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Glossary


  • Search
  • ABANDON
    Allowing an option to expire without exercising it, done generally when an option is OUT-OF-THE-MONEY.
  • ACCEPTANCE

    1. Formal indication by a debtor of his willingness to pay a time draft or bill of exchange.
    2. A written instrument so accepted; compliance by one party with the terms and conditions of another's offer so that a contract becomes legally binding between them.
    3. Contract law: words signifying consent to the terms of an offer (creating a contract).
    4. Banking: A time draft drawn on and accepted by a bank.

  • ACCOMMODATION TRADING

    Non-competitive trading conducted usually to assist another trader in illegal trading.

  • ACTIVE MONTH
    In FUTURES trading, the active month is the nearest contract month that isn't the current delivery month, e.g. if the current delivery month is January the active month is February. The January contract will be relatively inactive compared to the February contract as most traders will be closing out their positions unless they intend to deliver on expiry of the January contract.
  • ACTUALS

    1. The physical commodities underlying a FUTURES contract.
    2. A cash COMMODITY or physical asset, e.g. GOLD, wheat.Also known as CASH COMMODITY or SPOT COMMODITY.

  • ADP (ALTERNATIVE DELIVERY PROCEDURE)

    A provision of a FUTURES contract that allows buyers and sellers to make and take delivery under terms or conditions that differ from those prescribed in the contract. An ADP may occur at any time during the delivery period, after LONG and SHORT futures positions have been matched by the Exchange for the purpose of delivery.

  • ALL-OR-NONE
    An ORDER which must be filled in its entirety or not at all.
  • ALLIGATOR SPREAD
    A collection of PUT OPTION and CALL OPTION that may not be profitable.
  • ALPHA
    A RISK-adjusted measure of expected return on an investment and a useful tool to measure the performance of a given money manager compared with his peers. For example: a hedge fund focusing on H shares delivers a return of 25 per cent while short-term interest rates are 5 per cent (resulting in an excess return of 20 per cent) and an H-share index fund rises 14 per cent (for an excess return of 9 per cent); if the hedge fund has a BETA of 2.0, its expected excess return would amount to 2 x 9% = 18%.
  • ALUMINIUM
    A chemical element with symbol Al and atomic number 13. It is silvery white, malleable and ductile and is the most abundant metal in the earth's crust at about 8 per cent by weight. Its high reactivity in nature makes aluminium exceedingly rare in its elemental form. It is valued for its resistance to corrosion and low density; its alloys are extremely strong and light, making it the most widely used nonferrous metal. It is used in the manufacture of aircraft, packaging, bicycles, cooking utensils, heat sinks for transistors and CPUs, and electrical transmission lines.
  • AMERICAN PETROLEUM INSTITUTE
    The primary U.S. oil industry trade association, based in Washington, D.C. API conducts research and sets technical standards for industry equipment and products from wellhead to retail outlet. It also compiles statistics which are regarded as industry benchmarks. Members include producers, refiners, suppliers, pipeline operators and marine transporters as well as service and supply companies that support all segments of the industry.
  • AMERICAN-STYLE OPTION
    An OPTION which can be exercised at any time between the purchase date and the EXPIRATION DATE. Contrast with EUROPEAN-STYLE OPTION. Given the greater flexibility offered by an American-style option, it is generally more costly than a European-style option.
  • API GRAVITY

    Named for the American Petroleum Institute, API gravity is a measure of how dense a petroleum liquid is compared to water. If a petroleum liquid's API gravity is greater than 10, it is lighter than the same volume of water and floats; if less than 10 it is denser than water and sinks. If one petroleum liquid floats when poured into another, it will have a higher API gravity. Although mathematically API gravity has no units, it is customarily referred to as being in degrees. The formula for obtaining the API gravity of petroleum liquids is: API gravity = (141.5/SG - 131.5), SG = P(substance)/P(H2O) where SG, specific gravity, is and P, the Greek letter rho, denotes density.

  • APPROVED CARRIER
    A transport firm approved by an exchange to transport precious metals, e.g. GOLD, PALLADIUM, SILVER.
  • APPROVED DELIVERY FACILITY
    A facility, almost exclusively a warehouse, approved by an exchange for the delivery of commodities traded on the exchange. Another term is APPROVED WAREHOUSE.
  • APPROVED WAREHOUSE
    A warehouse approved by an exchange for the delivery of commodities traded on the exchange. Another term is APPROVED DELIVERY FACILITY.
  • ARBITRAGE
    The practice of taking advantage of different prices for the same security in two or more markets by striking a combination of trades to capitalize on the imbalance; the resulting profit comes from the difference in prices between the markets traded in. Variations include the simultaneous purchase and sale of different delivery months of the same commodity; of the same delivery month, but different grades of the same commodity; and of different commodities. This term generally applies to securities alone, such as BOND, COMMODITY, currencies, DERIVATIVE instruments, and equities.
  • ARBITRAGEUR
    One who engages in ARBITRAGE.
  • AS-OF-TRADE

    An unmatched trade from the previous trading session which is resubmitted to the clearing system "as of" the earlier trading session.

  • ASIAN-STYLE OPTION
    An option whose exercise price is calculated as the average underlying price over the course of the option's existence.
  • ASK
    An indication of willingness or a motion to sell a specified amount of a commodity at a specific price (also known as offer).
  • ASK PRICE
    The price at which a seller is prepared to trade.
  • ASSAY
    An analysis of a material to determine its qualities such as a breakdown of its contents, quality or weight.
  • ASSET
    A resource with economic value that owned/controlled by an individual, corporation or country with the expectation that it will provide future benefit.
  • ASSIGNMENT (OPTIONS)

    1. When an option is exercised, the matching of an options contract with an assigned counterparty who underwrote the option, obliging the counterparty to fulfil the option. The assigned seller of a PUT OPTION must buy the underlying futures contract while the assigned seller of a CALL OPTION must sell the underlying futures contract.
    2. The process by which a CLEARING HOUSE selects the holder of a long position to accept delivery on a contract.

  • ASSOCIATED GAS
    NATURAL GAS which is found and produced in the same reservoir as CRUDE OIL, either dissolved in the oil or found as a cap of free gas. Contrast with UNASSOCIATED GAS.
  • AT-THE-MONEY
    A situation in which the strike price of an OPTION is equal (or very close to) the market price of the underlying security.
  • AUDIT TRAIL
    A chronological sequence of records resulting from a business process such as a transaction, e.g. an exchange trade.
  • AUTOMATED TRADING SYSTEM
    A computer trading programme used by an exchange that automatically submits buy and sell orders to the exchange, increasing efficiency and security of trading and levelling the playing field for all market participants.
  • AUTOMATIC EXERCISE
    The execution of an AT-THE-MONEY OPTION by a designated options clearing organization in order to protect the holder of the option.
  • AVERAGE DAILY VOLUME
    The total trading volume over a given period, e.g. a year, divided by the number of trading sessions in that period.
  • AVERAGE PRICE SYSTEM
    A service provided by an exchange to market participants that provides an average price for a buy or sell order that involved many transactions at different prices.
  • AVERAGE TEMPERATURE
    The range of temperatures over a given period divided by the number of measurements, most typically the average temperature in a given day between midnight and midnight.
  • B/D (BARRELS PER DAY)
    Usually used to quantify a refiner's output capacity or an oilfield's rate of flow.
  • BACK MONTHS
    Contract months that are more distant in the future are collectively referred to as back months (also known as distant months). See FRONT MONTHS for comparison.
  • BACKSPREAD
    Also known as a REVERSE RATIO SPREAD, a type of options spread in which a trader holds more long positions than short positions, offering significant exposure to expected moves in the underlying market while limiting the amount of loss that would occur if the trader is wrong. See RATIO SPREAD.
  • BACKWARDATION
    A market situation in which the price of near delivery months is higher than more distant months, i.e. futures prices are lower in each succeeding delivery month. Also known as an inverted market. A signal that the commodity in question is in short supply. The opposite of CONTANGO.
  • BAD FAITH
    Dishonesty or fraud in a transaction, such as entering into an agreement with no intention of ever living up to its terms, or knowingly misrepresenting the quality of something that is being bought or sold.
  • BARGE
    A vessel, either motorized or towed and usually flat-bottomed, used to transport low-value bulk or heavy products in navigable waterways. Inland river barges that carry oil products generally hold 25,000 barrels. Oceangoing barges range in size up to 120,000 barrels.
  • BASE METAL
    Industrial non-ferrous metals excluding precious metals, i.e. aluminium, copper, lead, nickel, tin, zinc.
  • BASIS
    The difference between the cash or spot price of a given commodity and the futures price for the same commodity. Normally quoted as cash price minus futures price, i.e. a positive number indicates a futures discount; a negative number, indicating a futures premium, is more common and the sign of a normal market. Basis normally narrows as a contract moves closer to settlement.
  • BASIS PRICE
    A price quote for a security, almost always a fixed-income instrument, expressed in terms of yield to maturity.
  • BASIS RISK
    The uncertainty as to whether the cash-futures spread will widen or narrow between the time a hedge position is implemented and when it is liquidated.
  • BATCH
    In the oil industry, a measured amount of crude oil or refined product shipments that are pumped through a delivery pipeline.
  • BATCHING SEQUENCE
    The order in which such shipments are sent through a pipeline.
  • BBL (BARREL)
    A unit of volume measure used for petroleum and refined products that entered common use in early Pennsylvania oil fields in the last half of the 19th century. 1 barrel = 42 U.S. gallons or 34.972 Imperial gallons or 158.987 litres.
  • BCF
    Billion cubic feet, a measure of volume of NATURAL GAS.
  • BDI (BALTIC DRY INDEX)
    A measure of transportation costs for dry bulk commodities like coal and iron ore issued daily by the London-based Baltic Exchange after it polls shipping brokers around the world asking the cost of shipping various cargos in various volumes on various shipping routes around the world. The index is made up of an average of the Baltic Capesize, Handysize, Panamax and Supramax indices, which are based on the four standard categories of ocean-going dry bulk cargo vessels. The BDI is useful to businessmen and economists because it provides an indirect measure of the worldwide demand for commodities like grain, coal, IRON ORE and so on.
  • BEAR
    One who anticipates a sustained decline in prices. The opposite of a BULL.
  • BEAR MARKET
    A market in which prices are in a declining trend and investor outlook is marked by widespread gloom or pessimism. In quantitative terms, a market in which prices have declined 20 per cent or more over a period of at least two months.
  • BEAR SPREAD

    1. The simultaneous purchase and sale of two futures contracts in the same or related commodities with the intention of profiting from a decline in prices but, at the same time, limiting the potential loss if this expectation is wrong. This can usually be accomplished by selling a nearby delivery and buying a deferred delivery.
    2. A delta-negative options position composed of long and short options of the same type, either calls or puts, designed to be profitable in a declining market. An options contract with a lower strike price is sold and one with a higher strike price is bought. Compare with BULL SPREAD.

  • BEARISH
    Maintaining pessimism over the outlook for prices, expecting continuing price declines. An investor or market observer may be bearish about a particular security while remaining bullish regarding the market as a whole, or vice versa.
  • BETA
    Describes how the expected return to be earned from investment in a security or fund is correlated to the market as a whole. It answers the question: how much is my performance a product of the overall market's performance? A beta of 1 equals complete correlation with the benchmark; beta of 0 is no correlation whatsoever; a positive number beta shows positive correlation while a negative beta shows negative correlation, e.g. the price of the asset in question falls when the benchmark rises, etc. Beta is a key element of the CAPITAL ASSET PRICING MODEL.
  • BID
    A proposal or a motion at a given time to buy a specific amount of a commodity at a specified price. The opposite of OFFER.
  • BID PRICE
    The price at which a buyer is prepared to trade.
  • BID/ASK SPREAD
    The amount of money by which the ASK exceeds the BID; the difference between the highest price potential buyers are willing to pay and the lowest price sellers are willing to receive. This spread is generally inversely proportional to LIQUIDITY.
  • BITUMEN
    A highly viscous, black and sticky liquid made up of organic liquids, primarily highly condensed polycyclic aromatic hydrocarbons. Naturally occurring bitumen is a tar-like form of petroleum which is so think and heavy that it must be heated or diluted to make it flow. Most bitumens contain sulphur and such heavy metals as chromium, lead, mercury, nickel, vanadium and other toxic elements such as arsenic and selenium. Bitumen is chemically distinct from tar, the black viscous product resulting from the destructive distillation of coal. It is primarily used to pave roads and in the manufacture of roof shingles and in water-proofing flat roofs. See REFINED BITUMEN.
  • BLACK-SCHOLES MODEL
    A Nobel-prize-winning means of modelling the cost of a financial OPTION developed in a 1973 scientific paper. The model shows that under certain ideal conditions, the value of an option varies only with the price of the underlying security and the option's time to expiry.
  • BLOCK TRADE
    An order submitted for the sale or purchase of a large quantity of securities that is conducted either on the exchange or off-exchange and reported through the exchange's trading system. There are minimum size requirements that vary from contract to contract.
  • BLOWOFF VOLUME
    In TECHNICAL ANALYSIS, an unusually high volume trading session taking place unexpectedly in an uptrend. It is used to signal the end of the trend.
  • BOARD LOT
    The standard number of securities available as a trading unit, e.g. 1,000 shares for equities priced under $1 or 100 shares for equities priced $1 to $10; applies to all exchange-traded financial securities. See ODD LOT, ROUND LOT.
  • BOARD ORDER
    An order that becomes a market order when a particular price is reached. A sell MIT is placed above the market price while a buy MIT is placed below the market price. Also called MARKET-IF-TOUCHED.
  • BOND
    A debt security in which the issuer owes the bond holder a debt and pays interest at regular intervals in the form of a coupon on its way to maturing and being repaid. The bond issuer is a borrower and the bond holder is a lender.
  • BOOK TRANSFER
    Transfer of ownership without physically moving the security whose ownership is transferred, as when the security in question is located in a depository.
  • BORROWING
    A form of CARRY involving the purchase of a near-dated futures contract and the selling of a later-dated contract with the effect that the trader is borrowing the underlying commodity in the period intervening between the two contracts.
  • BOX SPREAD
    In OPTION trading, a combination of BULL SPREAD and BEAR SPREAD usually combining two pairs of options whose four points on a graph form a box, the eponymous name of this options strategy. Often called an ALLIGATOR SPREAD as the cost of commissions can eat up all profit generated by the strategy.
  • BRAND
    Insignia identifying the producer of a specific commodity.
  • BREAK
    A rapid and sharp price decline, usually occurring when surprising bad news is made public and a mass of investors rushes to sell.
  • BREAKAWAY GAP
    In TECHNICAL ANALYSIS, a change in prices that signals the end of a pattern and the beginning of a new trend or market direction.
  • BREAKEVEN
    The point at which there is neither financial loss nor financial gain; above it there is profit, below, a loss.
  • BRENT
    A benchmark variety of crude oil made up of Brent Sweet Light Crude, Oseberg and Forties – all produced in the North Sea. Oil produced in Africa, Europe and the Middle East flowing to Western markets tends to be priced against this benchmark. Brent is a light, SWEET CRUDE containing about 0.4 per cent SULFUR or SULPHUR and an API GRAVITY of about 38.06 that is ideal for producing gasoline and middle distillates. It is traded on the electronic INTERCONTINENTAL EXCHANGE as well as NYMEX under the trading symbol is LCO and one contract is 1,000 barrels with TICK measured in units of $10.
  • BRETTON WOODS SYSTEM
    Established in a series of agreements signed by 44 Allied nations in July 1944 to order the post-war economies. It established the International Monetary Fund and the International Bank for Reconstruction and Development (the IBRD, now part of the World Bank). Signatories adopted a monetary policy of maintaining fixed exchange rates of their currencies against gold; the system broke down soon after 1971 when the U.S. abandoned its guarantee to convert dollars to gold at a fixed rate. As a consequence, the U.S. dollar took the place of gold and became the world's reserve currency, while the collapse of fixed exchange rates soon led to explosive growth in FX markets and DERIVATIVE.
  • BROKER
    A mediator between buyer and seller. A broker-dealer trades securities for its own account or on behalf of its clients.
  • BROKERAGE HOUSE
    A firm that engages in brokering.
  • BS&W (BOTTOM SEDIMENT AND WATER)
    Often found in storage tanks for crude oil or petroleum storage tanks. Also known as bottoms, bottom sediment, bottom settlings, basic sediment and water.
  • BTU (BRITISH THERMAL UNIT)
    The amount of heat required to increase the temperature of one pound of water by one degree Fahrenheit from 60° to 61° Fahrenheit at a constant pressure of one atmosphere. A BTU is used as a common measure of heat value or energy content of different fuels. Prices of different fuels and their units of measure (dollars per barrel of crude, dollars per ton of coal, cents per gallon of gasoline, dollars per thousand cubic feet of natural gas) can be easily compared when expressed as dollars and cents per million BTUs.
  • BUCKET SHOP
    A brokerage which takes the other side of a client's order rather than take the order for execution on an exchange.
  • BUCKETING
    Taking the other side of a customer's order into the broker's own account without seeking the best price available on an exchange.
  • BULGE
    A rapid but short-lived advance in futures prices.
  • BULL
    One who anticipates a sustained rise in prices. The opposite of a BEAR.
  • BULL MARKET
    Market in which prices are in an upward trend and investor sentiment is marked by optimism.
  • BULL SPREAD

    1. The simultaneous purchase and sale of two futures contracts in the same or related commodities with the intention of profiting from a rise in prices but, at the same time, limiting the potential loss if this expectation is wrong. This can be accomplished by buying the nearby delivery and selling the deferred.
    2. A delta-positive options position composed of both long and short options of the same type, either calls or puts, designed to be profitable in a rising market. An options contract with a lower strike price is bought and one with a higher strike price is sold.

  • BULLISH
    Maintaining optimism over the outlook for prices, expecting continuing price rises. An investor or market observer may be bullish about a particular security while remaining bearish regarding the market as a whole, or vice versa.
  • BUNDLE
    The purchase or sale of a series of consecutive futures contracts, done to assure a stable price going forward.
  • BUNKER FUEL
    Broadly, any type of petroleum fuel used aboard ships; often, a synonym for No. 6 FUEL OIL.
  • BUTANE
    BUTANE
  • BUTTERFLY SPREAD
    An options trading strategy that offers limited profit and limited risk, involving three strike prices expiring on the same date. The investor is SHORT two CALL OPTION at price X, long one call at price X+a and long one call at price X-a. The long options are the wings of the butterfly and the shorts are the body. Variations include the long and short butterflies and the iron condor.
  • BUY
    The action to purchase an ASSET or a security. Compare to SELL.
  • BUY ON CLOSE
    To buy at the end of the trading session at a price within the closing price range.
  • BUY ON OPEN
    To buy at the beginning of the trading session at a price within the opening price range.
  • 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 prices lower than those recently prevailing. Like a SELLER'S MARKET this is an imbalance between supply and demand.
  • BUYING HEDGE
    Buying a futures contract to protect a short position against possible increase in the price of the underlying security. Also called a LONG HEDGE.
  • C & F
    Cost and freight, terms under which the seller pays to transport a shipment to the buyer's destination port except for the cost of insurance.
  • CAB (CABINET TRADE)

    1. An off-exchange transaction to close out a nearly worthless OUT-OF-THE-MONEY options contract.
    2. A transaction in an inactive stock or bond.

