: Method of public auction required for making bids and offers in the trading pits of commodity exchanges.

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

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

Option: A unilateral contract which gives the buyer the right 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 that 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 a customer by exchange regulations.

Out of the money: A call option with a strike price higher (or a put with strike price lower) than the current market value of the underlying commodity for delivery at the expiration time. Since it depends on current price, an option can vary from in the money to out of the money with market price movements during the life of the option contract.

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

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

[ Back to Top ]

Program trading: Coordinated buy orders and sell orders, usually done with the aid of computers, often to achieve index arbitrage objectives.

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.

Pit: A specially constructed arena on the trading floor of some exchanges where trading in a futures contract is conducted.

Point: The minimum price fluctuation in futures. It is equal to 1/100 of one cent in most futures traded in decimal units. In grains, it is 1/4 of one cent.

Position: An interest in the market, either long or short, in the form of one or more open contracts.

Position limit: The maximum number of positions, either net long or net short, in one commodity future or in all futures of one commodity combined which may be held or controlled by one person as prescribed by an exchange or by the CFTC.

Position trader: A commodity trader who either buys or sells contracts and holds them for an extended period of time, as distinguished from the 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) Refers to a futures delivery month selling at a higher price than another, as in "July is premium over May" (3) Cash prices that are above the future (4) The money, securities or property the buyer pays to the writer for granting an option contract.

Price limit movement: Maximum price advance or decline from the previous day's settlement price permitted for a commodity in one trading session.

Put option: The right to sell a specified amount of a commodity at an agreed price and time, made with expectation of a fall in price. The buyer has the right to sell the commodity or acquire a short position.

[ Back to Top ]

Quotation: The actual price or the bid or asked price of either cash commodities or futures contracts.

[ Back to Top ]

Rally: An upward movement of prices following a decline.

Range: The difference between the high and low price of a commodity during a given period.

Reaction: The downward tendency of a commodity after an advance.

Rebalancing: Realigning the proportions of assets in a portfolio as needed.

Recovery: An upward movement of price after a decline. Same as a rally.

Registered trader: A member of the exchange who executes frequent trades for his or her own account.

Reporting level or limit: Sizes of positions set by the exchanges and/or the CFTC at or above which commodity traders and/or brokers who carry their accounts must make daily reports as to the size of the position by commodity, by delivery month, and by whether the position is speculative or hedging.

Resistance level: A price level above which it is supposedly difficult for a stock index or futures contract to rise.

Resting order: An order to buy at a price below or to sell at a price above the prevailing market that is being held by a floor broker. Such orders may be either day orders or open orders.

Retender: In specific circumstances, some contract markets permit holders of futures contracts 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; others permit transfer of notices to another buyer.

Reversing trade: Entering the opposite side of a currently held futures position to close out the position.

Rollover: A special trading procedure involving the shift of one month of a straddle into another future month while holding the other contract month. The shift can take place in either the long or short straddle 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 liquidating sale, or a sale followed by a covering purchase.

Rules: The principles for government of the exchange. In some exchanges rules are adopted by a vote of the membership; regulations can be imposed by the governing board.

[ Back to Top ]

Sample grade: In commodities, usually the lowest quality of a commodity too low to be acceptable for delivery in satisfaction of futures contracts.

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 rapidly, with small profits or losses, 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.

Seller's market: A condition of the market in which there is a scarcity of goods available and hence sellers can obtain better conditions of sale or higher prices.

Short position or hedge: Protecting the value of an asset held by taking a short position in a futures contract.

Speculation: Undertaking a risky investment with the objective of earning a positive profit compared with investment in a risk-free alternative.

Settlement or settling price: The daily price at which the clearinghouse clears all trades and settles all accounts between clearing members for each contract month. Settlement prices are used to determine both margin calls and invoice prices for deliveries. The term also refers to a price established by the exchange to even up a position that may not be able to be liquidated in regular trading.

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 a call or put.

Short selling: Selling a contract with the idea of delivering or of buying to offset it at a later date.

Short the basis: A person or firm who has sold the spot commodity which he does not then own but that he has hedged with a purchase of futures is said to be short the basis.

Small traders: Traders who are not required to file reports of their futures transactions or position.

Soft: A description of a price which is gradually weakening.

Speculator: An individual who does not hedge, but who trades in commodity futures with the objective of achieving profits through the successful anticipation of price movements.

Spot: Market of immediate delivery of the product and immediate payment. Also refers to the nearest delivery month on futures contracts.

