Actuals: The physical or cash commodity, as opposed to the “futures”
Arbitrage: A strategy which involves the simultaneous purchase and sale of identical or equivalent futures contracts across more than one market to benefit from an often temporary discrepancy in their price relationship.
Ask: The expression of a price at which to sell a contract
At-the-Market: An order to buy or sell a contract at the best available price upon reaching the trading venue (trading floor or electronic platform)
Back Months: Delivery months for futures contracts other than the front or spot month.
Backwardation: The opposite of contango; a futures market with successively lower prices in further out contract months.
Basis: The difference between the cash price of a commodity and the nearest futures month price for the same or similar commodity.
Basis Point: A measurement of a change in the yield of a debt security. One basis point equals 1/100 of one percent.
Bear: An expression for a person who expects prices to decline.
Bear Market: An expression for a market in decline over a period of time.
Bear Spread: A trade design with a simultaneous purchase and sale of related - but not identical contracts – with the intent to benefit from a decline in prices.
Bid: An offer to buy a specific quantity of a commodity at a stated price.
Bid-Ask Spread: The price difference between the bid and ask quotes.
Break: Word to describe a rapid and sharp price decline.
Bull: A term to describe a person who expects prices to rise.
Bull Market: A term to describe a market in which prices are rising over a period of time.
Bull Spread: A trade design with a simultaneous purchase and sale of related - but not identical contracts – with the intent to benefit from a rise in prices.
Buy (or Sell) On Close: The designation to execute the order at the end of the trading session within the closing price range.
Buy (or Sell) On Opening: The designation to execute the order at the beginning of the trading session within the opening price range.
Calendar Spread: The simultaneous purchase and sale of contracts within the same market, but with different delivery or expiration dates.
Cash Commodity: The actual, physical commodity from which the futures contract is derived.
Cash Market: A marketplace for the physical commodity
Cash Price: The marketplace price for the physical commodity.
Cash Settlement: A way of settling a futures contract which involves an exchange of cash value rather than a tangible product. Often applied to financial instruments such as a stock index.
Commission: The fee charged by the broker or clearing firm for executing an order.
Commodity: Agricultural goods or articles as defined by the Commodity Exchange Act.
Commodity Pool: A collective enterprise which engages in the buying or selling of futures and/or options on commodities.
Commodity Trading Advisor (CTA): An individual who performs the business of advising others on trading futures or options and charges a fee for their services.
Congestion: A period of time within a market in which there are limited or repetitious price fluctuations.
Contango: A futures market in which prices for the further out delivery months are successively higher than the front months.
Contract: An agreement to buy or sell something according to the specifications set forth.
Contract Grades: Qualities or class of a commodity which conform to the levels set forth within the body of the contract.
Contract Month: The specified month for delivery on a futures contract.
Contract Size: The amount of the particular commodity specified within the contract.
Correction: A temporary change in prices during a significant price trend.
Cover: An action to offset a short position within a portfolio.
Crop Year: A term for the time period between one harvest and the next in agricultural commodities.
Daily Price Limit: The maximum price movement allowed above or below the previous session’s settlement price.
Day Order: An order which is good only for the trading session in which it was first placed and one which expires at the end of that session.
Day Trader: An individual who buys or sells a contract and offsets the position within the same trading session.
Delivery: The issue and receipt of the actual commodity or delivery instrument in order to settle a futures contract.
Delivery Date: A date on which delivery takes place.
Delivery Month: The month in which delivery takes place.
Delivery Notice: Notice issued by the seller of the contract which initiates delivery to the buyer.
Directional Trading: Positions or strategies which are designed for speculating on the price movements in the market .
Electronic Trading Facility: A trading venue which operates solely via telecommunication or electronics rather than floor trading.
Equity: As it refers to trading, is the balance of a trading account.
Euro: The official currency of most members of the European Union.
Exchange: The central marketplace which has been designated as the location on which to trade contracts.
Fast Market: A state in which transactions within the trading pit or ring are taking place with extreme volume and rapidity.
Fill: The execution of an order.