  • CABINET PRICE
    The nominal price for closing out a nearly worthless OUT-OF-THE-MONEY options contract.
  • CALENDAR SPREAD (FUTURES)

    1. The simultaneous purchase and sale of the same futures contract but at different contract months; also called an intra-commodity spread.
    2. An options spread trade involving buying options on an underlying security expiring in the same month with the same strike price and simultaneously selling other options with the same strike price in an earlier month. The strategy may be used with either CALL OPTION or PUT OPTION, but not both together.

    Note:
    BUYING the spread = BUYING near contract month + SELLING far contract month, and
    SELLING the spread = SELLING near contract month + BUYING far contract month

  • CALENDAR STRIP
    The simultaneous purchase (or sale) of an equal number of futures positions in consecutive months. The average of the prices for the futures contracts bought (or sold) is the price level of the hedge. A six-month strip, for example, consists of an equal number of futures contracts for each of six consecutive contract months. Also known as a STRIP TRADE.
  • CALL OPTION
    A security offering the right (but not the obligation) to buy a financial instrument such as a commodities future or an equity on a fixed date at an agreed price, which is known as the STRIKE PRICE. The seller is obliged to make the sale if the buyer of the call demands it.
  • CALL WARRANT
    A security granting the right (but not the obligation) to buy a pre-fixed quantity of an underlying security. Unlike an OPTION, a warrant has a very long duration, as long as five or 10 years.
  • CANCEL
    To void a BUY or SELL order.
  • CANDLESTICK CHARTING
    A CHARTING technique in TECHNICAL ANALYSIS which plots the range of a day's prices and illustrating the overall movement of the market. The chart that results tends to resemble a row of candlesticks.
  • CAP
    A supply contract that assures the buyer that he won't have to pay more than an agreed maximum price for the commodity she is purchasing.
  • CAPACITY
    In general, the maximum volume of liquid or gas that can be pumped through a pipeline, or the maximum load that a generating unit or station can carry under specified conditions for a given period of time, or the total storage space or volume of a warehouse or storage container or tank farm.
  • CAPITAL ASSET PRICING MODEL (CAPM)
    A stock valuation model that is used to price risky securities. It describes the relationship between expected returns and expected risk. Return on asset = risk free rate + Beta of a security (expected market return – risk free rate)
  • CAPPING
    A trading strategy employed in the run-up to the expiration of an option with the aim of moving the price of the underlying security so that the option moves OUT-OF-THE-MONEY, enabling the writer of the option to protect the premium he received from writing it.
  • CAR
    Originally, the amount of a given commodity, e.g. corn, that would fit into a railroad car and hence the unit of trade for a contract in that commodity. Analogous to LOT.
  • CARAT

    1. A unit of weight for measuring gemstones and pearls equal to exactly 200 milligrams and divisible into 100 points of 2 mg each. Historically, 1 carat was equal to the weight of one carob seed, thought to be the sole seed with a uniform weight. A diamond weighing 100 carats is known as a paragon.
    2. A measure of the purity of gold alloys such that, for example, 24-carat gold is fine 999 (99.9 per cent) pure gold, 18-carat gold is 750 fine (75 per cent) pure gold and 12-carat gold is 50 per cent pure gold and 50 per cent alloy. In this definition, often spelled KARAT in North America.

  • CARRY
    The simultaneous purchase and sale of the same amount of a commodity for delivery on different dates.
  • CARRY MARKET
    A market condition in which futures prices are higher in the succeeding BACK MONTHS than in the FRONT MONTHS. The forward curve slopes up, as in a normal yield curve, showing steadily higher prices; this is normal for non-perishable commodities which incur a CARRYING COST. Also known as CONTANGO, it is the converse of backwardation.
  • CARRYING COST
    The total cost of storing a physical commodity. Includes storage charges, insurance, interest, and opportunity costs.
  • CARRYING FIRM
    A broker-dealer that carries positions on its books that were entered into either by the broker-dealer or by another firm acting on its behalf.
  • CARRYOVER
    The end-year stock of a storable commodity.
  • CASH & CARRY
    An ARBITRAGE transaction involving the simultaneous purchase of a cash commodity with borrowed money and the sale of the corresponding futures contract.
  • CASH COMMODITY

    1. The physical commodities underlying a futures contract.
    2. A cash commodity or physical asset, e.g. gold, wheat.Sometimes called a SPOT COMMODITY or ACTUALS.

  • CASH CROP
    A crop grown for sale; contrasts with subsistence crops which are grown as food for the farmer's family or livestock.
  • CASH FOR FUTURES
    A provision in a futures contract allowing delivery of a physical commodity that doesn't necessarily conform to contract specifications and a corresponding assumption of equal and opposite futures positions by the counterparties in the transaction at the same time. Also known as EXCHANGE FOR PHYSICALS.
  • CASH FORWARD SALE
    A transaction in which buyer and seller agree on the delivery of a specified quantity and quality of a commodity at a fixed future date. The price is determined either at the time of agreement or it is agreed that the price will be set at the time of delivery.
  • CASH MARKET
    The physical market underlying a futures or options contract, i.e. where the actual physical product is traded.
  • CASH PRICE
    The current market price for delivery of a physical commodity. Also known as SPOT PRICE.
  • CASH SALE
    The sale of a commodity for immediate delivery, most often in local markets such as PUBLIC ELEVATOR, terminals or auction markets.
  • CASH SETTLEMENT
    Used in lieu of taking physical delivery of a commodity upon expiration of a futures contract or exercising an option when the buyer prefers cash to the underlying physical commodity.
  • CASH-SETTLED
    Futures contracts that are settled in cash without the option to deliver the underlying commodity.
  • CASING-HEAD GAS
    NATURAL GAS dissolved in crude oil which emerges at the casing head when pressure is lowered.
  • CATHODE
    In commodities trading, a flat rectangular slab of metal, most usually COPPER, that has been refined by electrolysis.
  • CEILING

    1. In TECHNICAL ANALYSIS, a price level that is regarded as the maximum a given security or index will reach in the near or medium term.
    2. The highest price a buyer is willing to pay for a security.
    3. The highest price a security or index reaches before a decline.

  • CENTRAL BANK
    A national or supranational bank that operates monetary policy, ideally with the prime goal of ensuring economic stability by intervening in currency markets and controlling the money supply and interest rates. Sometimes known as a monetary authority or a reserve bank, this institution is often the lender of last resort to the private banking sector. Economic orthodoxy maintains that independence from political control results in a stronger and more effective central bank.
  • CENTRAL BANK GOLD AGREEMENT
    Often known simply as CBGA, first signed in 1999 by European central banks promising to limit and pre-announce gold sales arguably to protect the status of gold as a viable store of reserve value. A subsequent CBGA signed in 2004 capped central bank gold sales at 500 tonnes per year over five years. CBGA signatories control 46.1 per cent of world gold reserves, according to the World Gold Council.
  • CETANE NUMBER
    A measurement of the combustion quality of light distillate diesel fuel at compression ignition; accordingly a key measure of the quality of a given diesel fuel. Sometimes referred to as CN. Automobile diesel engines run well on fuel with a CN of 40 to 55. The number indicates the length of time between the start of fuel injection and the point of combustion; higher CN number fuels have a shorter delay than lower number fuels.
  • CHARTING
    Also known as TECHNICAL ANALYSIS, a technique of securities analysis that purports to forecast the future direction of prices by manipulating such data as past price movements and trading volumes, Chartists primarily use chart patterns such as “head and shoulders” or “double top” reversal patterns. Tools used include regressions, moving averages, relative strength indices. The technique stands in sharp contrast with FUNDAMENTAL ANALYSIS and is widely used among traders and financial professionals in spite of much academic criticism that the technique is little more than a pseudoscience. A common charting motto is “the trend is your friend” on the theory that market prices reflect all pertinent information. Compare with QUANTITATIVE ANALYSIS.
  • CHOOSER OPTION
    An option which is specified as either a PUT OPTION or a CALL OPTION by the buyer of the option not at the time of purchase of the option but at an agreed-upon later date.
  • CHURNING
    The practice of excessive trading of a client account which drives up commission earnings for a broker at the expense of the best interests of the client paying such fees.
  • CIF
    Cost, insurance, freight, refers to a trade in which the seller pays all shipping charges to the buyer's destination port, including insurance.
  • CIP
    Carriage and Insurance Paid: A term of sale in which the seller agrees to pay transportation costs and insurance to the buyer's destination. Used in place of CIF for shipments in containers or by air.
  • CIRCUIT BREAKER
    An automatic system of trading halts and price limits on a securities exchange designed to act as a transparent means of cooling market sentiment during large intraday price movements.
  • CITY GATE
    The point in a gas pipeline at which ownership of the gas is transferred to the local gas utility or distributor from the pipeline operator or producer.
  • CLEAN OIL
    Highly refined petroleum products such as kerosene, gasoline or jet fuel carried by tankers, barges, and tank cars. Such products tend to be light with specific gravities in the range 0.66-0.89 and non-persistent in water. Also known as clean cargo. Compare with DIRTY OIL.
  • CLEARING

    The management of credit exposures occurring after a trade is made but before it is settled to ensure that the trade is settled in accordance with market or exchange rules even if one or both of the buyer and seller become insolvent in the meantime. Generally, clearing involves a highly capitalized central counterparty or clearing house which participates in every trade, acting as the buyer for every seller and the seller for every buyer. Accordingly, market participants don't bear each other's credit risk but instead they bear the credit risk of the central counterparty.

  • CLEARING FEE
    The sum charged by a clearing house for clearing trades through its facilities.
  • CLEARING HOUSE
    An Exchange-associated body charged with the function of insuring the financial integrity of each trade. Orders are cleared by means of the clearinghouse acting as the buyer to all sellers and the seller to all buyers.
  • CLEARING MEMBER
    A member of an exchange permitted to clear its own and/or clients' trades.
  • CLEARING NON-TRADE TRANSACTION
    The clearing of transactions that don't involve a trade: EFP, BLOCK TRADE, TRANSFER and GIVE UP. This does not include CANCEL and replaces transactions.
  • CLEARING TRADE TRANSACTION
    The transaction between the clearer of a trade and each of the buyer and seller – ordinarily two for every exchange trade insofar as a CLEARING HOUSE or CLEARING MEMBER acts as the counterparty for both the buyer and seller in an exchange trade.
  • CLIENT ACCOUNT
    Any individual or entity being serviced by an agent (broker) for a commission. Servicing generally includes advice, accounting, and order execution. A customer's business must be distinguished from the broker's principal in-house business and may be in a physically segregated account at the client's option.
  • CLOSE

    1. In an exchange's trading session, the period defined by occurring at the end of each trading session wherein any transactions are considered to be made “at the close”.
    2. The last price at which a security trades during a trading session and reported in the financial media. Also known as “closing price”, it is the price used in determining the price of the contents of investment portfolios.

  • CLOSE OUT
    A transaction which liquidates or closes out an open contract by performing a corresponding opposite trade (also known as offset).
  • CLOSING BELL
    The signal, historically a ringing bell, made at the end of a trading session to mark the end of trading for the day.
  • CLOSING PRICE
    The last traded price for an exchange-traded security at the CLOSE.
  • CLOSING RANGE
    A range of closely related prices at which transactions took place at the closing of the market; buying and selling orders during the closing period might have been filled at any point within such a range.
  • CODE OF CONDUCT
    The trading procedures and etiquette of a market.
  • COGENERATOR
    A power plant which produces both electricity and useful heat and is accordingly more thermodynamically efficient than ordinary power plants which emit electricity and waste heat. Also called combined heat and power or CHP.
  • COKE
    The solid material produced in the destructive distillation of low-ash, low-sulphur bituminous coal. Gray, hard and porous, coke is used as a fuel in blast furnaces for smelting IRON ore.
  • COLLAR
    An investment strategy using the buying of PUT OPTION and selling of an equal number of CALL OPTION on the same security with the same expiration dates. The STRIKE PRICE on the call options must be higher than the strike price on the puts. The strategy limits the range of possible gains and losses on the investment. This is used in times of high VOLATILITY or in BEAR markets to limit the downside risk to a portfolio. The cost of a collar is generally zero or close to zero as the income from selling the call is used to buy the put.
  • COMBINATION
    A mixture of FUTURES and OPTION contracts assembled to pursue a strategy to hedge.
  • COMBINATION UTILITY
    A power utility that provides piped gas and electricity to consumers.
  • COMMISSION
    The fee charged by a broker for the execution of an order.
  • COMMISSION HOUSE
    An organization that trades commodities and/or futures and options contracts for customer accounts in return for a fee.
  • COMMISSION MERCHANT
    One who makes a trade, either for another member of an exchange or for a non-member client, but in his own name, making him the liable counterparty in the trade.
  • COMMITMENT
    The number of open or outstanding contracts for which an individual or entity is obligated to the Exchange because that individual or entity has not yet made an offsetting sale or purchase, an actual contract delivery, or, in the case of options, hasn't yet exercised the option. Also known as OPEN INTEREST.
  • COMMODITY

    A product which has value and uniform quality, items of which from different producers are considered equivalent to each other. Examples include gold, rice, corn and even computer memory chips and generic pharmaceuticals – anything for which there is demand and an agreed standard to define what is being traded. Historically, corn produced in the American Midwest was shipped to buyers in burlap sacking that identified the farm it came from. Over time, the corn became commoditized, beginning in 1865, when the Chicago Board of Trade issued standards for a grading system making any No. 2 corn the equal of any other No. 2 corn.

  • COMMODITY CODE
    A unique alphanumeric code assigned to exchange-traded commodities to differentiate them from each other. For example, Au may denote gold while Cu may denote copper.
  • COMMODITY EXCHANGE (MERCANTILE EXCHANGE)
    A trading forum where exchange members may trade commodities and their DERIVATIVE such as FUTURES and OPTION under rules and a clearing system treating all traders equally, which is in turn answerable to a government regulator.
  • COMMODITY POOL
    A venture, usually a limited partnership, in which funds contributed by a number of investors are combined for the purpose of trading futures. Also called a commodity fund or a futures fund.
  • COMMODITY POOL OPERATOR (CPO)
    Acts as a general partner of commodity pools. CPOs hire independent commodity trading advisors to handle daily trading decisions. Responsible for the pool's administration, structure, and selecting and monitoring the traders who conduct transactions using the fund's money.
  • COMMODITY TRADING ADVISOR (CTA)
    Directs trading in the managed accounts of a commodity pool. Professional money managers who manage client assets on a discretionary basis, using global futures markets as an investment medium.
  • COMPLIANCE

    1. Action to comply with rules and regulations.
    2. A department responsible for ensuring the maintenance and adherence by Members to the rules and regulations of an exchange.

  • CONFIRMATION
    The process immediately following a transaction whereby the traders confirm the details of the trade.
  • CONGESTION

    1. A market condition in which SHORT attempting to buy in the market to cover their positions are unable to find enough contracts provided by LONG willing to liquidate or by new sellers willing to enter the market without seeing sharply higher prices.
    2. In TECHNICAL ANALYSIS, a period of trading characterized by directionless, repetitious and limited price changes.

  • CONSUMER'S HEDGE
    The purchase of FUTURES and/or OPTION to protect against a rise in the price of a COMMODITY required by the buyer, usually an end user.
  • CONTANGO
    A market condition in which futures prices are higher in the succeeding BACK MONTHS than in the FRONT MONTHS. The forward curve slopes up, as in a normal yield curve, showing steadily higher prices; this is normal for non-perishable commodities which incur a CARRYING COST. Also known as a CARRY MARKET, it is the converse of BACKWARDATION.
  • CONTINGENCY ORDER
    An order which becomes effective only upon the fulfilment of some condition in the marketplace. Also known as a contingent order.
  • CONTRACT

    1. A term of reference describing a unit of trading for a commodity future or option, e.g. Fuel Oil CST180 futures contract.
    2. A binding agreement to buy or sell a specified commodity, detailing the amount and grade of the product and the date on which the contract will mature and become deliverable.

  • CONTRACT GRADE
    That grade of product established in the rules of a commodity futures exchange as being suitable for delivery against a futures contract.
  • CONTRACT MONTH/YEAR
    The month or year specified in a given futures contract for delivery of the actual physical spot or cash commodity. Also known as DELIVERY MONTH (delivery year).
  • CONTRACT SIZE
    The amount of a COMMODITY or security defined in a CONTRACT SPECIFICATION as making up one contract. For example, an oil contract is typically 1,000 BARRELS.
  • CONTRACT SPECIFICATION
    Detailed guideline setting out the conditions a commodity or a DERIVATIVE must meet to be traded on an exchange.
  • CONTROLLED ACCOUNT
    An arrangement under which an investor gives power of attorney to her broker or other finance manager to buy and sell commodities or other securities without the obligation of first receiving the client's prior approval or knowledge. Also known as a DISCRETIONARY ACCOUNT.
  • CONVERGENCE
    The approach made to each other by CASH SETTLEMENT and FUTURES prices for the same COMMODITY as the futures contract approaches expiration.
  • CONVERSION

    1. An OPTION strategy in which a delta-neutral ARBITRAGE transaction combines a LONG FUTURE contract with a long PUT OPTION and a CALL OPTION, both of which have the same STRIKE PRICE and expiration date.
    2. A feature of some BOND (convertible bonds) and preferred equity issues allowing the holder to convert his bond or preferred stock into common stock.

