The product itself; the actual commodity that the market represents.

ARBITRAGE

The process of balancing the prices of a specific market between separate exchanges.

AT-THE-MARKET

To trade at  whatever price is available

AT-THE-MONEY

To trade at the cash price of the product

BASIS

The difference in price between the required point of delivery and the actual point of purchase for any commodity that is sold.

BASIS GRADE

Same as basis but also includes price adjustments for quality of product.

BEAR

Word to describe a down trending market.

BID /ASK

Price a buyer is willing to pay/Price a seller is willing to accept

BULL

Word to describe an upwards trending market

BUY ON CLOSE

To buy during the last minutes of a market session

BUY ON OPENING

To buy as soon as the market session begins

CALL

An option that gives the buyer the right to purchase a long position in a specific market at a specific set price for an extended and specific amount of time.

CASH COMMODITY

Any commodity available for immediate posession

CASH DELIVERY

The release of the actual commodity in exchange for cash

CASH MARKET

Any market where cash is exchanged for a commodity

CFTC

Commodity Futures Trading Commission; the government agency charged with the regulation of the commodity futures and options exchanges and their representatives.

CTA

Commodity Trading Advisor; Person who recommends specific trades for a fee or a portion of the profits

CLOSE

The end of a trading session

CLOSING PRICE

Usually an average of the last trade prices in a trading session.

COMMISSION HOUSE

Brokerage company that charges transaction fees.

COVER

To complete a trade

CROSS HEDGE

DAY ORDERS

Orders that expire at the end of a trading session

DELIVERY

The process of delivering an actual stock or commodity to a buyer.

DELIVERY MONTH

The specified month in which a delivery could be made – usually applying to commodities

DELIVERY NOTICE

The notification that a delivery is pending

DIFFERENTIALS

FINANCIAL FUTURES

Commodity futures contracts that represent financial instruments including currencies, interest bearing instruments and stock indexes

FUNDAMENTAL ANALYSIS

A method aimed at predicting market direction based on the study of circumstances.

FUTURES CONTRACT

A contract for a specific amount of a commodity to be delivered or received at a designated future date.

FUTURES COMMISSION MERCHANT

A type of brokerage office that may hold an exchange seat, handle customer accounts but typically doesn’t have clearing privileges.

FUTURES FUNDS

Trading funds that contain commodity futures rather than stocks

HEDGE

Process used in business to protect against adverse market movement

IN-THE-MONEY

Refers to a call option with a strike price below or a put option with the strike price above the current price of the underlying stock or commodity

INDEX FUTURES

Futures contract with stock indexes as the underlying product

INTRINSIC VALUE

The portion of value attributed to an option by the amount they are in the money 

LIMIT

A predetermined distance that a market is allowed to trade in a given amount of time as determined by the exchange.

LIMIT ORDER

Also known as a priced order sets a limit on the amount a trader is willing to buy or sell for.

LIQUIDATION

Process of abandoning a position in the market.

LOCAL

A trader who owns or leases a seat on an exchange and trades on the exchange floor.

LONG

A market position that has been bought to begin the trade.

MARGIN

Amount of money set and required by the exchange to trade a stock or commodity. It acts as a performance bond.

MARGIN CALL

A request from the exchange for additional funds to maintain an adequate margin.

MARK-TO-MARKET

To establish a price based on the current corresponding market.

MARKET ORDER

To make a transaction at the existing price, whatever it may be, when the order is placed.

NEARBY

Usually the closest active delivery month in a commodity

NET POSITION

The balance of a position that is not offset by a hedge

OFFER

The price a seller is willing to accept

ON OPENING

Refers to the placement of an order to be executed as soon as the session starts trading.

OPEN CONTRACTS

Contracts that are currently in an account.

OPEN INTEREST

The total number of long and short positions that are being held in a particular commodity contract delivery month.

OPEN ORDER

An order that has been placed and will stay active until it is cancelled.

OPENING

The beginning of a trading session.

OPTIONS ON FUTURES

An investment vehicle that allows the buyer to lock in the right to make a transaction at a specific price for a predetermined period of time.

OPENING PRICE

The first price of a trading session

OUT-OF-THE-MONEY

Refers to a call option with a strike price above or a put option with the strike price below the current price of the underlying stock or commodity

PIT

Area designated for the traders on a commodity exchange floor

POINT

A specific price or place in time.

POSITION

Holdings in the market

PREMIUM

The amount paid for an option

PRICE LIMIT |

Type of order requesting a specific price

PURCHASE AND SALE STATEMENT

Record of the transactions including prices that have been made.

PUT

An option that gives the buyer the right to purchase a short position in a specific market at a specific set price for an extended and specific amount of time.

RANGE

The difference between the high and the low of a market for a given period of time.

RATIO HEDGING

Typically a hedge established to protect a given price percentage

REACTION

ROUND-TURN

Refers to the complete process of both entering and exiting the market.

ROUND-TURN COMMISSION

Refers to the total commission cost for both entering and exiting the market.

SCALPING

Short term trading for a quick gain

SETTLEMENT PRICE

The price that the exchange will use to settle the books at the end of the trading day.

SHORT

A market position that has been sold as the first part of a trade.

SPECULATOR

Trader who buys or sells the market with no vested interest beyond the success of the trade.

SPOT COMMODITY

Closest commodity to the cash market in time and price.

SPOT PRICE

The value of a spot commodity

SPREAD

The type of trade that can benefit from the difference between two or more markets.

STRIKE PRICE

The stock or commodity price attached to an option that the option’s value is based upon.

TECHNICAL ANALYSIS

A method aimed at predicting market direction based on the study of previous market movement.

TIME VALUE

The part of an option’s worth that is based on the amount of time until expiration.

VOLUME OF TRADING

Total number of stocks or contracts traded in a given amount of time.

WRITER

The party who takes responsibility for the sell side of an option when someone buys it