Fill or Kill Order: A designation for an order which demands immediate execution or cancellation.
Financial Instruments: As it refers to futures trading, any market which has not been designated as a tangible or agricultural commodity.
First Notice Day: The first day on which sellers may tender notices of delivery to buyers.
Floor Broker: An individual with the rights to trade contracts within the trading ring or pit for another person.
Floor Trader: An individual with the rights to trade contracts within the trading ring or pit for his own account. Also know as a local.
Forced Liquidation: A situation in which an account is liquidated (positions are offset) usually after notice of insufficient margin.
Foreign Exchange: Trading in foreign currencies.
Forex: A term for a foreign exchange market.
Forward Contract: A non-standardized agreement to fulfill delivery and receipt of goods for a fixed price at a specified date in the future.
Front Month: The closest traded futures month for a market.
Fundamental Analysis: The study of the underlying supply and demand issues as they may relate to the futures price.
Fungibility: A commodity which has units which are capable of mutual substitution.
Futures Commission Merchant (FCM): Individuals or entities who solicit or accept orders for the purchase or sale of any commodity for future delivery on or subject to the rules of any exchange and that accept payment from or extend credit to those whose orders are accepted.
Futures Contract: A standardized agreement to purchase or sell a commodity at a price determined at initiation for a future date and according to the specifications within the contract. These contracts may be satisfied by delivery or offset prior to the date of maturation.
Futures Option: An option on a futures contract.
Good 'Till Canceled Order (GTC): An order which is valid for each trading session until the relative contract expires or the order is cancelled.
Hedging: Taking a position in a futures market opposite a current or future position in the cash market to minimize the risk of financial loss.
Historical Volatility: A statistical measure of the rate of price change of a futures contract over a specified period in the past.
Implied Volatility: The likely rate of change in price of a futures contract as implied by the prices of an option on that instrument calculated using an options pricing model.
Initial Margin: The funds required within an account when a position is initiated.
Invisible Supply: Commodity supplies which are uncounted or outside commercial supplies but are still available to the market.
Last Trading Day: The day on which trading ceases for the contract month.
Limit (Up or Down): The maximum price movement allowed above or below the previous session’s settlement price.
Liquidation: The action of closing a long position.
Liquid Market: A designation for a market in which buying and selling can be easily conducted with minimal effect on the price.
Locked Limit: A market which has reached the maximum price movement allowed above or below the previous session’s settlement price.
Long: A term describing someone who holds or buys a contract.
Maintenance Margin: The minimum price level to which an account with an open position can fall without being required to deposit additional funds.
Margin: Funds or other collateral within a trading account used as a performance bond for trading positions. The margin requirements are established by the exchange (using the SPAN margining system), but Futures Commission Merchants may require a higher amount. See also; Maintenance Margin, Initial Margin.
Margin Call: A request to bring account deposits up to initial margin levels, normally due to adverse price movements within positions which cause the account to drop below maintenance margin levels.
Market-if-Touched (MIT) Order: A type of order which specifies a price level at which the order will become a market order. Sell MIT orders are placed above the market price, buy MIT orders are placed below.
Market-on-Close: An order which stipulates execution at the close of the trading session within the closing price range.
Market-on-Opening: An order which stipulates execution at the open of the trading session within the opening price range.
Market Order: An order to buy or sell a contract at the best available price when the order enters the trading venue.
Minimum Tick: Smallest possible price movement up or down for a contract.
Momentum: A term in technical analysis which refers to the relative change in price over a span of time and usually meant with speed.
Nearby Delivery Month: The nearest month of maturity for a futures contract.
Negative Carry: A term to describe a state in which the cost of financing a financial instrument is above the current return.
NFA: The National Futures Association
Offer: A price expression of a level at which there is willingness to sell a contract.
Offset: A term to describe an action or contract which closes other positions within the account.
One Cancels the Other (OCO) Order: Two orders issued together which stipulate that when one if filled, the other is automatically cancelled.
Opening Price (or Range): A price or price range which occurs at the beginning of the trading session.