  • COOLING DEGREE DAY
    An index used by electricity traders to understand the potential increase in demand for electricity due to use of air conditioning. The temperature of 65°F is taken to deliver a degree of comfort requiring neither heating nor cooling. The day's average temperature minus 65° F provides that day's index. See HEATING DEGREE DAY.
  • COPPER
    A chemical element with symbol Cu and atomic number 29. It is a ductile and malleable pink-coloured metal with very good thermal and electrical conductivity. As one of the few metals to occur in its pure form in nature, copper was known to and used in the earliest human civilizations at least 10,000 years ago. One of copper's earliest uses was alloying it with tin to make bronze. In modern times, copper is used in wiring, pipes, roofing, cookware and flatware and in biomedical applications.
  • CORNER
    The buying of enough of a particular security to be able to manipulate its price at will. Many try, but few succeed, as the very size of the position necessary to begin to manipulate price leaves the buyer extremely vulnerable to a price move away from her position.
  • COUNTERPARTY
    The opposite party in a bilateral transaction, contract or agreement, such as a swap.
  • COUNTERPARTY RISK
    The risk that a COUNTERPARTY defaults on an agreement, contract or transaction. FUTURES contracts executed on an EXCHANGE through a CLEARING HOUSE are guaranteed against DEFAULT by the clearing house. Also known as DEFAULT RISK.
  • COUNTRY RISK
    A manifestation of RISK that is due to uncertainties inherent in a particular country or region. For example, a buyer of oil exported from Badplacia (a fictitious country) faces a number of risks associated solely with this country: civil war, unrest, expropriation of her oil by the authorities, theft, corruption.
  • COUPON
    In fixed income, the interest paid per year on a BOND expressed as a percentage of that bond's face value. The term coupon comes from the fact that the first bonds were bearer certificates with coupons printed directly on them; at the due date, the bondholder detached the coupon and presented it for payment.
  • COVER
    To offset a SHORT or OPTION position by buying in the market; to possess the physical underlying commodity that might be deliverable on a short sale.
  • COVERED CALL
    A transaction in which the seller of a CALL OPTION already owns the underlying security, thereby limiting her potential loss if the price of the underlying security moves above the STRIKE PRICE of the option.
  • CPT
    Carriage paid to: term of sale in which the seller pays for all deliver costs to the buyer's named destination (usually the buyer's warehouse) except for insurance. The seller is also obliged to clear the goods for export.
  • CRACK SPREAD

    1. The differential between the price of crude oil and the petroleum products which can be extracted from it.
    2. the profit margin a refinery might expect to make by “cracking” the crude.
    3. A specific spread trade involving simultaneous buying and selling of contracts in crude oil and one or more derivative products, such as heating oil or gasoline. The crack spread is often used by refineries to hedge the price risk of their operations while a speculator would trade it in a bid to profit from a (likely brief) mis-correspondence in relative pricing between crude and its products. Any combination of energy futures can be used, provided that the number of crude contracts equals the number of product contracts; the most common crack ratios are 3:2:1, 2:1:1 and 5:3:2 where the last two digits refer to two different refined products and the first refers to the crude. These spread differentials which represent refining margins are normally quoted in dollars per barrel by converting the product prices into dollars per barrel and subtracting the crude oil price.

  • CRACKING
    The process of breaking down the molecular structure of a substance into smaller units. Petroleum is cracked as part of the refining process to extract products such as heating oil and gasoline.
  • CREDIT DEFAULT OPTION
    A put option that pays out in the event of a DEFAULT by the issuer of a specified ASSET.
  • CREDIT DEFAULT SWAP
    Often abbreviated CDS, a swap contract in which the buyer of the CDS makes periodic payments to the seller and in return receives a payout if the reference credit instrument, usually a corporate BOND or loan, defaults or its issuer suffers a credit event like restructuring or bankruptcy. Note that neither the buyer nor the seller of the CDS is obliged to have any connection or relationship with the reference credit instrument or the issuer of it.
  • CREDIT DERIVATIVE
    An innovation designed to protect lenders and bondholders from the danger of DEFAULT but also usable for SPECULATION and ARBITRAGE; an over-the-counter DERIVATIVE designed to transfer or assume CREDIT RISK, in which the buyer makes a fixed or periodic payments to the seller in return for a payment to the buyer if a CREDIT EVENT occurs.
  • CREDIT EVENT
    An occurrence such as debt default, bankruptcy or ratings downgrade that triggers payout on a CREDIT DERIVATIVE as defined in the derivative agreement.
  • CREDIT RATING
    A rating agency's best understanding of a borrower's ability to repay its debt, hence the expression “triple-A credit” to mean an utterly reliable borrower.
  • CREDIT RISK
    The risk of loss stemming from a debtor's non-payment of a bond, loan or other line of credit, including one or both of principal and interest.
  • CREDIT SPREAD
    The difference between the yield on the debt of a given borrower and the yield offered by corresponding Treasury debt.
  • CREDIT SPREAD OPTION
    An OPTION whose payout is determined by the SPREAD between the yield on the debt of a given borrower and the yield offered by corresponding Treasury debt.
  • CROP
    Any plant harvested in enough quantity to be used as food, animal fodder or in further processing, e.g. cotton.
  • CROP (MARKETING) YEAR
    The year from one harvest to the next, varying from crop to crop, e.g. July 1 to June 30 for wheat.
  • CROSS HEDGING
    Hedging a cash market position with a FUTURES or OPTION contract for a different but price-related commodity.
  • CROSS MARGINING
    The procedure for jointly setting margins on related OPTION, FUTURES and underlying securities when different CLEARING HOUSE clear each side of the position.
  • CROSS RATE
    The exchange rate of one currency into another currency in the market of a third, e.g. USD/EUR in Hong Kong.
  • CROSS/SELF TRADE
    Offsetting match by a broker of the buy order of one customer against the sell order of another, or a match of a trade made by a broker with his customer, a practice that is permissible only when executed in accordance with Exchange and SFC rules.
  • CRUDE OIL
    Or PETROLEUM from the ancient Greek “rock oil”. A naturally occurring flammable liquid found in rock formations and consisting of a mixture of different hydrocarbons, other organic compounds and trace metals. The proportion of hydrocarbons can vary from as little as 50 per cent in heavier oils and BITUMEN up to 97 per cent. It is the raw material from which gasoline, heating oil, jet fuel, propane, petrochemicals, and other products are refined. It is most often black or dark brown in colour and often occurs with a cap of NATURAL GAS over it owing to the lower density of the gas.
  • CRUSH SPREAD
    The simultaneous purchase of soybean futures and sale of soybean meal and soybean oil futures of the same contract month to establish a processing margin.
  • CSRC
    The China Securities Regulatory Commission (CSRC) is a government body with ministerial-level ranking responsible for regulating the securities and futures markets in People's Republic of China. The Securities Law passed in December 1998 was the country's first comprehensive securities legislation and grants the CSRC the “authority to implement a centralized and unified regulation of the nationwide securities market in order to ensure their lawful operation.”
  • CUBIC FEET PER DAY
    A measurement of natural gas production or flow in a pipeline. Often abbreviated to CF/D.
  • CUBIC FOOT
    A measure of gas volume, the amount of gas that can fill a cubic foot at one atmosphere of pressure at 60°F. This volume contains on average 1,027 BTUs.
  • CURB TRADING
    Trading that takes place off-exchange outside trading hours, so called because legend says it originally took place outside the physical exchange.
  • CURRENCY RISK
    RISK arising from adverse movement in EXCHANGE RATE.
  • CURRENT ASSETS
    Cash and easily liquidated assets.
  • CURRENT DELIVERY MONTH
    The futures contract which ceases trading and becomes deliverable during the present month or the month closest to delivery. Also called the spot month.
  • CURRENT YIELD
    The ratio of a BOND's annual interest payment to its current price.
  • CUSHING
    Cushing, Oklahoma is a major hub connecting Gulf Coast oil wells with refineries and storage facilities and onward to consumers in the northern and north-eastern U.S., holding 5 per cent to 10 per cent of the country's inventory. Maximum capacity is about 42.2 million barrels but only about 80 per cent is usable at any one time. The city is surrounded by many TANK FARMS, most of which are owned by four firms: oil giant BP, Enbridge Energy Partners, Plains All American Pipeline and SemGroup Energy Partners. The city was historically a centre for oil production from nearby fields and in 1983 NYMEX chose Cushing as the delivery point for its crude oil futures contracts.
  • CUSHION GAS
    The minimum amount of gas required to remain in a storage system to ensure adequate pressure to maintain continuous supply.
  • CUSTOM SMELTER
    A smelter that processes concentrate or ore for customers rather than smelting its own mine output.
  • CUSTOMER
    A designation designed to ensure that clients' trading activity and funds are segregated from a BROKER DEALER house activity.
  • CUSTOMER SEGREGATED ACCOUNT
    A brokerage account set aside to hold client assets from those of the brokerage.
  • DAILY LIMIT
    The maximum futures contract price advance or decline from the previous day's settlement price permitted during one trading session, as fixed by the rules of the Exchange where they are traded.
  • DAILY SETTLEMENT PRICE

    The price established by the Exchange settlement committee at the close of each trading session as the official price to be used by the clearinghouse in determining net gains or losses, margin requirements, and the next day's price limits. The term “settlement price” is often used as an approximate equivalent to the term “closing price.” The close in futures trading refers to a brief period at the end of the day, during which transactions frequently take place quickly and at a range of prices immediately before the bell. Therefore, there frequently is no single closing price, but a range of prices. In months with significant activity, the settlement price is derived by calculating the weighted average of the prices at which trades were conducted during that period.

  • DAY ORDER
    An ORDER that expires at the end of the day's trading session.
  • DAY TRADE
    The taking and offsetting of positions during the same trading session prior to the CLOSE.
  • DEALER
    A party that trades securities, commodities or foreign exchange on its own account.
  • DEALER OPTION
    A CALL OPTION or a PUT OPTION on a physical commodity offered by a dealer in the underlying commodity; such options are not subject to rules and regulations of an exchange.
  • DEBIT SPREAD
    A SPREAD OPTION position in which the price of the option bought is greater than the price of the option sold or written, resulting in a net payout of premium. Compare with CREDIT SPREAD.
  • DECATHERM
    Abbreviated Dth, the unit in which wholesale gas transactions are often made; 1 therm = 1 BTU.
  • DECLARATION DATE
    The date on which an options contract automatically expires, the last day on which it can be exercised. More commonly known as EXPIRATION DATE.
  • DEFAULT
    Failure to uphold the terms of an agreement, contract, swap, trade or transaction as required by exchange rules, such as failure to make or take delivery. Most commonly a failure to pay.
  • DEFAULT RISK
    The risk that a COUNTERPARTY defaults on an agreement, contract, swap, trade or transaction. FUTURES contracts executed on an EXCHANGE through a CLEARING HOUSE are guaranteed against DEFAULT by the clearing house. Also known as COUNTERPARTY RISK.
  • DEFERRED DELIVERY
    Longer-term delivery months of futures contracts, in contrast to NEARBY futures delivery months.
  • DELIVERABLE GRADE
    A grade of a commodity defined by an exchange as deliverable in settlement of a FUTURES contract.
  • DELIVERED
    Often regarded as synonymous with CIF (cost, insurance, and freight) in the international cargo trade, its terms differ from the latter in a number of ways. Generally, the seller's risks are greater in a delivered transaction because the buyer pays on the basis of landed quality and quantity. Risk and title are borne by the seller until such time as the commodity, such as oil, passes from shipboard into the connecting flange of the buyer's shore installation. The seller is responsible for clearance through customs and payment of all duties. Any in-transit contamination or loss of cargo is the seller's liability. In delivered transactions, the buyer pays only for the quantity of oil actually received in storage.
  • DELIVERY
    Generally refers to the change of ownership or control of a commodity under specific terms and procedures established by the Exchange upon which the contract is traded. Typically, except for energy, the commodity must be placed in an approved warehouse, depository, or other storage facility, and be inspected by approved personnel, after which the facility issues a warehouse receipt, shipping certificate, demand certificate, or due bill, which becomes a transferable delivery instrument. Delivery of the instrument usually is preceded by a notice of intention to deliver.
  • DELIVERY DATE
    The date on which a commodity or other security must be delivered to fulfil the terms of a trade.
  • DELIVERY INSTRUMENT
    The document used to effect delivery on a futures contract, such as a warehouse receipt or warrant.
  • DELIVERY MONTH
    The month specified in a given futures contract for delivery of the actual physical spot or cash commodity. Also known as CONTRACT MONTH.
  • DELIVERY NOTICE
    A notice presented through an Exchange's clearinghouse by a clearing member announcing the intention to deliver the actual commodity in satisfaction of a contract obligation. See DELIVERY.
  • DELIVERY POINT
    A location designated by an Exchange at which delivery may be made in fulfilment of contract terms.
  • DELTA
    The expected change in an option's price given a one-unit change in the price of the underlying security or physical commodity. For example, an option with a delta of 0.25 would change $0.50 when the underlying moves $1.00.
  • DEMAND

    1. The desire to own something and the means to pay for it.
    2. The amount of an economic good or service that consumers want to purchase at a given price, generally resulting in greater purchases in response to lower prices.

  • DEPOSITORY RECEIPT
    A document issued by a bank or warehouse indicating ownership of a commodity stored in a bank depository or warehouse. In the case of many commodities deliverable against futures contracts, transfer of ownership of an appropriate depository receipt may affect contract delivery. Also WAREHOUSE RECEIPT.
  • DEPRECIATION

    1. The decline in value of an asset over time as a result of wear and tear, obsolescence, depletion or other factors. Used in accounting to distribute the cost of an asset across its useful life.
    2. The decline in value of a currency within a floating exchange rate regime. Compare with DEVALUATION.

  • DERIVATIVE
    Financial instrument derived from a cash market commodity, futures contract, or other financial instrument. Derivatives can be traded on regulated exchange markets or over the counter. For example, futures contracts are derivatives of physical commodities and options on futures are derivatives of futures contracts.
  • DEVALUATION
    A reduction in the value of a currency against other currencies made by its monetary authority within a system of fixed exchange rates. Compare with DEVALUATION.
  • DIAGONAL SPREAD
    A kind of SPREAD OPTION in which options on the same underlying security are bought and sold at different strike prices and expiration dates – so called because a diagonal spread is a combination of CALENDAR SPREAD (FUTURES) and HORIZONTAL SPREAD.
  • DIESEL
    Any fuel used in diesel engines, most commonly a specific fractional distillate of petroleum obtained between 200 °C and 350 °C at atmospheric pressure but also increasingly including alternative derived from non-petroleum sources such as biodiesel, biomass to liquid and gas to liquid diesel. While simpler to refine than GASOLINE, its price is often higher because of the costly and complicated move to ultra-low sulphur diesel. The price of diesel tends to rise in colder months owing to increasing demand for HEATING OIL, which is refined in a way similar to diesel.
  • DIFFERENCE ACCOUNT
    Similar to a bank statement, a statement listing a customer's buy and sell orders for a given period net of commissions and other fees and ending with the net sum of money due to or from the BROKER.
  • DIFFERENTIALS
    Price differences between classes, grades, and locations of different stocks of the same commodity.
  • DIRECTLY CROSSING ORDERS
    The condition when a trader acts as both the buyer and seller on a matched trade.
  • DIRTY OIL or DIRTY CARGO
    Those petroleum products which leave significant amounts of residue in tanks, such as crude oil and residual fuel oil.
  • DISCOUNT

    1. A downward adjustment in price allowed for delivery of stocks of a commodity of lesser than contract grade against a futures contract.
    2. Sometimes used to refer to the price differences between futures of different delivery months.

  • DISCOUNT BROKER
    A broker who charges lower commissions than a full-service broker but provides fewer services, such as investment advice or market research.
  • DISCOUNT METHOD
    A means of paying interest by issuing a security at less than its face value and paying face value on maturity, e.g. a zero-coupon BOND.
  • DISCOUNT RATE
    The interest rate charged on borrowings by member banks from a U.S. Federal Reserve Bank.
  • DISCRETIONARY ACCOUNT
    An arrangement under which an investor gives power of attorney to her broker or other finance manager to buy and sell commodities or other securities without the obligation of first receiving the client's prior approval or knowledge. Also known as a CONTROLLED ACCOUNT.
  • DISORDERLY TRADING
    Excessive volatility at a time when there is no news to drive such movements, often caused by order imbalances such as when NAKED, SHORT try to cover their positions. Trading is sometimes halted in such conditions.
  • DISTANT MONTHS
    The far-dated delivery months in a futures or option contract (also known as back months).
  • DISTILLATE FUEL OIL
    Products of refinery distillation sometimes referred to as middle distillates, e.g. U.S No. 2 fuel, gasoil, kerosene or diesel fuel, used in compression ignition engines, and in light industrial manufacturing.
  • DOCTOR TEST
    A qualitative method of detecting undesirable sulphur compounds in petroleum distillates; that is, determining whether a given oil is SOUR CRUDE or SWEET CRUDE.
  • DOUBLE BOTTOMS
    In TECHNICAL ANALYSIS, a chart pattern of the price movement of a commodity that shows resistance to a falling market; the inverse of DOUBLE TOPS. The price patterns are used by technical analysts to recognize a reversal of a price trend.
  • DOUBLE TOPS
    In TECHNICAL ANALYSIS, a chart pattern of price movements that depicts a rising market which hits resistance at a certain level, retreats, rises again, but still cannot breach the previous resistance point, and falls back again. The price pattern is used to recognize a reversal of a price trend.
  • DOWNSTREAM
    An industry term referring to commercial oil and gas operations beyond the production phase; oil refining and marketing, and natural gas transmission and distribution.
  • DOWNTREND
    The change in price of a security over a period of time during which each successive peak or trough is lower than the previous one, respectively.
  • DRY GAS
    NATURAL GAS that contains no liquid hydrocarbons such as PROPANE or BUTANE which have a greater density than ETHANE.
  • DUBAI CRUDE
    A light, SOUR CRUDE crude oil produced in Dubai used as a benchmark for the pricing of other varieties of crude oil, particularly those exported from the Middle East to Asia. It has an API GRAVITY of 31°.
  • ECONOMETRICS
    The application of statistical or quantitative tools to the study of economics to develop, test and refine economic principles or to solve economic problems.
  • EDSP
    Exchange Delivery Settlement Price. The settlement price for physical delivery.
  • EFFICIENT MARKET HYPOTHESIS
    The proposal that the price of any asset reflects all known information affecting that price. One corollary of this hypothesis is that it is impossible to consistently outperform the market except through luck. However, the hypothesis is contradicted by the historical outperformance of shares with low price/earnings ratios over other stocks.
  • ELECTRONIC TRADING
    The use of computers to trade securities.
  • ELLIOT WAVE THEORY
    Named after Ralph Nelson Elliott, a theory which holds that since biological processes and human life are rhythmical, human activities could be forecast in rhythms, too, and so could market movements. This leads to the charting method of TECHNICAL ANALYSIS in which prices are seen as moving in waves.
  • END-USER
    The ultimate consumer of petroleum products or natural gas; most commonly refers to large commercial, industrial, or utility consumers.
  • ENDING STOCKS
    The amount of a storable commodity such as corn or ALUMINIUM remaining at the end of a unit of time, generally year-end.
  • EQUILIBRIUM PRICE
    The price of a good or service at which demand and supply are equal.
  • EQUITY

    1. Stock, shares, common or preferred stock.
    2. An ownership stake in a property or business.

  • ETHANE
    A chemical with the formula C2H6, a colourless, odourless gas at room temperature; contained in NATURAL GAS and produced as a by-product of petroleum refining; used as a feedstock for producing ETHYLENE.
  • ETHYLENE
    A chemical with the formula C2H4; the most heavily manufactured organic compound in the world; used in the manufacture of plastics, surfactants, detergents, antifreeze, synthetic lubricants and others.
  • EUREX
    One of the world's leading derivatives exchanges, jointly operated by Deutsche Börse AG and SIX Swiss Exchange. Eurex offers a broad range of international benchmark products and operates the most liquid fixed income markets in the world, featuring open and low-cost electronic access. With market participants connected from 700 locations worldwide, trading volume exceeds 1.5 billion contracts a year.
  • EURIBOR
    The Euro Interbank Offered Rate, a daily reference rate based on the average interbank interest rate charged in the Euro zone. It is used as a reference rate for euro-denominated interest rate FUTURES and SWAP, and in forward rate agreements.
  • EURODOLLAR
    Any holding of U.S. dollars outside the United States. Such deposits often earn higher interest than in the U.S. because they do not face the cost of complying with U.S. Federal Reserve regulations. The prefix euro- attached to any currency has come to mean a holding of that currency outside its jurisdiction.
  • EUROPEAN CENTRAL BANK
    The monetary authority for the Euro zone of 16 countries whose currency is the Euro; established in 1998.
  • EUROPEAN TERMS
    An FX market quotation that states the foreign currency price of one U.S. dollar.
  • EUROPEAN-STYLE OPTION
    An option that may be exercised only on its expiration date. Compare with AMERICAN-STYLE OPTION, ASIAN-STYLE OPTION.
  • EX-PIT TRANSACTION
    In a floor-trading exchange, the closing out of a futures position off the exchange floor. This takes place when two hedgers with equal and opposite positions make a private deal in the cash market and no longer need their futures as a hedge.
  • EXCESS MARGIN
    Assets in a margin account above the minimum maintenance requirement.
  • EXCHANGE
    A marketplace for the trading of securities such as: shares, options and futures on bonds, commodities, equities and indices.
  • EXCHANGE CONTRACT
    A contract, matched and registered with the clearing house, made by two clearing members.
  • EXCHANGE FOR PHYSICAL (EFP)

    An off-market trading mechanism that enables customers to swap futures and options exposure for an offsetting stock position.