Spot commodity: The actual commodity as distinguished from futures.

Spot futures parity theorem, or cost-of-carrying relationships: Describes the theoretically correct relationship between spot and futures prices. Violation of the parity relationship gives rise to arbitrage opportunities.

Spread (or straddle): Done to take advantage of and profit from a change in price relationships. (1) Taking a long position in a futures contract of one maturity and a short position in a contract of a different maturity, both on the same commodity (2) The purchase of one delivery month of one commodity against the sale of the same delivery month of a different commodity, or sell verses buy. (3) The term "spread" is also used to refer to the difference between the price of one futures month and the price of another month of the same commodity.

Spread (options): A combination of two or more call options or put options on the same commodity with differing exercise prices or times of expiration. A vertical or money spread refers to a spread with different exercise prices; a horizontal or time spread refers to differing expiration dates.

Stop order: This is an order that becomes a market order when a particular price level is reached. A sell stop is placed below the market, a buy stop is place 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 only be filled at the stop limit price or better.

Straddle: A combination of buying both a call and a put, each with the same exercise price and expiration date. The purpose is to profit from the expected volatility in either direction.

Strike price: The price, specified in the option contract, at which the underlying futures contract or commodity will move from seller to buyer.

Support level: A price level below which it is supposedly difficult for a commodity or futures or stock index to fall.

[ Back to Top ]

Taker: The buyer of an option contract.

Technical analysis: An approach to analysis of futures markets and likely future trends of commodity prices which examines patterns of price change, rate of change, and changes in volume of trading and open interest. This data is usually charted.

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 is clearly overbought, its technical position is said to be weak.

Technical rally (or decline): A price movement resulting from conditions developing within the futures market itself and not dependent on outside supply and demand factors. These conditions vary from such technical factors as volume, open interest, delivery condition, or chart configurations as distinguished from movements resulting from supply and demand circumstances.

Tender: The act of giving notice to the clearinghouse of intention to initiate delivery of the physical commodity in satisfaction of the current futures price.

Terminal elevator: An elevator located at a point of greatest accumulation in the movement of agricultural products which stores the commodity or moves it to processors.

Tick: Refers to an upward or downward change in price.

Ticker tape: A continuous paper tape transmission of commodity or security prices, volume, and other trading and market information which operates on private wires leased by the exchanges.

Trader: (1) A merchant involved in cash commodities (2) A professional speculator who trades for his own account.

Trading limit: (1) The maximum number of futures positions any individual is allowed to hold at any time under CFTC or exchange regulations (2) Prices above or below which trading is not allowed during any one day.

Transfer trades: Entries made upon the books of futures commission merchants for the purpose of (1) transferring existing trades from one account to another within the same office where no change in ownership is involved or (2) transferring existing trades from the books of one commission merchant to the books of another commission merchant where no change in ownership is involved (3) Exchanging futures for cash commodities or (4) exchanging futures positions, one of which was taken to fix the price of a commodity involved in a call sale.

Trend: The general direction, either upward or downward, in which prices are moving.

Triple witching: The four times a year that the Value Line futures contract expires at the same time as the Value Line index option contract and options contracts on individual stocks.

[ Back to Top ]

Underlying commodity: The commodity or futures contract on which a commodity option is based and which must be accepted or delivered if the option is exercised.

[ Back to Top ]

Variable limit margins: The performance deposit required whenever the daily trading limits on prices of a commodity are raised in accordance with exchange rules. In periods of extreme price volatility, some exchanges permit trading at price levels that exceed regular daily limits. At such times, margins also are increased.

Variation margin: Payment required upon margin call.

Volume of trade: The number of contracts traded during a specified period of time. It may be quoted as the number of contracts traded or in the total of physical units, such as bales, bushels, pounds or dozens.

Volatility risk: The risk in the value of options due to unpredictable changes in the volatility of the underlying asset.

[ Back to Top ]

Warehouse receipts: A document evidencing possession by a warehouse 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 exchange on which such futures contracts are traded.

Winter wheat: Wheat that is planted in the fall, lies dormant during the winter and is harvested beginning about May of the next year.

[ Back to Top ]

Value Line® is a registered mark of Value Line, Inc., a New York corporation that provides financial services and publications. Since 1982, the Kansas City Board of Trade has been licensed to use the Value Line® mark in connection with its efforts to establish futures markets tied to the Value Line® index. The Kansas City Board of Trade and Value Line, Inc. are not affiliated corporate entities.