Opening: The start of the trading session as designated by rules or the exchange.
Open Interest: A number which shows the total number of contracts either bought or sold in a particular futures market which have not been offset or closed by delivery.
Open Order (or Orders): Another term for GTC orders. Orders which are effective until cancelled or until the contract expires.
Open Outcry: Trading which occurs on the trading floor of an exchange in which participants make bids and offers simultaneously during the designated trading hours for the particular contract.
Open Trade Equity: The gain or loss on existing trades which has not been realized through offset or liquidation.
Outright: An order to buy or sell a contract not within a spread.
Overbought: A term in technical analysis with which the analyst implies that the market price has risen too high and fast in relation to the fundamental factors.
Oversold: A term in technical analysis with which the analyst implies that the market price has dropped too steeply and with greater speed in relation to the fundamental factors.
Pit: An area on certain exchanges designated as the spot for trading particular contracts.
Point-and-Figure: A charting technique which marks patterns in price changes regardless of time.
Position: An option contract in a market.
Position Trader: A trader who buys or sells a contract and holds for an extended period of time or over more than one trading session.
Positive Carry: A description of a state in which the cost of financing a financial instrument is less than the current return.
Pyramiding: A term for a strategy which uses gains on existing positions to increase the size of the overall position, usually in successively smaller increments.
Quote: A statement of the price or bid/ask price of a futures contract.
Rally: An upward movement of prices.
Range: A term for the high and low price of a contract over a time frame.
Retracement: A reversal within a greater overall price trend.
Reversal: A change in price direction
Reverse Conversion or Reversal: With regard to options, a position which involves buying a call option, selling a put option and selling the underlying futures contract.
Ring: An area on certain exchanges designated as the spot for trading particular contracts.
Risk/Reward Ratio: The comparison of the likely loss and potential profit which is often used in trade selection.
Roll-Over: A term to describe the action of closing a position in a nearby month and initiating the same position in a further out month.
Round Turn: The term for a completed transaction where a position was initiated and then closed by offset, delivery or expiration.
Scalper: An individual on a trading floor who speculates and buys and sells rapidly with small profits or losses within short time frames.
Settlement: The act of fulfilling the delivery requirements of the contract or the daily prices at which the clearing organization settle trades within accounts.
Short: The act of selling a futures contract or a net sale position within an account.
Soft: A term for prices which are gradually weakening or the term to describe contracts coffee, cocoa, cotton, orange juice, sugar.
Speculative Position Limit: A maximum number of contracts which may be held by one person within a market when the individual is not a hedger.
Speculator: An individual participating in the buying and/or selling of futures or option contracts with the objective of profiting from changes in price when the individual is not hedging a cash position.
Spot: Market of immediate delivery of and payment for the product.
Spread: A strategy involving the sale of one or more contracts against the purchase one or more contracts. Also refers to the price difference between like contracts.
Stop Limit Order: An order which specifies a price at which the order will go into effect (the stop price) and a price at level where the order may be filled or better (limit price).
Stop Loss Order: See Stop Order.
Stop Order: An order which stipulates a price at which, if crossed, the order will be executed at the market. A buy stop is placed above market and a sell stop is placed below.
Support: A term in technical analysis which describes a level at which prices appear to bring in buyers at which point the market does not move lower.
Systematic Risk: Risk which cannot be eliminated with diversification.
Systemic Risk: Risk which is common to a whole market and has wide ranging effects.
Technical Analysis: A trading approach in which future price forecasts are attempted based on analysis of patterns in price changes, rates of change, and changes in volume and open interest without regard for the fundamental factors.
Tick: The minimum price change in a market
Trend: A general upward or downward direction in market price over an extended time frame.
Trendline: In technical analysis, a line which can be drawn across the top or bottom of prices.
Variable Price Limit: A schedule for limit price as determined by the exchange which varies from the normal allowable price movement.
Visible Supply: The available commercial stocks of a commodity.
Volatility: The statistical measurement of the rate of change in the price of a market.
Volume of Trade: The number of contracts traded during a specified period of time.