  • EXCHANGE FOR PHYSICALS
    A provision in a futures contract allowing delivery of a physical commodity that doesn't necessarily conform to contract specifications and a corresponding assumption of equal and opposite futures positions by the counterparties in the transaction at the same time. Also known as CASH FOR FUTURES.
  • EXCHANGE OF FUTURES FOR CASH
    A transaction in which the buyer of a cash commodity receives from the seller a corresponding amount of short futures, or the buyer transfers to the seller a corresponding amount of long futures contracts, at an agreed price difference, allowing both counterparties to close out opposite hedges simultaneously.
  • EXCHANGE RATE

    In currency trading, the worth of one currency in terms of another, e.g. JPY per USD.

  • EXCHANGE-CERTIFIED STOCKS
    Stocks of commodities held in depositories or warehouses certified by an Exchange-approved inspection authority as constituting good for delivery against a futures contract position. Current total certified stocks are reported in the press for many important commodities such as gold, silver, copper, platinum and palladium.
  • EXCHANGE-TRADED COMMODITIES
    Or ETCs, securities that rise and fall with oil, gold, and other products, tracking the value of an underlying instrument, such as gold bullion or oil futures like U.S. crude oil or North Sea BRENT crude. They replicate an underlying futures contract almost exactly, moving in tandem with the price and even allowing investors to take a yield on their capital through a collateral gain based on three-month U.S. Treasury bills and a roll-yield as the underlying futures roll forward.
  • EXCHANGE-TRADED FUND
    An investment vehicle traded on stock exchanges which is designed to mimic the performance of an underlying security. For example a gold ETF will have a net value and market price approximating the value of the gold backing it; gold ETFs have become so popular that they now rank sixth among holders of above-ground gold (in order: the US, Germany, the IMF, France, Italy, ETFs). Most ETFs track a stock index and are backed by a basket of securities making up that index.
  • EXECUTION
    The process of completing an order to buy or sell securities.
  • EXERCISE
    The right of the holder to implement the BUY or SELL of an OPTION at the option's strike price.
  • EXERCISE NOTICE
    A notification by an investor to her BROKER that she will use her right to buy or sell the underlying security of the corresponding OPTION contract.
  • EXERCISE PRICE
    The price at which an OPTION may be exercised.
  • EXHAUSTION GAP
    In TECHNICAL ANALYSIS, a gap in a price range occurring at the top of a price rally, usually on relatively low volume as demand tapers off.
  • EXOTIC OPTIONS
    A derivative with various additional elements, including trigger prices, comparative performance criteria, compound options, etc., that make it more complex than more commonly traded instruments; traded over the counter.
  • EXPIRATION
    The date on which an OPTION contract lapses.
  • EXPIRATION DATE
    The date on which an options contract automatically expires, the last day on which it can be exercised. Also known as DECLARATION DATE.
  • EXTRA-HEAVY OIL
    Refers to any type of crude oil that does not flow easily, with API gravity less than 20 degrees.
  • EXTRINSIC VALUE
    Value which is entirely due to shared agreement, most commonly observed, e.g., in the general acceptance that a given banknote is worth the value printed on it.
  • FAIR VALUE (FUTURES)

    1. The perception that a given asset is neither underpriced nor overpriced.
    2. Often called the theoretical futures price, equal to the current spot price continuously compounded at the cost of carry rate over a given time interval.
    3. In accounting, an estimate of market value of an asset for which a market price can't be determined, usually because of illiquidity.

  • FAST MARKET
    A market in which trading is occurring so fast that electronic updating of its last trade price and market conditions is delayed. MARKET ORDER made in a fast market may find themselves executed at prices far different from the prices in effect when the order was made.
  • FEAR INDEX

    An informal name for the Chicago Board Options Exchange Volatility Index, known as VIX, which is designed to estimate the implied volatility of the S&P 500 index over the next 30 days. A popular measure of MARKET RISK.

  • FEDERAL FUNDS
    Reserves maintained by a commercial bank in the U.S. Federal Reserve System over and above the bank's reserve requirement. These funds are available for lending to other banks overnight.
  • FEDERAL FUNDS RATE
    The interest rate charged on overnight loans made between commercial banks from their reserves held in the FEDERAL RESERVE SYSTEM. The rate, set by the Federal Reserve, is closely watched by market participants and economists as a key indicator of the direction of monetary policy.
  • FEDERAL RESERVE SYSTEM
    The central banking system of the U.S., established in 1913. It is comprised of a Board of Governors, the Federal Open Market Committee, 12 regional Federal Reserve Banks, many other private member banks, and several advisory councils.
  • FEED RATIO
    A ratio of the cost of feed for an animal commodity (e.g. beef, pork, chicken) and the price of that commodity. Indicates how profitable or not it is to feed that animal to market weight.
  • FEEDSTOCK
    The supply of crude oil, natural gas liquids, or natural gas to a refinery or petrochemical plant or the supply of some refined fraction of intermediate product to some other manufacturing process.
  • FICTITIOUS TRADING
    Schemes which provide the appearance but not the fact of trading, such as WASH TRADING, BUCKETING, CROSS/SELF TRADE and so on.
  • FILL
    To complete an order to buy or sell a security.
  • FILL-AND-KILL (FAK)
    An order which is filled to the extent possible and the remaining balance is cancelled.
  • FILL-OR-KILL (FOK)
    An order which must be filled immediately, and in its entirety. Failing this, the order is cancelled.
  • FINAL SETTLEMENT PRICE

    The Final Settlement Price of a futures contract is the price as determined by the Exchange and its Clearing House for the purposes of settlement of the futures contract upon its expiration. The futures contract may be settled in cash or through physical delivery of the underlying commodity.

  • FINANCIAL SERVICES AUTHORITY
    A U.K. independent non-governmental body, given statutory powers by the U.K. Financial Services and Markets Act 2000 to regulate the financial services industry in the U.K. FSA is a company limited by guarantee and financed by the financial services industry. It has four objectives:Maintaining confidence in the financial systemProtecting consumers from financial predatorsReducing financial crimeMaintaining confidence in the financial sector
  • FINE WEIGHT
    The weight of precious metal contained in bullion or a collectable coin; obtained by multiplying the gross weight by the fineness.
  • FINENESS
    A measure of the purity of a precious metal, expressed in parts per thousand, e.g. .999 fine gold is 99.9 per cent gold and 0.1 per cent base metal.
  • FIRST NOTICE DAY
    The first day that a notice of intent to deliver a commodity can be made by a clearinghouse to a buyer in fulfilment of a given month's futures contract.
  • FLAT
    Unchanged, used generally to refer to the price of a security, less often with regard to trading volume.
  • FLEX OPTION
    Or flexible exchange option, wherein its strike price, expiration date and exercise can be modified.
  • FLOOR
    1. The minimum acceptable limit, as in a minimum price guaranteed in a share issue by the underwriter.
  • FLOOR BROKER
    An employee of an exchange member firm who trades on the exchange's trading floor on behalf of his firm's clients.
  • FOB
    Or free on board: A transaction in which the seller provides a commodity at an agreed unit price delivered onto a ship at a specified port of departure; it is the responsibility of the buyer to pay for further transportation and insurance.
  • FORCE MAJEURE
    A standard clause which indemnifies either or both parties to a transaction whenever events which the Exchange declares to be reasonably beyond the control of either party occur to prevent fulfilment of the terms of the contract.
  • FOREIGN EXCHANGE
    Trading money in one currency for another.
  • FOREIGN EXCHANGE MARKET
    A regulated central marketplace for the trading of currencies using on-exchange clearing.
  • FORWARD CONTRACT
    A supply contract between a buyer and seller, whereby the buyer is obligated to take delivery and the seller is obligated to provide delivery of a fixed amount of a commodity at a predetermined price on a specified future date. Payment in full is due at the time of, or following, delivery. This differs from a futures contract where settlement is made daily, resulting in partial payment over the life of the contract.
  • FORWARD MONTH
    The month in which a futures contract expires.
  • FRACTIONATION
    The process of separating elements of a mixture into different groups according to a gradient of a feature common to all components of the mixture. For example, CRUDE OIL is fractionated into various petroleum products according to their different boiling points.
  • FREE ALONGSIDE or FREE ON QUAY
    Abbreviated FAS, a trading term describing the condition of delivery of a commodity in which the commodity is delivered to a point within reach of the shipping tackle of a cargo vessel designated by the buyer.
  • FRONT MONTHS
    Depending on the commodity, each of which tends to have its own level of trading activity, front months may refer to any of the first few contract months.
  • FRONTRUNNING
    The condition when a trading takes a position in a market or on a security based on non-public information about an upcoming transaction in that market or security.
  • FUEL OIL

    1. A fraction obtained from petroleum distillation, either as a distillate or a residue and made up of long hydrocarbon chains, particularly alkanes, cycloalkanes and aromatics; any liquid petroleum product burned in a boiler to produce heat or generate power except oils which have a flash point of 40°C or lower; also used in a stricter sense to denote only the heaviest commercial fuel that can be distilled from petroleum. Fuel oil is divided into six classes according to boiling point, composition and purpose. Boiling point, viscosity and carbon chain length increase with fuel oil number while price generally decreases.
    2. Residual fuel oil, a heavy fuel used in large commercial, industrial and electric utility boilers, which is classified as No. 6 fuel in the U.S.

  • FULL-SERVICE BROKER
    A broker who offers clients a wide spectrum of ancillary services such as investment research and advice, tax counselling, and so on. Fees charged by such brokers are generally higher than those charged by discount brokers.
  • FUNDAMENTAL ANALYSIS
    The study of economic data, financial data, markets and competition to forecast probable price movements; this technique maintains that markets often misprice assets in the short run, creating an opportunity for profit for those able to use fundamental analysis to spot the market failure. Compare QUANTITATIVE ANALYSIS and TECHNICAL ANALYSIS.
  • FUNGIBLE
    Interchangeable. Products which can be substituted for each other for purposes of shipment or storage.
  • FUTURES
    A financial contract in which an asset, generally a physical commodity or a financial instrument is agreed to be transacted at a future date and price. Exchange-traded futures detail a standard quality and quantity of the underlying asset in question. Trades may be settled by physical delivery of the underlying asset or by the exchange of money. Futures are generally used to speculate or hedge on the price movement of the underlying asset.
  • FUTURES COMMISSION MERCHANT (FCM)
    An FCM is the only exchange participant who receives, handles, and manages customer funds, margin payments, and commission charges. An FCM is also responsible for confirmation of trade slips, customer statements, and guarantees.
  • FUTURES CONTRACT
    A contract between a buyer and seller, whereby the buyer is obligated to take delivery and the seller is obligated to provide future delivery of a fixed amount of a commodity at a predetermined price at a specified location and time. Futures contracts are most often liquidated prior to the delivery date and are generally used as a financial risk management and investment tool rather than for supply purposes. These contracts are traded exclusively on regulated exchanges and are settled daily based on their current value in the marketplace.
  • FUTURES CURVE
    A series of prices of a series of futures contracts for a given commodity or financial asset that buyers and sellers are willing to trade at today.
  • FUTURES EQUIVALENT
    The number of futures contracts implied by an options position.
  • FUTURES EXCHANGE
    A central, regulated marketplace for the trading of futures contracts and on-exchange clearing of such contracts.
  • GAMMA
    The rate of change of DELTA of an option with respect to the price of the underlying asset.
  • GAP
    A break between prices on a chart that occurs when the price of a security makes a sharp move up or down with no trading occurring in between, a not-uncommon occurrence on stock markets between the close of one day's trading and the opening of the next.
  • GAP THEORY
    In TECHNICAL ANALYSIS, the study of gaps in prices.
  • GASOIL
    European designation for No. 2 heating oil and diesel fuel.
  • GASOLINE
    A liquid fuel derived from petroleum and used in internal combustion engines, consisting mostly of aliphatic hydrocarbons of five to 12 carbon atoms per molecule and enhanced with iso-octane or aromatic hydrocarbons like toluene and benzene to increase its octane rating. It is the most common fuel for automobiles. Before being used as a fuel, gasoline was used to treat lice and their eggs, and as a cleaning fluid for clothing stains.
  • GASOLINE, STRAIGHT-RUN
    Also known as “raw” or “virgin” gasoline. Gasoline which is separated directly from crude oil by fractional distillation. Straight-run gasoline generally must be upgraded to meet current motor fuel specifications.
  • GIVE UP
    A trade executed by one broker for the client of another broker that the client orders to be turned over to the second broker. The broker accepting the order from the customer collects a fee from the carrying broker for the use of the facilities. Often used to consolidate many small orders or to disperse large ones.
  • GOLD
    A chemical element with the symbol Au and atomic number of 79. As a sought-after precious metal, gold has been used throughout recorded history as a store of value, as money and as jewellery or ornamentation. Gold is dense (19.3 grams per cubic centimetre) and shiny and is the most malleable and ductile metal known. It is found in nature most often as a metal, usually alloyed with SILVER in ratios of eight to 10 percent; alloys with silver amounting to more than 20 per cent are known as electrum. Gold extraction can take place profitably from ore grades with as little gold as five parts per million, or more commonly 1-5 ppm. In 2007 China overtook South Africa as the world's biggest gold producer, marking the first time in more than 100 years that South Africa was not number one. Like other precious metals, gold is measured by mass, using TROY WEIGHT or grams. When allowed with other metals, its purity is expressed in CARAT while the purity of a gold bar is described by its MILLESIMAL FINENESS.
  • GOLD STANDARD
    A monetary system locked to the value of gold such that a given monetary authority or central bank promises to exchange a fixed amount of gold for a given sum of money. For many years, the U.S. government set the value of the U.S. dollar such that it would hand over one troy ounce of gold for $20.67. However, President Franklin Roosevelt devalued the USD to $35.00 per troy ounce in 1934 in a key plank of his attack on the Great Depression. By the early 1960s this price was becoming increasingly difficult to defend and a group of U.S. and European central banks agreed to manipulate the market to prevent currency devaluations against rising demand for gold. This arrangement quickly collapsed. On 17th March 1968 a two-tier pricing mechanism was introduced whereby international accounts were settled at the old price while the private market for gold was allowed to fluctuate in price. This also didn't last long. U.S. President Richard Nixon abandoned the gold standard in 1971. Many of the world's central banks continue to hold relatively large gold holdings.
  • GOLD/SILVER RATIO
    The number of ounces of silver required to buy one ounce of gold at current spot prices.
  • GOOD DELIVERY
    When an exchange-traded security meets a set of requirements for being in proper form for transfer of title to the buyer.
  • GOOD THIS WEEK (GTW)
    An order which is valid only during the week in which it is placed.
  • GOOD TILL CANCELED (GTC)
    An order to be held by a broker until it can be filled or until cancelled.
  • GOOD TILL DATE (GTD)
    An order to be held by a broker until it can be filled or until cancelled by expiring on a specifically named date.
  • GRADE
    A position in a scale of quality, such as size, density, colour, etc.
  • GRADE 1 COPPER
    In recycling or trading, a grade of copper pipe with a new appearance and free of any foreign material.
  • GRADING CERTIFICATE
    A document issued by an authorized inspector attesting to the quality or grade of a commodity.
  • GREEKS
    In mathematical finance, the quantities representing the market sensitivities of OPTION or other DERIVATIVE, so named because they are often denoted by Greek letters. Each Greek measures a different aspect of risk in a derivatives position and corresponds to a parameter on which the value of a financial instrument depends.
  • GROSS MARGIN
    Revenue minus the cost of goods sold, divided by revenue; this figure can vary enormously between industries.
  • GROSS POSITION
    The sum of a clearing house's current open positions in a given contract.
  • GROSS PROCESSING MARGIN
    The difference between the cost of a raw commodity and the income generated once it is processed into a finished product, e.g. from crude oil to petroleum products.
  • HAIRCUT

    1. The percentage by which an asset's market value is reduced for the purpose of calculating capital requirements, margins and collateral.
    2. The difference between the prices at which a MARKET MAKER can buy and sell a given security.

  • HALLMARK
    An official mark imprinted on precious metals as a guarantee of the metal's purity or fineness.
  • HEAD-AND-SHOULDERS
    In TECHNICAL ANALYSIS, a pattern seen on a price/time graph of a security's price in which the price rises to a peak, declines, rises to a higher peak, declines, rises but not as high as the second peak, and declines again; the pattern is regarded as a strong signal that a trend has now reversed.
  • HEATING DEGREE DAY
    An index used by electricity traders to understand the potential increase in demand for electricity due to use of heating in homes and offices. The temperature of 65° F is taken to deliver a degree of comfort requiring neither heating nor cooling. The temperature of 65° F minus that day's temperature provides that day's index. See COOLING DEGREE DAY.
  • HEATING OIL
    A low-viscosity PETROLEUM distillate used to fuel furnaces and, less commonly, electric power stations. Chemically, it is a mixture of 14- to 20-carbon hydrocarbons which condenses at one atmosphere between 250 °C and 350 °C.
  • HEAVY CRUDE
    Crude oil with a high specific gravity and a low API gravity due to the presence of a high proportion of heavy hydrocarbon fractions.
  • HEAVY DISTILLATE
    One of three categories of petroleum product which are based on where the petroleum product is found when crude oil is separated in the fractional distillation process. Heavy distillates include heavy fuel oil, lubricants, TAR and wax. See LIGHT DISTILLATE and MIDDLE DISTILLATE.
  • HEAVY FUEL OIL
    Refers to the remains of crude oil after gasoline and the distillate fuel oils are extracted through distillation, also known as number 6 fuel oil.
  • HEDGE
    The establishment of a position in one market to offset risk of an equal but opposite position in another market, usually in the context of insuring a business's commercial activity against such shocks as a sharp drop in demand for one's products. Financial institutions often use hedging to rebalance asset-liability mismatches. For example: the sale of futures contracts in anticipation of future sales of cash commodities as a protection against possible price declines, or the purchase of futures contracts in anticipation of future purchases of cash commodities as a protection against the possibility of increasing costs. The reduction of risk, for example, when a homeowner buys fire insurance.
  • HEDGE RATIO

    1. Ratio of the value of futures contracts purchased or sold to the value of the cash commodity being hedged, a computation necessary to minimize basis risk.
    2. The ratio, determined by an option's delta, of futures to options required to establish a risk-free position. For example, if a $1/barrel change in the underlying futures price leads to a $0.25/barrel change in the options premium, the hedge ratio is four (four options for each futures contract).

  • HEDGER
    A market participant who enters the market with the specific intent of protecting an existing or anticipated physical market exposure from unexpected or adverse price fluctuations. Contrast with SPECULATOR.
  • HEDGING LINE OF CREDIT
    A loan used to finance the sale and purchase of commodities.
  • HIDDEN QUANTITY
    Also called ICEBERG, a kind of ORDER in which only part of the volume of contracts to be traded is displayed to the exchange; used to disguise large-volume trading.
  • HIGH
    A near-term or 52-week peak in the price of a security.
  • HISTORICAL VOLATILITY
    The annualized standard deviation of percent changes in futures prices over a specific period. It is an indication of past volatility in the marketplace.
  • HOG/CORN RATIO
    The ratio of feeding costs to the dollar value of hogs, used to express the relationship between feeding costs and the value of livestock.
  • HORIZONTAL SPREAD
    A SPREAD OPTION in which the defining difference between the options bought and sold are in their expiration date. See CALENDAR SPREAD (FUTURES).
  • HUNDREDWEIGHT
    Abbreviated cwt, 100 pounds.
  • HYDROCARBONS
    Organic chemical compounds containing hydrogen and carbon atoms. They form the basis of all petroleum products.
  • ICEBERG
    Also called HIDDEN QUANTITY, a kind of ORDER in which only part of the volume of contracts to be traded is displayed to the exchange; used to disguise large-volume trading.
  • IMBALANCED ENERGY
    The difference between the amount of electricity that a seller has contracted to deliver and the actual delivery amount, settled in cash.
  • IMMEDIATE-OR-CANCEL
    An order which must be filled immediately or be cancelled. IOC orders need not be filled in their entirety.
  • IMPLIED VOLATILITY
    The volatility implied by the market price of an option based on an option pricing model, such as BLACK-SCHOLES MODEL.
  • IN-THE-MONEY
    Of an option, having a strike price that makes the option profitable to exercise.
  • IN-WELL TRANSFER
    An inventory transfer of propane held in underground caverns or storage.
  • INDEX
    An imaginary portfolio of securities assembled so as to reflect as well as possible the underlying market. This provides investors with a snapshot of market condition and fund managers with a ready benchmark to compare their performance against.
  • INDEX ARBITRAGE
    The simultaneous purchase (or sale) of stock index futures and the sale (purchase) of the index's component shares to profit from a spread between the futures contract and the index itself.
  • INDICATIVE OPENING PRICE
    During pre-trading before the opening of trade on an exchange, a forecast of the forthcoming opening price based on and continuously updated from orders entered into the exchange's matching engine.
  • INDICATIVE PRICES

    A future exchange may release indicative prices for its futures contracts at certain points of the day. The purpose is to provide market users with an indicative price based on transactions which will facilitate comparison with other regional futures contracts. The indicative price is calculated using the same methodology employed in calculating daily settlement prices. It is not used for margining purposes or for settlement purposes. This indicative price is not necessarily a traded price.

  • INDIRECT QUOTE
    A foreign exchange rate quoted as the foreign currency per unit of domestic currency. The foreign currency is a variable amount and the domestic currency is fixed at one unit.
  • INDIRECT RATE PARITY
    Forward premium (or discount) that is dependent on the interest rate differential between two currencies.
  • INFLATION
    The rate at which the general level of prices for goods and services is rising, and, consequently, purchasing power is falling.
  • INITIAL MARGIN
    The fraction of the market price of a security (that is allowed to be bought on margin) that the buyer must pay with her own cash or marginable securities.
  • INITIAL PERFORMANCE BOND
    The funds required when a futures position (or a short options on futures position) is opened.
  • INSTRUMENT
    A tradable asset or such as a security, commodity, derivative or index, or any item that underlies a derivative; a means by which something of value is transferred, held or accomplished.
  • INTERBANK RATE
    The interest rate banks charge one another for short-term loans. The rate depends on market conditions, the sum of money being borrowed, and other factors such as the term of the loan.
  • INTERCOMMODITY SPREAD
    The simultaneous purchase of a given delivery month of a futures contract on one exchange and sale of the same delivery month of the same contract on another exchange to profit from the sale price being higher than the purchase price. Also called INTERMARKET SPREAD.
  • INTERCOMMODITY SPREAD
    on one exchange and sale of the same delivery month of the same contract on another exchange to profit from the sale price being higher than the purchase price. Also called INTERMARKET SPREAD.
  • INTERCONTINENTAL EXCHANGE (ICE)
    A group of energy and futures companies founded the International Petroleum Exchange (IPE) in 1980. The IPE is well known for its Brent Crude and Gas Oil contracts. The New York Board of Trade (NYBOT) was originated in 1870 as the New York Cotton Exchange, which was founded by a group of one hundred cotton brokers and merchants. In 1998, NYBOT became the parent company of the New York Cotton Exchange and the Coffee, Sugar and Cocoa Exchange (CSCE) (founded in 1882). In May 2000, Intercontinental Exchange was established, with its founding shareholders representing some of the world’s largest energy traders. In June of 2001, ICE expanded its business into futures trading by acquiring the International Petroleum Exchange (IPE) and in January of 2007, ICE acquired the New York Board of Trade (NYBOT). ICE became listed on New York Stock Exchange in Nov 2005. On March 4, 2009, ICE announced that ICE US Trust, LLC (ICE Trust) received regulatory approval from the Board of Governors of the Federal Reserve System to become a member of the Federal Reserve System and to serve as a clearing house and central counterparty for credit default swap (CDS) transactions.
  • INTEREST

    1. The cost of borrowing money.
    2. The amount of ownership an investor has in an asset, usually expressed in per cent.

  • INTEREST RATE FUTURES
    Futures contracts traded on underlying fixed income securities such as U.S. Treasury issues or certificates of deposit. Does not include currencies, even as interest rates are a factor in currency values.
  • INTEREST RATE SWAP
    An exchange of cash flows in which, most commonly, one party pays the other a fixed interest rate on a notional principal amount and his counterparty agrees to pay a floating interest rate in the same currency, usually pegged to LIBOR. There is no exchange of principal amounts. The party who pays floating benefits when rates fall. Other common IRS's include fixed-for-floating in different currencies, floating-for-floating in the same currency, floating-for-floating in different currencies, or fixed-for-fixed in different currencies. IRS's are mainly used to speculate or hedge against changes in interest rates.
  • INTERMARKET SPREAD
    The simultaneous purchase of a given delivery month of a futures contract on one exchange and sale of the same delivery month of the same contract on another exchange to profit from the sale price being higher than the purchase price. Also called INTERCOMMODITY SPREAD.
  • INTRINSIC VALUE

    1. The actual value of a security, in contrast to its market value or book value. It includes difficult-to-value factors such as brand name, copyrights, trademarks and reputation.
    2. The amount by which an OPTION is in the money, calculated as the difference between its STRIKE PRICE and the price of the underlying security.

  • INVERTED MARKET
    A futures market is said to be inverted when distant contract months are selling at a discount to nearby contract months; also known as BACKWARDATION and generally caused by near-term supply shortages.
  • INVISIBLE SUPPLY
    Uncounted stocks of a commodity in the hands of wholesalers, manufacturers, and producers which cannot be identified accurately; stocks outside commercial channels but theoretically available to the market.
  • IRON
    A chemical element, with symbol Fe and atomic number 26. It is one of the few ferromagnetic elements, silvery in colour and the most abundant metal on Earth. Its low cost and high strength make it the most widely used metal, about 95 per cent of worldwide metal production. It is used chiefly in making STEEL and STAINLESS STEEL. It is widely thought that iron was first SMELT in the second millennium BC; cast iron was first produced in China about 550 BC and in Europe not until the mediaeval period.
  • IRON CONDOR
    A options trading strategy using two VERTICAL SPREAD with the same expiration date: a bull put spread and a bear call spread with the number of puts equal to the number of calls. A plot of possible profit and loss of the position drawn against the underlying price is reminiscent of a graphical depiction of a large-winged bird.
  • IRON ORE
    Rocks or minerals from which elemental iron can be extracted. Rich in iron oxides, they range in colour from rust to purple, bright yellow and dark gray. The iron is most commonly locked up in magnetite and hematite as well as in goethite, limonite and siderite. Apart from metallic iron delivered by meteorite, pure iron is virtually unknown on Earth. China is the leading user of iron ore, producing and importing more than 500 million tons in 2008.
  • JET FUEL
    High-quality kerosene product used primarily as fuel for commercial turbojet and turboprop aircraft engines. It is a mixture of a large number of different hydrocarbons.
  • JOB LOT
    In commodities trading, the amount of a given commodity that is smaller than the standard lot size specified in that commodity's standard contract.
  • JOBBER
    Slang term for a MARKET MAKER.
  • KAPPA
    In regression analysis, the ratio of the price change of an option to a 1% change in the expected price volatility.
  • KARAT
    A measure of the purity of gold alloys such that, for example, 24-carat gold is fine 999 (99.9 per cent) pure gold, 18-carat gold is 750 fine (75 per cent) pure gold and 12-carat gold is 50 per cent pure gold and 50 per cent alloy. In this definition, spelled CARAT outside North America.
  • KEROSENE
    A combustible hydrocarbon liquid of 12- to 15-carbon chains commonly used as fuel for jet engines, as a heating fuel and in some rocket engines in the satellite launch industry. And, where purity is less of an issue, it is also used as a cooking fuel in less developed countries. Kerosene's fractional distillation occurs between 150 °C and 275 °C. Its original use in the 19th century as a fuel for lamps helped drive the whaling industry into decline.
  • KEY REVERSAL
    In TECHNICAL ANALYSIS, A chart formation that signals a reversal of the current trend. To end an uptrend, the market must open above the previous day's close, make a new high for the trend and then close below the previous day's low. To end a downtrend, the market must open below the previous day's close, mark a new low for the trend and close higher than the previous day's high. High trading volumes during such conditions add weight to the forecast.
  • KILOWATT HOUR
    In measuring electricity use, the use of 1,000 watts for one hour; the electricity needed to light 10 100-watt light bulbs for one hour.
  • KYOTO PROTOCOL
    The international agreement signed in 1997 to limit the level of greenhouse gas emissions in an effort to inhibit damage to the earth's ozone layer and thereby reduce the rate of global warming.
  • LAGGING INDICATOR
    An economic or market indicator which serves to confirm or deny the general trend in prices, growth, etc., which is already indicated by leading indicators.
  • LANDED PRICE
    The actual delivered cost of oil to a refiner, taking into account all costs from production or purchase to the refinery.
  • LAST NOTICE DAY
    The final day on which notices of intent to deliver on futures contracts may be issued.
  • LAST TRADING DAY
    The final trading day for a particular delivery month futures contract or options contract. Any futures contracts left open following this session must be settled by delivery.
  • LCH.CLEARNET
    The leading independent clearing house, serving major international exchanges and platforms, as well as a range of OTC markets. It clears a broad range of asset classes including: securities, exchange traded derivatives, energy, freight, interbank interest rate swaps and euro and sterling denominated bonds and repos; and works closely with market participants and exchanges to identify and develop clearing services for new asset classes.
  • LEAD
    A chemical element, with symbol Pb and atomic number 82. It is a soft, malleable heavy metal with a bluish colour when freshly cut but more commonly a dull gray as a result of exposure to air. It has poor electrical conductivity and is exceptionally resistant to corrosion. Its relatively high density of 11.34 grams per cubic centimetre makes it valuable for use in weights, bullets and shot. It is also used in radiation shields and lead-acid batteries. Lead is highly poisonous.
  • LEADING INDICATOR
    An economic or market indicator which forecasts the general economic or price trend for the coming period. Examples include durable goods orders, initial claims for unemployment insurance and so on.
  • LEAP
    A long-dated exchange-traded OPTION.
  • LEG
    The name for each component transaction of a SPREAD or SWAP.
  • LENDING
    The simultaneous selling of a near-dated commodity future and the purchase of a later-dated future, in effect lending the commodity. See CARRY.
  • LEVERAGE
    The degree to which a given sum of capital can or cannot control generally much larger amounts of a given commodity or market.
  • LIBOR (LONDON INTERBANK OFFERED RATE)
    A daily reference rate based on the interest rates at which banks borrow unsecured funds from each other in the London interbank market; roughly comparable to the U.S. Federal funds rate.
  • LICENSED WAREHOUSE
    A storage facility licensed by an exchange for storage of commodities traded on the exchange for physical delivery.
  • LIFTING
    Refers to tankers and barges loading cargoes of petroleum at a terminal or transhipment point.
  • LIFTING A LEG
    The closing out of one side of a balance position, leaving the trader or investor exposed to potential price fluctuations.
  • LIGHT CRUDE
    Crude oil with a low SPECIFIC GRAVITY and high API GRAVITY due to the presence of a high proportion of light hydrocarbon fractions.
  • LIGHT DISTILLATE
    One of three categories of petroleum product which are based on where the petroleum product is found when crude oil is separated in the fractional distillation process. Light distillates include GASOLINE , LPG and NAPHTHA. See HEAVY DISTILLATE and MIDDLE DISTILLATE .
  • LIMIT
    The maximum daily allowable amount a futures price may advance or decline in any one day's trading session. Limits are also placed on the number of positions a participant may hold in the market.
  • LIMIT ORDER
    A contingent order for an options or futures trade specifying a certain maximum (or minimum) price, beyond which the order (buy or sell) is not to be executed.
  • LIQUID
    A market in which enough securities are available for sale and purchase that large transactions can take place without resulting in big price swings; generally marked by narrow spreads between bid and offer prices.
  • LIQUID MARKET
    A market characterized by the ability to buy and sell with relative ease.
  • LIQUIDATION
    The closing out of futures and options positions.
  • LIQUIDITY
    A market condition marked by a high level of trading activity, narrow price spreads, and open interest.
  • LISTED OPTION
    An exchange-traded -- versus OTC -- option with underlying asset, quantity, expiration date and strike price all standardized. Benefits include greater liquidity and transparency and a reduction in COUNTERPARTY RISK via the use of a clearing house to settle trades in such options. Also known as a TRADED OPTION.
  • LNG (LIQUEFIED NATURAL GAS)
    Natural gas which has been made liquid by reducing its temperature to minus 258° Fahrenheit at atmospheric pressure. Its volume is 1/600 of gas in vapour form.
  • LOCKED IN
    An investment hedge that can't be lifted without offsetting both sides of the hedge position.
  • LOCKED MARKET
    A market where prices have reached their daily trading limit and trading can only be conducted at that price or prices which are closer to the previous day's settlement price.
  • LONG

    1. The market position of a futures contract buyer whose purchase obligates him to accept delivery unless he liquidates his contract with an offsetting sale.
    2. One who has bought a futures contract to establish a market position.
    3. In the options market, position of the buyer of a CALL OPTION or PUT OPTION contract. Opposite of SHORT.

  • LONG HEDGE
    Buying a futures contract to protect a short position against possible increase in the price of the underlying security. Also called a BUYING HEDGE.
  • LONG POSITION
    A market position in which the trader or investor is hoping to see prices rise.
  • LONG SQUEEZE
    The condition when holders of a security whose price is falling feel compelled to sell to cut their losses, often adding further downward pressure on the price of the security.
  • LONG TON
    A unit of weight in the Imperial system of measurements equalling 2,240 pounds versus the 2,000 pounds of a short ton and the 2,205 pounds of a metric tonne. It is commonly abbreviated L/T.
  • LONG-THE-BASIS
    A person or firm that owns the spot commodity while hedging with a sale of futures on that commodity.
  • LOOKBACK OPTION
    An OPTION whose payout depends on the minimum or maximum price of the underlying asset during a specified period during the life of the option.
  • LOT

    The minimum amount of a given security that may be exchanged in trade on an exchange; the unit of trade on an exchange.

  • LOW
    The lowest trade price of a security in a given period, e.g. a daily low, a 52-week low.
  • LPG (LIQUEFIED PETROLEUM GAS)
    PROPANE, BUTANE, or propane-butane mixtures derived from crude oil refining or natural gas fractionation. For convenience of transportation, these gases are liquefied through pressurization. Used as a fuel.
  • LUBRICANTS
    A product originated from petroleum. It is used to reduce friction between two moving surfaces. It can be sold to industrial plants immediately after distillation without further refining.
  • MAINTENANCE MARGIN
    A minimum margin established per futures contract that a customer must maintain.
  • MAJOR
    A term broadly applied to those multinational oil companies which by virtue of size, age, or degree of integration are among the preeminent companies in the international petroleum industry.
  • MANAGED ACCOUNT
    An investment account whose owner have given legal power to another party, usually a broker, to buy or sell from the account without first being required to seek the approval of the account owner.
  • MARGIN

    1. The amount of money or collateral deposited by a customer with his broker, or deposited by a broker with a clearing member, or by a clearing member with the clearinghouse, for the purpose of insuring the broker or CLEARING HOUSE against adverse price movement on open futures contracts. The margin is not partial payment on a purchase.
    2. Initial margin is the minimum deposit per contract required when a FUTURES position is opened.
    3. Maintenance margin is a sum which must be maintained on deposit at all times. If the equity in a customers' account drops to, or under, that level because of an adverse price movement, the CLEARING MEMBER must issue a margin call to restore the customers' equity. Margins are set by the EXCHANGE based on its analysis of price risk volatility in the market at that time. (See VARIATION MARGIN; REFINERY MARGIN.)

  • MARGIN CALL
    A demand for additional margin funds when futures prices move in an adverse direction to a trader's position, or if margin requirements are increased. Buyers of options are not subject to margin calls.
  • MARK TO MARKET
    The process whereby positions are revalued daily using current prices to determine profit/loss and therefore variation margin.
  • MARKET CORRECTION
    In TECHNICAL ANALYSIS, a small reversal in prices following a significant trending period.
  • MARKET MAKER
    An independent trader or trading firm which is prepared (and often obliged by contract with an exchange) to buy and sell futures or options contracts in a designated market. Market makers provide a two-sided (bid and ask) market and greater liquidity.
  • MARKET ORDER
    An order to be filled immediately at the best current market price.
  • MARKET RISK
    The risk of an investment changing in value because of changes in factors affecting market prices; the most common such factors are commodity risk (that commodity prices will change), currency risk (the risk that exchange rates will change), equity risk (the risk that share prices will change) and interest rate risk. Traditionally measured using the VALUE analytical tool.
  • MARKET VALUE
    The value of an exchange-traded security as determined by its last traded price.
  • MARKET WITH PROTECTION
    A MARKET ORDER where the customer is protected from extreme price movement between the time the order is made and the time it is fulfilled by the imposition of a price limit on the order.
  • MARKET-IF-TOUCHED
    An order that becomes a market order once a specified price is reached; a buy MIT is placed below the current market price while a sell MIT is placed above. Also known as a BOARD ORDER.
  • MARKET-ON-CLOSE
    An order to buy or sell at the end of the trading session at a price within the closing range of prices.
  • MARKET-ON-OPEN
    A buy or sell order in which the trade price is instructed to be the opening market price.
  • MASP (MONTHLY AVERAGE SETTLEMENT PRICE)
    The average of the daily official settlement prices for a given month.
  • MATCHING
    The bringing together of buy and sell orders resulting in trades.
  • MATURITY

    1. The date of expiry of a futures contract.
    2. The date on which a bond issuer is required to pay principal owed and any coupons due.

  • MAXIMUM PRICE FLUCTUATION
    A commodity exchange's established maximum limits for movements in futures prices during any one trading session.
  • MEGAWATT HOUR
    A measure of the rate of energy conversion, equal to the lighting of 10,000 100-watt light bulbs for an hour. Used to measure the capacity of electric power stations and the electricity consumption of large consumers.
  • MEMBER
    An individual or institution admitted to membership of an exchange.
  • MERCANTILE EXCHANGE (COMMODITY EXCHANGE)
    A trading forum where exchange members may trade commodities and their DERIVATIVE such as FUTURES and OPTION under rules and a clearing system treating all traders equally, which is in turn answerable to a government regulator.
  • MIDDLE DISTILLATE
    One of three categories of petroleum product which are based on where the petroleum product is found when crude oil is separated in the fractional distillation process. Middle distillates include DIESEL and KEROSENE. See HEAVY DISTILLATE and LIGHT DISTILLATE.
  • MILLESIMAL FINENESS
    A system for describing the purity of alloys of precious metals, particularly gold, silver and platinum, by parts per thousand of pure metal by mass in the alloy. For example, 18-carat gold (where the fraction of pure gold in the alloy is 18/24) has millesimal fineness of 750. Sterling silver is defined as 925, i.e. 92.5 per cent pure silver.
  • MIN-MAX
    The use of put and call options to obtain a flexible hedge within a predetermined price range.
  • MINIMUM PRICE FLUCTUATION
    Minimum unit by which a futures price or an options premium can fluctuate per trade, also known as tick size.
  • 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 price while a buy MIT is placed below the market price. Also called BOARD ORDER.
  • MONEY LAUNDERING
    Transactions or cash flows designed to conceal the source, location or ownership of capital, particularly cash; conducted often to disguise the provenance of illegally-obtained funds.
  • MONEY PASS
    Execution of a transaction between the personal accounts of two traders which results in a profit for one and a loss for the other; often used as a means of illicitly transferring funds.
  • MOVING AVERAGE
    In quantitative analysis, a system of charting a security's (or index's) average over time, e.g. a one-month moving average, a daily moving average, etc.
  • NAKED
    having an offsetting short or long position. For options, the term “uncovered” is used interchangeably and refers to a position that is taken without the benefit of an offsetting position in the futures market. A trader who executes one side of a spread is said to be naked until he executes the other side.
  • NAPHTHA
    A volatile, colourless product of petroleum distillation; any volatile, flammable liquid hydrocarbon mixture which is an intermediate between the light gases obtained in crude oil and the heavier liquid KEROSENE. Used primarily as a paint solvent, cleaning fluid, fuel in some lighters such as Zippo, fuel in portable stoves and lanterns sold as “white gas”, and feedstock in gasoline production.
  • NAPHTHENES
    One of the three basic hydrocarbon classifications found naturally in crude oil. Naphthenes are widely used as petrochemical feed stocks.
  • NATURAL GAS
    A gas found in nature (associated with such fossil fuels as crude oil and coal and found also in its own reservoirs) and made up mostly of methane but with by-products such as butane, ethane, propane and other hydrocarbons.
  • NEAR-THE-MONEY
    An option when its strike price is near the current price of the underlying security.
  • NEARBY
    The nearest active trading month of a futures contract.
  • NEGATIVE YIELD CURVE
    A condition in which long-term interest rates are lower than shorter-term rates; also known as an inverted yield curve.
  • NEGOTIABLE WAREHOUSE RECEIPT
    A receipt issued by a warehouse guaranteeing the existence of a specific quantity and quality of a commodity stored there.
  • NET MARGINING
    A condition in which a MARGIN requirement is arrived at by netting out long and short positions.
  • NET PERFORMANCE
    The change in net asset value disregarding additions, withdrawals and redemptions.
  • NET POSITION
    The difference between an individual or firm's open long contracts and open short contracts in any one commodity.
  • NETBACK
    A summary of all the costs incurred in bringing oil to the market and all the revenue earned from the sale of products made from that oil. It is calculated by subtracting all costs from all revenue. Costs can include transportation, production and refining costs, etc.
  • NICKEL
    A chemical element, with symbol Ni and atomic number 28. It is corrosion-resistant and finds many uses in alloys and as plating. It is a silvery-white magnetic metal that takes a high polish. It is used in STAINLESS STEEL, magnets, superalloys, plating and alloying of other metals, and as a green tint in glass.
  • NO BUST RANGE
    The range of prices established by an exchange above and below the prevailing market price, within which trades cannot be cancelled.
  • NOMINAL PRICE
    The declared price for a futures month sometimes used in place of a closing price when no recent trading has taken place in that particular delivery month; usually an average of the bid and asked prices. Also known as “nominal quote” or “nominal quotation”.
  • NOMINATION

    1. The process whereby the holder of a long Exchange petroleum product futures position who has elected to stand for delivery tells the seller (the short) where the product is to be delivered and the method of transport.
    2. A shipper's offer to move gas in a pipeline during a given period. Most nominations are made on a daily basis, although mid-day hourly nominations are possible in some systems.
    3. A request for a physical quantity of gas under a specific purchase, sales or transportation agreement or for all contracts at a specific point.

  • NONASSOCIATED GAS
    NATURAL GAS found alone in a reservoir, with no CRUDE OIL.
  • NOTICE DAY
    The day on which an exchange clearinghouse issues delivery allocation notices to clearing members. See DELIVERY.
  • NYMEX
    The New York Mercantile Exchange, the world's largest physical commodity futures exchange, with roots in an 1872 gathering of dairy merchants in Manhattan to create the Butter and Cheese Exchange of New York. Trade in eggs was soon added, and when poultry, canned goods and dried fruits were added to the mix, the name was changed to New York Mercantile Exchange. NYMEX merged with COMEX in 1994 and agreed in 2008 to be bought by CME Group, the parent of the Chicago Commodity Exchange, in 2008.
  • OCTANE NUMBER
    A measure of the resistance of fuel, usually gasoline, to detonation in internal combustion engines whose burning is regulated by spark plugs.
  • ODD LOT
    A trading order for a non-standard number of securities, e.g. an offer of 83 shares for an equity whose BOARD LOT is 100. Odd lots are generally transacted at a slight discount to the same shares traded as a board lot in an effective penalty for the transaction's non-standard size.
  • OFFER
    An indication of willingness or a motion to sell a futures or options contract at a specified price (also known as ask). Opposite of BID.
  • OFFSET
    A transaction which liquidates or closes out an open contract by performing an equal and opposite trade (also known as closeout). In spread positions, one side offsets the other without liquidating the entire position. Risk is reduced when one side offsets the other.
  • OFFSET HEDGE
    For a short hedger, to buy back futures and sell the underlying commodity. For a long hedger, to sell back futures and buy the underlying.
  • OIL SANDS
    Known also as extra-heavy oil or tar sands (though there is in fact no TAR), this is a type of BITUMEN deposit consisting of naturally occurring mixtures of sand or clay, water and bitumen, a very dense and viscous form of petroleum. Found all over the world, the biggest deposits are the Athabasca Oil Sands in Alberta, Canada and the Orinoco Belt in Venezuela which together contain as much petroleum as the world's reserves of crude oil. It is obtained by strip mining or made to flow into wells by techniques aimed at reducing bitumen's viscosity, e.g. by injecting steam or solvents into the deposit. Generally far more costly to produce then crude oil, bitumen can be either refined into petroleum products by specialized refineries or converted into synthetic oil by bitumen upgraders.
  • ONE-CANCELS-THE-OTHER
    Two orders submitted simultaneously, either of which may be filled. If one order is filled, the other is cancelled. Also known as ORDER-CANCELS-ORDER.
  • OPEC
    The Organization of the Petroleum Exporting Countries, founded in 1960 by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela and currently having 12 members. Member countries coordinate their oil production policies to provide stable supplies at stable prices while ensuring that oil producers achieve a reasonable rate of return on their investments.
  • OPEC REFERENCE BASKET
    Also known as the OPEC Basket, a weighted average of prices of crude oil blends produced by OPEC member nations and used as a benchmark for crude oil prices. Made up of 11 varieties of crude, it is heavier than both BRENT and WEST TEXAS INTERMEDIATE. Its constituent crudes are:Saharan Blend (Algeria) Girassol (Angola) Oriente (Ecuador)Iran Heavy (Iran) Basra Light (Iraq)Kuwait Export (Kuwait)Es Sider (Libya)Bonny Light (Nigeria)Qatar Marine (Qatar)Arab Light (Saudi Arabia)Murban (United Arab Emirates)BCF 17 (Venezuela)
  • OPEN COMMITMENT
    The number of open or outstanding contracts for which an individual or entity is obligated to the Exchange because that individual or entity has not yet made an offsetting sale or purchase, an actual contract delivery, or, in the case of options, hasn't yet exercised the option. Also known as OPEN INTEREST.
  • OPEN INTEREST
    The number of open or outstanding contracts for which an individual or entity is obligated to the Exchange because that individual or entity has not yet made an offsetting sale or purchase, an actual contract delivery, or, in the case of options, hasn't yet exercised the option. Also known as OPEN COMMITMENT.
  • OPEN MARKET OPERATION
    The buying and selling of U.S. Treasury debt by the Federal Reserve.
  • OPEN ORDER
    Also known as “good until cancelled”; an order placed in the market that will remain there until it is either fulfilled or cancelled.
  • OPEN OUTCRY
    A form of trading on an exchange's trading floor in which brokers verbally make bids and offers, stating the quantity, price and (in futures markets) the delivery date of the security in question.
  • OPEN POSITION
    A long or short position that has not been offset by an equal and opposite position, e.g. closed out.
  • OPEN TRADE EQUITY
    Unrealized gains or losses on open positions.
  • OPENING PRICE
    The price for a given exchange-traded security that is generated by open trading during the opening range of trading on its exchange.
  • OPENING PROCEDURE
    The market procedure to establish the opening level of a particular contract.
  • OPENING RANGE
    The range of prices determined by trades executed within the opening period for each trading session.
  • OPTION
    A contract that gives the buyer the right but not the obligation to buy or sell an underlying security at a set price.
  • OPTION PREMIUM
    The price of an option expressed in relation to the price of the underlying security.
  • OPTION SERIES
    Options of the same class which have the same strike price.
  • OPTION SPREAD
    Any spread transaction involving two or more options contracts, consisting of the simultaneous conclusion of two or more such contracts at a stated price differential for a single account.
  • OPTION-FUTURES SPREAD

    A spread transaction (within the combinations listed below) involving at least one Futures Contract and at least one Options Contract on the same underlying Futures Contract, consisting of the simultaneous conclusion of two or more such contracts at a stated price differential for a single account. The combinations are:
    1. Long calls (puts) and short (long) futures;
    2. short calls (puts) and long (short) futures; and
    3. long (short) puts, short (long) calls, and long (short) futures as a conversion (or reverse conversion).

  • ORDER
    A buy or sell instruction, or combination thereof.
  • ORDER TYPE
    Description of conditions an order must meet for it to be executed, e.g. LIMIT ORDER, STOP ORDER, etc.
  • ORDER-CANCELS-ORDER
    Two linked orders, with the condition that the filling of one of them cancels another, such as a combination of a LIMIT ORDER and a STOP ORDER.
  • ORIGINAL MARGIN
    The initial deposit of funds, as good faith monies, when a position is initiated in order to guarantee fulfilment of its obligations. Also known as initial margin.
  • OUT TRADE
    A trade which a clearing house can't clear because of mismatch(es) in the data describing it submitted by the two counterparties to the trade.
  • OUT-OF-THE-MONEY
    Describes an option with no value: a call option with a strike price higher than the underlying security, or a put option with a strike price lower than the underlying.
  • OVER-THE-COUNTER (OTC)
    A term referring to trade in financial instruments that is conducted outside the realm of regulated exchanges. Transactions are conducted directly through banks or brokerage houses, or by principal-to-principal in the over-the-counter market.
  • OVERBOUGHT
    A technical opinion that the market price has risen too steeply and too fast in relation to underlying fundamental factors; implies that the next price movement will be down.
  • OVERSOLD
    A technical opinion that the market price has declined too steeply and too fast in relation to underlying fundamental factors; implies that the security in question is due to rise in price.
  • PACK
    The simultaneous purchase or sale of equal volumes of four consecutive futures contracts in the same underlying security; quoted on the basis of average net change from the previous day's settlement price.
  • PALLADIUM
    The chemical element of symbol Pd with atomic number 46. It is electrically stable and resistant to intense heat, tarnish and chemical erosion. It is the least dense and has the lowest melting point of the platinum group metals (iridium, osmium, palladium, PLATINUM, rhodium and ruthenium) and is used extensively in electronics and catalytic converters as well as in fuel cells, dentistry and medicine. It can absorb up to 900 times its volume of hydrogen at room temperature, expanding slightly in size. Erratic supply from Russia, the world's biggest producer of palladium, in the late 1990s pushed the price of palladium to record highs as demand for the metal tripled in the decade.
  • PAPER BARRELS
    A term used to denote trade in non-physical oil (futures, forwards, swaps) markets which give a buyer or seller the right to a certain quantity and quality of crude oil or refined products at a future date, but not to any specific physical lot.
  • PAR
    The face value of a security, such as a bond.
  • PAR GRADE
    The grade or grades specified in a given futures contract for delivery. A contract may permit substitutions for and deviations from the par grade subject to specified premiums or discounts.
  • PEGGED PRICE
    The price of a commodity agreed between buyer and seller.
  • PETROCHEMICAL
    A chemical product derived from petroleum, hydrocarbon liquids, or natural gas, such as ETHYLENE, propylene, benzene, toluene, and xylene.
  • PETROLEUM
    A generic name for hydrocarbons, including CRUDE OIL, natural gas liquids, refined, and product derivatives.
  • PHYSICAL DELIVERY
    The transfer of ownership of an underlying commodity between a buyer and seller following expiry of a FUTURES contract between them.
  • PIPELINE
    A pipe through which PETROLEUM or NATURAL GAS is pumped between two points, either offshore or onshore.
  • PIT
    A section of a trading floor in which trading in a specific future or options contract is conducted by OPEN OUTCRY.
  • PLAIN VANILLA SWAP
    The simultaneous purchase and sale of the same currency with different maturity dates and different exchange rates.
  • PLATINUM
    A chemical element with the symbol Pt and atomic number of 79. It is a heavy, malleable, ductile gray-white transition metal resistant to corrosion. It is used in jewellery, laboratory equipment, dentistry, electrical contacts and catalytic converters. Platinum is also used in the petroleum CRACKING process. In periods of sustained economic stability, platinum's industrial uses tend to push its price higher than that of GOLD but in bad times, gold becomes more sought as a store of value and the industrial demand for platinum declines, dropping its price below gold's.
  • POINT or TICK
    The smallest monetary unit of change in a futures price or an options premium.
  • POINT-AND-FIGURE CHART
    In TECHNICAL ANALYSIS, a price chart in which X denotes a price increase and an O marks a decline. Used in the prediction of price movements.
  • POSITION
    The net total of a trader's open contracts, either long or short, in a particular underlying commodity.
  • POSITION LIMIT
    For a single trader or firm, the maximum number of permitted outstanding obligations in a particular commodity, often revised daily.
  • POSITION TRADER
    A trader or investor who takes a position on a security in anticipation of a hoped-for longer profitable trend.
  • POSITIVE CARRY
    Similar to arbitrage, a strategy of conducting two simultaneous transactions whereby the cash flow from one is greater than the obligations of the other, e.g. borrowing at 5 per cent and buying a bond that pays 6 per cent.
  • POUR POINT
    A temperature 3°C higher than the temperature at which crude oil or a refined product stops flowing. Used as an indication of the lowest temperature at which crude oil can be pumped.
  • PRE-MARKET
    A trading session held before the official opening of an exchange's daily trading session; often an abbreviated period where securities are priced in an auction.
  • PREARRANGED TRADING
    Trading between brokers which results from a prior agreement or understanding; generally illegal in most jurisdictions.
  • PREMIUM

    1. The price or cost of an options contract determined competitively by buyers and sellers.
    2. An upward adjustment in price allowed for delivery of a commodity of higher grade against a futures contract.

  • PRICE DISCOVERY
    The manner of making prices visible and readily available to the marketplace or public using factors of supply and demand.
  • PRICE GAP
    In technical analysis, a chart pattern of the price movement of a commodity when the low price of one bar on a chart is higher than the high of the preceding bar (or inversely, the high is lower than the low of the preceding bar); depicting a price or price range where no trades take place. The price patterns are used to try to recognize changes in a price trend.
  • PRICE LIMIT
    The top or bottom of a price range within which a security is permitted to rise or decline within a trading session.
  • PRICE TRANSPARENCY
    The condition in which all buyers and sellers in a given market have equal knowledge of information relevant to price formation.
  • PRIME RATE
    The interest charged by financial institutions to their most creditworthy customers.
  • PRINCIPAL TO PRINCIPAL
    A trade in which buyer and seller are both transacting on their own behalf, with no client involvement.
  • PRODUCER'S HEDGE
    The purchase of futures or options on futures to protect against a decline in the price of a given commodity.
  • PROGRAMME TRADING
    Computer-aided trading of securities, often on several markets at the same time, aimed at profiting from relatively tiny price movements.
  • PROMPT
    Due for immediate delivery.
  • PROMPT DATE
    The delivery date for a futures contract.
  • PROPANE
    A three-carbon alkane derived from petroleum products produced in the refining of crude oil or natural gas. Normally a gas at room temperature, it can be compressed into a liquid for transport and storage. Used as a fuel; when mixed with butane, butylene and propylene it is known as liquefied petroleum gas (LPG).
  • PROPYLENE, BENZENE
    A by-product of petroleum during oil refining and natural gas processing. It is the raw material for a wide variety of products including polypropylene,
  • PUBLIC ELEVATOR
    A granary, or grain storage elevator, in which the grain holdings of individual clients are not segregated, resulting in the likelihood that the stored grain from different physical sources will become mixed together. A public elevator must be approved by an exchange to be permitted for use as a delivery point for futures contracts.
  • PUMP-OVER
    An intra- or inter-facility transfer. For example, when one pipeline pumps crude oil or refined products from its tanks or mainline into the mainline or storage tank of the receiving pipeline.
  • PURCHASE-AND-SALES STATEMENT
    A record of a client's buying and selling activity prepared by the client's broker.
  • PURE HEDGER
    An investor -- buyer or seller -- who places a hedge solely for the purpose of locking in the price of a given commodity.
  • PUT OPTION
    A security offering the right (but not the obligation) to sell a financial instrument such as a commodities future or an equity on a fixed date at an agreed price, which is known as the STRIKE PRICE. The buyer is obliged to accept the sale if the seller of the put demands it.
  • PUT WARRANT
    A security granting the right (but not the obligation) to sell a pre-fixed quantity of an underlying security. Unlike an OPTION, a warrant has a very long duration, as long as five or 10 years.
  • PYRAMIDING
    The used of unrealized gains on a futures position as margin to increase the size of that position, generally in ever-smaller increments.
  • QUANTITATIVE ANALYSIS
    The application of numerical or quantitative techniques from advanced mathematics to minimize risk and/or forecast future price movements. The technique falls broadly into two categories: mathematical and statistical analysis. Historically, quants (as quantitative analysts are known) focused solely on risk management and DERIVATIVE pricing but in recent decades the technique has expanded to all corners of finance.
  • QUANTITY
    The number of units or lots in a given futures contract; synonymous with size.
  • QUOTATION
    The bid or ask price of a contract for trading purposes; more generically, also the last trade price; refers to both exchange-traded and OTC securities.
  • RALLY
    The rapid rise in a security or market following a decline.
  • RANDOM WALK
    An economic theory positing that price movements in a financial market are completely random and, as a result, past price performance offers no guidance as to future prices.
  • RANGE
    The difference between the highest and lowest prices recorded during a given trading period.
  • RATIO SPREAD
    A strategy in options trading of buying a number of options and selling a larger number of options of the same underlying market, usually with the same expiration date, but with a different strike prices. This strategy is often used by traders who expect the market to move in their favour during the life of the OPTION. See BACKSPREAD.
  • RECIPROCAL OF EUROPEAN TERMS
    An FX market quotation that states the value of the U.S. dollar per unit of foreign currency, e.g. USD per GBP.
  • REFERENCE PRICE
    The price of a security used to determine, e.g., an opening price, a settlement price, etc. It is often based on the previous closing price.
  • REFINED BITUMEN
    The residual or bottom fraction obtained in the fractional distillation of crude oil. It is the heaviest fraction and has the highest boiling point, 525° C. While it is also used in roofing applications, pipe coatings, paint and carpet tile backing, most refined bitumen is used in the making of pavements from sidewalks to airport runways. See BITUMEN.
  • REFINERY
    A plant used to process crude oil or metals. An oil refinery separates the fractions of crude oil and converts them into usable products. A metals refinery removes impurities, bringing the metal up to designated purity specifications.
  • REFINERY MARGIN
    The difference between a refinery's cost to produce a product and the amount it will procure from the sale of the product.
  • REGISTERED REPRESENTATIVE
    A person who solicits business on behalf of a futures commission merchant.
  • REPORTABLE POSITION
    The number of futures contracts, as determined by the Exchange, above which a customer must be identified daily to the Exchange and to the Commission with regard to the size of his position by commodity, by delivery month, and by purpose of the trading.
  • REPURCHASE AGREEMENT
    Often known as Repo, an agreement between a seller and a buyer in which the seller agrees to buy back the security at a later time. Often used by the seller to raise short-term funds.
  • REQUEST FOR QUOTE (RFQ)
    The process of inviting market participants to bid or offer on a specific security or market; market makers are often obliged to respond with a specified volume of the security in question.
  • RESERVE REQUIREMENTS
    The amount of cash or liquid securities that banks and other financial institutions are required by their regulator to reserve against client deposits.
  • RESIDUAL FUEL OIL
    Fuel oil produced from crude oil residue after lighter distillates are removed in the process of fractional distillation.
  • RESISTANCE LEVEL
    A temporary price ceiling established at a price point when sellers outnumber buyers for a given security; also happens with index levels.
  • RESTING ORDER
    An order away from the market, waiting to be executed.
  • RETRACEMENT
    A reversal in the movement of the price of an exchange-traded instrument which counters the prevailing trend.
  • REVERSE AUCTION
    An auction in which sellers bid for prices at which they are willing to sell. The buyer enters a request for a required good or service and the seller offering the lowest sum of money to meet the buyer's conditions wins the auction.
  • REVERSE RATIO SPREAD
    Also known as a BACKSPREAD, a type of options spread in which a trader holds more long positions than short positions, offering significant exposure to expected moves in the underlying market while limiting the amount of loss that would occur if the trader is wrong. See RATIO SPREAD.
  • RING DEALER
    A member firm of the London Metal Exchange which has the right to deal on the market floor.
  • RISK
    The chance that an investment return or profit will be different from what is expected, often calculated using the standard deviation from historical returns or average returns over a specific period of time.
  • RISK MANAGEMENT
    The application of financial analysis to identify, assess, mitigate and monitor selected types of risk threatening the profitability or existence of an organization, including avoidance or elimination of unacceptable risks. Types of risk to be managed include: market, sovereign, counterparty, country, delivery, transfer and credit risk. HEDGE are a common tool used to minimize risk.
  • ROLL BACK
    Replacing an expiring options position with one at the same strike price but an earlier expiration date.
  • ROLL FORWARD
    Replacing an expiring options position with one at the same strike price but a later expiration date.
  • ROLLOVER
    A special futures straddle trading procedure involving the shift of one month of a STRADDLE into another future month while maintaining the other contract month of the original spread position, i.e. the transfer of a position from one expiry month to another – always involving the purchase (sale) or the nearby month and simultaneous corresponding sale (purchase) of a longer dated expiry month. The shift can take place in either the long or short straddle month.
  • ROUND LOT
    A quantity of a commodity equal in size to the corresponding contract for the commodity, as distinguished from a JOB LOT.
  • ROUND-TURN/ROUND TRIP
    The completion of both a purchase and sale of a commodity futures contract. Transaction costs are usually quoted on a "round-turn/round trip" basis.
  • RP-1
    A highly-refined kerosene used as rocket fuel, most famously in the first stage of the Saturn V rocket that carried men to the moon. While having a lower specific impulse than liquid hydrogen, another rocket fuel, RP-1 can be stored at room temperature, is less of an explosive hazard and is cheaper.
  • RULE BOOK
    The Regulations of the Exchange.
  • RUNAWAY GAP
    A type of gap on a price chart that occurs during strong bull or bear movements characterized by an abrupt change in price and appearing over a range of prices. They are best described as gaps caused by an sudden increase/decrease in interest for a stock.
  • RUNNERS
    Messengers who rush orders they receive from phone clerks to floor brokers for execution on an exchange's trading floor.
  • 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.
  • SECONDARY MARKET
    The market, nearly always an exchange, where securities are traded after they are initially offered in the primary market.
  • SECONDARY METAL
    Metal which has been recycled from scrap by remelting and refining.
  • SECURITIES AND FUTURES COMMISSION (SFC)
    The Securities and Futures Commission (SFC) is an independent non-governmental statutory body outside the civil service, responsible for regulating the securities and futures markets in Hong Kong. It was established in May 1989 following the enactment of the Securities and Futures Commission Ordinance, which was itself the product of a committee set up to examine Hong Kong's regulatory regime following the October 1987 stock market crash, which closed the Hong Kong stock market for four days.
  • SECURITY
    A financial asset, such as stocks and bonds.
  • SEGREGATED ACCOUNT
    A brokerage account set aside to hold client assets from those of the brokerage.
  • SELL
    To exchange an asset for money.
  • SELL-ON-CLOSE
    An exchange order requiring a sale within the closing price range.
  • SELL-ON-OPEN
    An exchange order requiring a sale within the opening price range.
  • 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. Opposite of BUYER'S MARKET.
  • SELLING HEDGE (OR SHORT HEDGE)
    Selling futures contracts to protect against possible price declines of the underlying commodities. See HEDGE.
  • SEMI-FABRICATOR
    A plant which rolls, casts or extrudes aluminium from raw ingots. Such plants produce: bars, rods and structural shapes; castings; foil; pipe and tubing; plate, sheet and strip; aluminium powder; and uninsulated wire and cable.
  • SETTLEMENT DATE
    The date by which a trade that has been executed must be settled, with payment make by the buyer and/or delivered by the seller.
  • SHARES
    Certificates or book entries which demonstrate ownership in a corporation.
  • SHORT

    1. A sale of a contract to open a position, i.e. the market position of a futures contract seller whose sale obligates him to deliver the commodity unless he liquidates his contract by an offsetting purchase.
    2. A trader whose net position in the futures market shows an excess of open sales over open purchases.
    3. The holder of a short position.
    4. In the options market, the position of the seller of a call or a put option. The short in the options market is obliged to take a futures position if he is assigned for exercise. Opposite of LONG.

  • SHORT COVERING
    Buying of a security with the purpose of offsetting a corresponding SHORT position in that security.
  • SHORT HEDGE
    A trade designed to offer (some) protection against a fall in the value of an asset, for example the purchase of a put option by an investor who is worried that the underlying security may decline in price.
  • SHORT SELLING
    Selling a contract with the aim of delivering or buying to offset it at a later date in the expectation that its price will go down in the meantime, enabling the short to realize a profit in the price difference.
  • SHORT SQUEEZE
    The condition when the price of a security, commonly an equity, rises to the extent that those who sold it short feel compelled to buy back the security to cover their losses.
  • SHORT TON
    A weight measurement equalling 2,000 pounds.
  • SHORT-THE-BASIS
    A person or firm that has a commitment to sell in the cash or spot markets and hedges through the purchase of futures is said to be short-the-basis. See BASIS.
  • SIDE-BY-SIDE TRADING
    Making a market in a stock and its associated options at the same time. The practice can earn the suspicion of regulators because of the inherent possibility of price manipulation made possible by the arrangement.
  • SILVER
    A chemical element with the symbol Ag and atomic number 47. It has the highest electrical conductivity of any metal and the highest thermal conductivity of any metal. Known since prehistory, silver is valued as a precious metal, used to make ornaments, jewellery, money and silverware. It is very ductile and malleable with a brilliant white metallic lustre that polishes beautifully. Jewellery and silverware are generally made of sterling silver, an ally of 92.5 per cent silver and 7.5 per cent copper.
  • SINGLE-STOCK FUTURES
    Futures contracts based on a single underlying equity. They may be priced according to the formula: futures price = underlying share price x (1 + annualized interest rate - dividend).
  • SMELT
    A form of extractive metallurgy, used to extract metals from their ore, which employs heat and a reducing agent to change the oxidation state of the metal ore. Most commonly, carbon or carbon monoxide supplied by COKE or charcoal strips oxygen away from the ore, leaving the metal behind. However, as most ores are impure, a flux such as limestone is used to remove the accompanying slag. Note that smelting is not simply heating up an ore to melt out its metal. For illustration, the smelting of the iron ore hematite involves this chemical reaction:2Fe2O3 + 3C --> 4Fe + 3CO2
  • SMELTER
    A plant which employs chemical reduction to extract base metals from their ores. A chemical reducing agent, generally a fuel as a source of carbon such as coke or coal, helps to remove oxygen from the ore and combine it with carbon to produce carbon dioxide and carbon monoxide. Since most ores are impure, it is generally necessary to use a flux such as limestone to remove impurities as slag.
  • SOFT

    1. Description of a price or market which is gradually weakening.
    2. Agricultural commodities such as coffee, cocoa, sugar.

  • SOUR CRUDE
    Industry term which denotes the relative degree of a given crude oil's sulphur content. Sour crude refers to those crudes with a comparatively high sulphur content, 0.5% by weight and above.
  • SOUR GAS
    The name for natural gas which contains more than four parts per million of hydrogen sulphide. Such gas burns less efficiently and produces poisonous sulphur dioxide and must be treated carefully as many metals can suffer from sulphide stress cracking.
  • SPAN (STANDARD PORTFOLIO ANALYSIS)
    The Standard Portfolio Analysis of Risk system developed by the Chicago Mercantile Exchange and now utilized by the New York Mercantile Exchange and most other commodity exchanges to calculate margin requirements.
  • SPARK SPREAD
    The theoretical income accruing to a gas-fired power plant from selling a unit of electricity.
  • SPECIFIC GRAVITY
    The ratio of the density of a substance at a specific temperature and pressure, typically 4°C and 1 atmosphere (the point at which water has its greatest density), to the density of water, making it a dimensionless quantity; substances with a value greater than 1 will sink in water.
  • SPECIFICATIONS

    1. Contract terms specified or defined by the Exchange.
    2. Term referring to the properties of a given crude oil or refined petroleum product, which are “specified” since they often vary widely even within the same grade of product. In the normal process of negotiation, the seller will guarantee the buyer that the product or crude to be sold will meet certain specified limits. Generally, the major properties of oil that are guaranteed are API GRAVITY, SULFUR or SULPHUR, POUR POINT, VISCOSITY, and BS&W.

  • SPECULATION
    A high-risk investment strategy aimed at making quick, substantial gains from the buying or selling of a financial product. It is often based on expectations of a future event, or a sense of how other investors might react to such expectations.
  • SPECULATIVE POSITION LIMIT
    The maximum position, either net long or net short, in one commodity futures or options, or in all futures or options of one commodity combined, which may be held or controlled by an entity without a hedge exemption as prescribed by an exchange.
  • SPECULATOR
    A person who takes on the risk of losing money in return for the possibility of gaining money; any market participant who is not motivated solely by expectation of an income stream such as dividends or interest payments.
  • SPOT
    Term which describes one-time open market cash transaction, where a commodity is purchased “on the spot” at current market rates. Spot transactions are in contrast to term sales, which specify a steady supply of product over a period of time.
  • SPOT COMMODITY

    1. The physical commodities underlying a futures contract.
    2. A cash commodity or physical asset, e.g. gold, wheat.Sometimes called a CASH COMMODITY or ACTUALS.

  • SPOT MARKET
    A market of immediate delivery of product and immediate payment for it.
  • SPOT MONTH
    The futures contract closest to maturity; the nearby delivery month.
  • SPOT PRICE
    The market price for immediate delivery of a commodity.
  • SPREAD

    1. The difference between the current BID and OFFER on a security.
    2. More generally, the difference between any two prices.

  • SPREAD OPTION
    The basis of many options trading strategies in which an investor buys and sells multiple options of the same class on the same underlying security but with different strike prices or expiration dates. The three main classes are VERTICAL SPREAD, HORIZONTAL SPREAD or CALENDAR SPREAD, and DIAGONAL SPREAD, which differ according to strike price and/or expiration date.
  • SPREAD ORDER
    The simultaneous purchase and sale of futures contracts for different months, different commodities, or different grades of the same commodity.
  • SQUEEZE

    1. A period of high interest rates and difficult borrowing.
    2. The condition of market pressure on an investor or her strategy; see SHORT SQUEEZE and LONG SQUEEZE.

  • STAINLESS STEEL
    An alloy of steel with a minimum of 10 per cent chromium by mass. Its name is slightly misleading as stainless steel is not corrosion-proof but merely stains less; accordingly it is also sometimes described as CRES or corrosion-resistant steel. Its most common grade is austenitic, or 300 series, stainless steel, totalling more than 70 per cent of all stainless steel production; they have at most 0.15% carbon and at least 16 per cent chromium as well as NICKEL and/or manganese. A typical combination of 18 per cent chromium and 10 per cent nickel is known as 18/10 stainless steel as well as 301. Type 304, the most common grade of the 300 series, is also known as 18/8 steel.
  • STANDARD DEVIATION
    A measure of the variability or dispersion of a population, a data set, or a probability distribution. A low standard deviation indicates that the data points tend to be very close to the same value (the mean), while high standard deviation indicates that the data are spread out over a large range of values.
  • STEEL
    An alloy consisting mostly of IRON and with carbon content varying between 0.2 per cent and 2.14 per cent by weight. The addition and proportion of other ingredients such as chromium, manganese, tungsten and vanadium changes steel's hardness, ductility and tensile strength. Long steel is used in reinforced concrete, railroad tracks, as structural steel and in wires. Flat carbon steel is used in cars, ships and trains and in major household appliances. Stainless steel is used in cutlery, surgical equipment and in other specialized applications. See STAINLESS STEEL.
  • STEER/CORN RATIO
    A ratio of the cost of feed for steer and the price of steer; the number of bushels of corn it takes to equal the value of one-hundredweight of fed steer. Indicates how profitable or not it is to feed the steer to market weight.
  • STOCK INDEX
    An index of share prices which is designed to be viewed as a proxy for the condition of the overall market.
  • STOP CLOSE ONLY
    A stop order that is executed only when the stop price is reached during the closing trading session.
  • STOP LIMIT ORDER
    An order that goes into force as soon as there is a trade at the specified stop price. The order, however, can only be filled at the limit price or better. The stop price and the limit price can be the same or different. The stop price is the price level specified in the order.
  • STOP ORDER
    An order that becomes a market order when the market reaches the elected price of the stop order. See MARKET ORDER.
  • STOP-LOSS
    A resting order designed to close out a losing position when the price reaches a level specified in the order. It becomes an at-the-market order when the “stop” price is reached. Individuals also use stops to enter the market when the prices reach a specified level.
  • STORAGE GAIN
    The selling price of a physical commodity minus the previous harvest market price and the cost of storage.
  • STRADDLE
    Also known as a spread, the purchase of one futures month against the sale of another futures month of the same commodity. A straddle trade is based on a price relationship between the two months.
  • STRANGLE
    The purchase of a put and a call, in which the options have the same expiration date but the put strike is lower than the call strike, called a long strangle. Also, the sale of a put and a call, in which the options have the same expiration and the put strike is lower than the call strike, called a short strangle.
  • STRIKE PRICE
    The price at which the holder of an option may exercise his right to buy or sell the underlying futures contract.
  • STRIP TRADE
    The simultaneous purchase (or sale) of an equal number of futures positions in consecutive months. The average of the prices for the futures contracts bought (or sold) is the price level of the hedge. A six-month strip, for example, consists of an equal number of futures contracts for each of six consecutive contract months. Also known as a CALENDAR STRIP.
  • STRONG HANDS
    A futures contract holder who is willing and likely to take delivery of the underlying commodity when the contract expires. These make up 5 per cent or less of participants in futures trading.
  • SULFUR or SULPHUR
    A chemical element with atomic number 16, denoted by the symbol S. It is present in some oil, gas, and coal as an impurity in the form of its various compounds. It is used primarily in fertilizers and also in insecticides and fungicides, gunpowder and matches. Also known as brimstone.
  • SUPPLY
    The amount of a commodity available to the market at a given price.
  • SUPPORT
    In TECHNICAL ANALYSIS, a price area where new buying is likely to come in and stem any decline.
  • SWAP
    A custom-tailored, individually negotiated transaction designed to manage financial risk, usually over a period of one to 12 years. Swaps can be conducted directly by two counterparties, or through a third party such as a bank or brokerage house. The writer of the swap, such as a bank or brokerage house, may elect to assume the risk itself, or manage its own market exposure on an exchange. Swap transactions include INTEREST RATE SWAP, currency swaps, and price swaps for commodities, including energy and metals. In a typical commodity or price swap, parties exchange payments based on changes in the price of a commodity or a market index, while fixing the price they effectively pay for the physical commodity. The transaction enables each party to manage exposure to commodity prices or index values. Settlements are usually made in cash.
  • SWAPTION
    An OPTION to enter into a SWAP at a specified future date.
  • SWEET CRUDE
    Industry term which denotes the relative degree of a given crude oil's sulphur content. Sweet refers to those crudes with sulphur content of less than 0.5% by weight.
  • SWITCH
    To move funds from one investment or security into another.
  • SYNTHETIC CALL OPTION
    A combination of a LONG futures contract and a long PUT OPTION called a synthetic long CALL OPTION. Also, a combination of a SHORT futures contract and a short put, called a synthetic short call.
  • SYNTHETIC FUTURES
    A combination of a bullish PUT OPTION and a bullish CALL OPTION with the same strike price, called synthetic LONG futures. Also, a combination of a bearish put and a bearish call with the same strike price, called synthetic SHORT futures.
  • SYNTHETIC PUT OPTION
    The purchase of a CALL OPTION option on a stock that the buyer of the call has already SHORT, protecting the buyer against an increase in the price of the underlying stock.
  • SYNTHETIC SPOT
    A theoretical SPOT price for a commodity derived from the prices on futures of that commodity.
  • SYSTEMIC RISK
    The risk that an entire financial market ceases operating normally or at all.
  • TANK FARM
    A (usually very large) facility for storing crude oil and petroleum products. They are usually co-located with refineries or ports where oil tankers can discharge their cargo.
  • TAR
    A viscous, black liquid obtained in the destructive distillation of organic matter, most commonly produced from coal as a by-product of COKE production but also derivable from PETROLEUM, peat or wood. Used as sealing for roofing shingles and historically to seal the hulls of wooden sea-going vessels and in waterproofing sails. Modern uses include as a spice for food, a flavouring in candies, a scenting agent in saunas, and an ingredient in cosmetics.
  • TAR SANDS
    Bitumen deposit that is a source of unconventional oil. It is recently considered to be part of the world’s oil reserves. Tar sands require a much larger amount of energy to refine into liquid fuels compared to conventional oil. It is also known as oil sands.
  • TARGET PRICE
    The price at which the holder of a security hopes to sell it, higher than the current price.
  • TARIFF
    A schedule of rates or charges permitted a common carrier or utility; pipeline tariffs are the charges made by pipelines for transporting crude oil, refined products, or natural gas from an origin to a destination.
  • TECHNICAL ANALYSIS
    Also known as CHARTING, a technique of securities analysis that purports to forecast the future direction of prices by manipulating such data as past price movements and trading volumes, Chartists primarily use chart patterns such as “head and shoulders” or “double top” reversal patterns. Tools used include regressions, moving averages, relative strength indices. The technique stands in sharp contrast with FUNDAMENTAL ANALYSIS and is widely used among traders and financial professionals in spite of much academic criticism that the technique is little more than a pseudoscience. A common charting motto is “the trend is your friend” on the theory that market prices reflect all pertinent information. Compare with QUANTITATIVE ANALYSIS.
  • TENDER

    1. To offer for delivery, such as a FUTURES contract.
    2. To give up shares in return for payment following acceptance of a tender offer.

  • TENDER OFFER
    A takeover bid for a listed company in which all shareholders are invited to sell their stock, generally at a price higher than the prevailing market price.
  • TENDERABLE GRADES
    The GRADE of a commodity that an exchange has defined as acceptable for delivery in settlement of a FUTURES contract.
  • THEORETICAL VALUE
    The value of an option as calculated using the BLACK-SCHOLES MODEL option pricing model.
  • THERM
    A commercial unit of heat equal to 29.3 kilowatt hours or 100,000 Btu or 97 cubic feet of natural gas.
  • THETA
    The ratio of the change in an OPTION's price to the decrease in its time to expiration. also called TIME DECAY.
  • THROUGHPUT

    1. A term used to describe the total volume of raw materials that are processed by a plant such as an oil refinery in a given period.
    2. The total volume of crude oil and refined products that are handled by a tank farm, pipeline, or terminal loading facility.

  • TICK
    The standardized minimum price movement of a contract's QUOTATION.
  • TICKER
    A scrolling display of current or recent securities prices, sometimes including trade VOLUME OR TRADING VOLUME.
  • TIDYING UP PERIOD
    Refers to the period of time at the clearing up process on futures contracts.
  • TIME AND SALES
    The bids, offers, traded prices and estimated volume as observed by an Exchange Pit Observer and then recorded or recorded by the trading system in the sequence in which they occurred.
  • TIME DECAY
    The ratio of the change in an OPTION's price to the decrease in its time to expiration. also called THETA.
  • TIME LIMIT ORDER
    A client order specifying the time period during which to execute the order.
  • TIME SPREAD
    An OPTION strategy involving the purchase and sale of PUT OPTION and CALL OPTION having the same STRIKE PRICE but different expiration dates. also called HORIZONTAL SPREAD.
  • TIME STAMP
    The time logging machine which records the exact time an order is received and when it's executed.
  • TIME VALUE
    The sum of money by which an option's premium exceeds its INTRINSIC VALUE; generally decreasing over time. See THETA.
  • TIN
    A chemical element with the symbol Sn and atomic number of 50. This crystalline metal is malleable and ductile at room temperature but becomes brittle when cold. As tin isn't easily oxidized, it is often used to coat other metals (hence the ubiquitous “tin can” or found in kitchens everywhere) though its most important industrial use is as solder. Alloys of tin include bronze (which is mostly COPPER) and pewter (which is mostly tin with some copper and antimony and LEAD for lower grades of pewter).
  • TOM NEXT
    In FOREX transactions, a currency position which is closed out at the end of the day's trading at the closing price and re-entered at the same price at the opening of the next trading session, done so as to maintain a position in a currency without actually taking delivery of it.
  • TOTAL RETURN SWAP
    Known also as TRS or total rate of return swap (TRORS), a financial contract between a buyer and a seller of a kind of insurance. An investor engages in a total return swap if he owns a debt security he is afraid will lose value. He pays to the seller any capital gains in the security as all its interest payments over the period of his agreement with the seller. The seller makes up the difference for any and all loss in value of the debt security to the buyer as well as an interest payment equal to LIBOR plus a spread. The attractiveness to the seller of this arrangement is that he enjoys the economic benefit of owning an asset without putting it on his balance sheet.
  • TOUCHED
    In the expression “market if touched”, meaning an order to be executed if the market reaches a designated price level.
  • TRADE

    1. The exchange of one good or service for money or for another good or service.
    2. The business of buying and selling with the aim of earning profit in the activity.
    3. A transaction, the instance of buying or selling a good or service.
    4. To engage in buying or selling for a profit.

  • TRADE DATE
    The date on which a trade in a security occurs, not to be confused with SETTLEMENT DATE.
  • TRADE DISPUTE
    Where two traders or more disagree about a particular trade.
  • TRADE HOUSE
    A firm which deals in the physical commodity.
  • TRADE PRICE
    The price agreed between buyer and seller at which the transaction is executed.
  • TRADED OPTION
    An exchange-traded -- versus OTC -- option with underlying asset, quantity, expiration date and strike price all standardized. Benefits include greater liquidity and transparency and a reduction in COUNTERPARTY RISK via the use of a clearing house to settle trades in such options. Also known as a LISTED OPTION.
  • TRADING
    Buying and selling.
  • TRADING AHEAD
    Trading for her personal account by a trader to take advantage of a customer order she has received.
  • TRADING DAY
    The length of time that an exchange is open from the opening bell to the close.
  • TRADING HOURS
    Refers to the hours when a particular contract is open for trading.
  • TRADING LIMIT
    The price range within which a security is permitted to rise or decline within a trading session.
  • TRADING RANGE
    The range of prices that have been traded over a particular period of time.
  • TRADING SESSION
    The period of trading activity between the opening and closing of a financial market or exchange.
  • TRADING VOLUME
    The number of contracts that change hands during a specified period of time. Often measured in their total value in currency.
  • TRANSFER
    A changing of ownership from one person or institution to another.
  • TREASURY BILL
    A U.S. government debt issue with maturity of one year or less and sold at a discount to face value as a zero-coupon bill.
  • TREASURY BOND
    A U.S. government debt issue with maturity longer than 10 years and paying its COUPON twice a year.
  • TREASURY NOTE
    A U.S. government debt issue with maturity ranging from one year to 10 and paying its COUPON twice a year.
  • TREND
    The general direction of price movement.
  • TREND LINE
    In TECHNICAL ANALYSIS, a line drawn across the top of a price graph which shows the general direction of prices.
  • TROY WEIGHT
    A system of measurement of weight used for precious metals and gemstones. One troy ounce (abbreviated ozt) is equal to 20 pennyweights or 480 grains whereas the more familiar avoirdupois ounce is equal to 437.5 grains; at 31.1034768 grams, 1 troy ounce is about 10 per cent heavier than an ounce. This measuring system is named for Troyes, France where in mediaeval times a vast mercantile fair was held. There are 12 troy ounces in 1 troy pound rather than the 16 ounces in the usual pound. The troy system of measurement was the basis for coinage in Britain brought in by Henry II (reigned 1154-1189, a great grandson of William the Conqueror) and abandoned with decimalization around 800 years later. The penny was equal to 1 pennyweight of silver, 1 shilling was equal to 12 pennies and 1 pound sterling was equal to 20 shillings; thus 1 pound sterling was equal to 240 pennies, 240 pennyweights and 1 troy pound of silver.
  • TRS
    The Trade Registration System is a real-time dual-sided matching and account assignment system which allows traders to actively confirm trades.
  • UNASSOCIATED GAS
    NATURAL GAS found alone in a reservoir, with no CRUDE OIL.
  • UNCOVERED OPTION
    A short CALL OPTION or PUT OPTION position which isn't covered by a corresponding position in the underlying security.
  • UNDERLYING
    The stock, commodity, futures contract, or cash index against which the futures or options contract is valued.
  • UNDERLYING FUTURES CONTRACT
    A futures contract which underlies a given option on it.
  • UNDERWRITER

    1. An institution, usually an investment bank, which guarantees that the full issue of shares or bonds will be bought at the offer price.
    2. A person or firm engaged in the insurance business.

  • UPTREND
    The change in price of a security over a period of time during which each successive peak or trough is higher than the previous one, respectively.
  • USER-DEFINED SPREADS
    Options strategies created by a trader that include the spread's LEG and ratios.
  • VALUE
    The monetary worth of an asset or obligation.
  • VALUE DATE

    1. The date on which the value of an asset is determined for the purpose of eliminating discrepancy caused by a difference in timing of asset valuation. Usually applicable to currency forwards, options and other derivatives.
    2. The intended settlement date of a trade, sometimes distinct from the actual date of settlement.

  • VAR
    Value at risk, known as VaR, is a widely used measure of the risk of loss on a specific portfolio of assets. It is defined as the threshold value such that the probability that the mark-to-market loss on the portfolio over the given time horizon exceeds this value is the given probability level, assuming normal markets and no trading. For example, if a portfolio has a one-day 5 per cent VaR of $1 million, there is a 5 per cent probability that the portfolio will fall in value by more than $1 million over a one-day period, assuming normal markets and no trading. While often very useful to experts on risk, VaR is sometimes accused of giving misleading comfort to regulators and bank executives.
  • VARIATION MARGIN
    Payment made on a daily or intraday basis by a clearing member to the clearinghouse to cover losses on open positions which are calculated daily by the mark-to-market process, calculated separately for customer and proprietary positions.
  • VEGA
    A measure of sensitivity to volatility. Vega is the derivative of the option value with respect to the volatility of the underlying security.
  • VERTICAL SPREAD
    In options trading, a strategy of buying and selling multiple CALL or PUT options on the same underlying security and expiration date but at different strike prices. A variety of SPREAD OPTION.
  • VISCOSITY
    A method of measuring a given liquid's resistance to flow, usually decreasing with increasing temperatures. Material with higher viscosity is more resistant to flow and commonly described as “thick”; water is considered “thin”.
  • VIX
    The ticker symbol for the Chicago Board Options Exchange Volatility Index, often called the fear index as a proxy for investor expectations of volatility over the next 30-day period. VIX is determined by the implied volatility on the S&P 500 option and calculated using near the money option activity from both calls and puts.
  • VOLATILE
    Refers to liquids that change to gas at moderate, room temperatures.
  • VOLATILE MARKETS
    Markets with exceptional price movements in both directions, generally driven by the economic forces of supply and demand as well as world events.
  • VOLATILITY
    The market's price range and movement within that range. The direction of the price move, whether up or down, is not relevant. Historical volatility indicates how much prices have changed in the past and is derived by using daily settlement prices for futures. Implied volatility measures how much the market thinks prices will change in the future, and is obtained from daily settlement prices for options.
  • VOLATILITY QUOTE
    A method of quoting OPTION contracts in which BID and ASK are quoted according to their implied volatilities rather than prices.
  • VOLATILITY SMILE
    When implied volatility is graphed against strike price in such markets as FX options or equity index options, the typical graph turns up at either end, creating the visual effect of a smile.
  • VOLUME OR TRADING VOLUME
    The total number of contracts traded in a designated period of time.
  • WAREHOUSE RECEIPT
    A document issued by a bank or warehouse indicating ownership of a commodity stored in a bank depository or warehouse. In the case of many commodities deliverable against futures contracts, transfer of ownership of an appropriate depository receipt may affect contract delivery. Also DEPOSITORY RECEIPT.
  • WARRANT
    The right to buy or sell a certain quantity of an underlying security at a pre-fixed price. The right to buy is a CALL WARRANT and the right to sell is a PUT WARRANT. The main difference between a warrant and an OPTION is that a warrant lasts much longer, as long as five to 10 years.
  • WASH TRADING
    Engaging in, or pretending to engage in, trading to give the appearance that purchases and sales are being made when in fact no ownership changes hands.
  • WASHINGTON AGREEMENT
    An accord signed on 26 September 1999 by the European Central Bank, and the 11 central banks of the countries then using the Euro as their currency plus those of Sweden, Switzerland and the U.K. which committed them to capping any sales of gold at 400 tonnes a year over five years with an overall ceiling of 2,000 tonnes for the period. The same 15 institutions signed a renewed agreement on 8 March 2004 for the same five-year period but lifting the annual and total caps to 500 tonnes and 2,500 tonnes respectively.
  • WAX
    A product originated from natural petroleum. It is use to coat leather or polish floors and other surfaces.
  • WEATHER CONTRACT
    Exchange-traded derivatives that reflect monthly and seasonal average temperatures of 15 U.S. and five European cities using indexes: in winter months, weather contracts are based on an index of HEATING DEGREE DAY values and in the summer contracts are linked to an index of COOLING DEGREE DAY. Also known as a weather derivative.
  • WEST TEXAS INTERMEDIATE
    A type of crude oil used as a benchmark in oil pricing, particularly in the U.S. It is a light, sweet crude with sulphur content of about 0.24 per cent making it a high-quality and easily refined oil. Under normal circumstances, these qualities make WTI more valuable than North Sea BRENT though occasionally storage gluts in regional storage facilities such as at CUSHING, Oklahoma can bring its price down below that of Brent.
  • WET BARREL
    A physical barrel of crude oil or refined product as opposed to a “PAPER BARRELS.”
  • WET GAS
    Natural gas containing a significant proportion of hydrocarbons such as PROPANE or BUTANE which are more dense than ETHANE and may be liquid under reservoir pressure. Confusingly, wet gas nearly always also contains a proportion of water vapour that precipitates out as the temperature and pressure of the natural gas falls as it moves from reservoir to pipeline. Water is often present under similar conditions in DRY GAS.
  • WIRE HOUSE
    In the 19th century, a brokerage or bank which communicated with clients via telegraph to confirm the sale or purchase of securities.
  • WRITER
    The issuer of an OPTION contract.
  • YIELD

    1. A measure of the annual return on an investment expressed as a percentage of the investment principal, e.g. coupon yield on a bond, dividend yield on a share.
    2. The proportion of heavy or light products which can be derived from a given barrel of crude oil.

  • YIELD CURVE
    A graph of yield over time where the Y-axis plots the interest rate and the X-axis plots time. Generally, yields rise over time with diminishing marginal growth but can become inverted, for example if the market as a whole anticipates a fall in interest rates.
  • YIELD TO MATURITY
    The rate of interest return on a fixed-income security if it is held to maturity from the time of purchase.
  • ZERO-COUPON
    A kind of bond, defined insofar as its offer price is lower than its face price. At maturity, the issuer pays face value for the bond and there is no coupon payment, hence "zero coupon." Examples include U.S. Treasury bills, which form the biggest and most liquid debt market in the world. Zero-coupon bonds often have maturities of a year or less and are called bills.
  • ZERO-SUM GAME
    In economic and game theory, a situation in which one person's gain or loss is exactly balanced by the gains or losses of another; when the sum total of gains and losses by all participants equals zero. For example, a large glass of wine poured from a bottle diminishes the amount of wine available for pouring in other glasses.
  • ZINC
    A metallic chemical element with the symbol Zn and atomic number of 30. Historically, zinc was combined with copper to form the alloy brass. Its main use in industry is zinc plating of steel to improve its corrosion resistance, in the manufacturing of batteries and in brass. Zinc is also used in deodorants, anti-dandruff shampoos and in luminescent paints.
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Last update: 06 Mar 2012 15:29

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