A B C D F G H I L M N O P R S T V W
ACCOUNT EXECUTIVE � The person who deals with
customers and their orders in commission house offices.
ACTUALS � The physical or cash commodity, as distinguished from
commodity futures contracts.
ARBITRAGE � The simultaneous purchase of one commodity against the sale
of another in order to profit from distortions in usual price
AT THE MARKET � Orders which are intended to be executed immediately by
the floor broker at the best obtainable price.
AT THE MONEY � An option is at-the-money when the underlying futures
price equals, or nearly equals, the strike price.
BASIS � Point difference over or
under a designated future at which a cash commodity of a certain
description is sold or quoted. A most important term for those who hedge.
BEAR MARKET � A market characterized by falling prices.
BID � An offer to buy a specific quantity of a commodity that is
subject to immediate acceptance.
BROKER � A person paid a fee or commission for acting as a agent in
making contracts or sales.
BULL MARKET � A market characterized by rising prices.
BUOYANT � Describes a market in which prices have a tendency to rise
easily with a considerable show of strength.
BUYING HEDGE � A hedge that is initiated by taking a long position in
the futures market equal to the amount of the cash commodity which
CALL OPTION � Gives the buyer the right, but not
the obligation, to buy a specific futures contract at a predetermined
price within a limited period of time.
CARRYING CHARGE � The cost to store and insure a physical
CFTC � The Commodity Futures Trading Commission.
CHART � Futures prices plotted in a way that the chartist believes
gives insight into futures price movements. Several futures markets are
regularly influenced by buying or selling based on traders� price chart
CHICAGO BOARD OF TRADE (CBOT) � The world�s largest futures exchange,
it was founded in 1848.
CHICAGO MERCANTILE EXCHANGE (CME) � The world�s largest livestock
exchange, it traces its origins to a group of agricultural dealers who
formed the Chicago Produce Exchange in 1874. It was given its present name
CLOSE � A period of time at the end of the trading session when all
orders are filled within the closing range.
CLOSING RANGE � A range of closely related prices in which transactions
take place at the closing of the market; buying and selling orders at the
closing might have been filled at any point within such a range.
CONTRACT � In futures markets, a standardized traded instrument that
specifies the quantity and quality of a commodity (or financial asset) for
delivery (or cash settlement) at a specified future date.
CONTRACT UNIT � Specifications of amount of the commodity to be
delivered (such as 5,000 bushels of grain, 40,000 pounds of livestock, or
100 troy ounces of gold).
COVER � To buy futures contracts in order to offset previous
COMMODITY TRADING ADVISOR � An individual (or firm) that, for a fee,
provides advice on commodity trading, including specific trading
recommendations such as when to establish a particular long or short
position and when to liquidate that position.
COMMODITY POOL � Similar in concept to a common stock mutual fund, the
investor's money is combined with that of other pool participants and
traded as a single account.
CRUSH � The process of reducing the raw, unusable soybean into its two
major components, oil and meal.
CRUSH SPREAD � A futures spreading position in which a trader attempts
to profit from what he believes to be discrepancies in the price
relationship between soybeans and their two derivative products.
DAILY LIMIT � Daily price limits for trading in
futures contracts, stated in terms of the previous day's closing price
plus and minus so many cents or dollars per trading unit. Once a futures
price has increased or decreased by its daily limit, there can be no
trading at any higher or lower price until the next day of trading.
DAY ORDER � An order that expires on the close of trading if not filled
during that day.
DAY TRADING � A purchase and a sale of the same futures during the
trading hours of a single day.
DELIVERY NOTICE � A notice of a clearing member�s intentions to deliver
a stated quantity of a commodity in settlement of a futures contract.
DISCRETIONARY ACCOUNT � An account in which the customer authorizes
another person to make full trading decisions.
FILL OR KILL � An order that must be filled
immediately or canceled.
FIRST NOTICE DAY (FND) � The first day on which notice of intentions to
deliver actual commodities against futures contracts can be made.
FLOOR BROKER � A member who executes orders for the accounts of other
members on the trading floor.
FLOOR TRADER � An exchange member who fills orders for his own account
by being personally on the floor. Normally called a "local."
FUTURES COMMISSION MERCHANT (FCM) � An intermediary who stands between
the brokers in the pits and the nonmember speculating and hedging public.
Every brokerage house must be a futures commission merchant in order to do
business with the public.
FUTURES CONTRACT � A firm commitment to make or accept delivery of a
specified quantity and quality of a commodity during a specific month in
the future at a price agreed upon at the time the commitment was made.
GOOD TILL CANCELED ORDER (GTC) � An open order
that remains in force until the customer explicitly cancels the order,
until the futures contract expires, or until the order is filled.
HEDGE � To use the futures market to reduce the
price risks inherent in buying and selling cash commodities. For example,
as an elevator operator buys cash grain from farmers, he can hedge his
purchases by selling futures contracts; when he sells the cash commodity,
he purchases an offsetting number of futures contracts to liquidate his
HEDGING � 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
INTERMARKET SPREAD � A spread between commodities
that are traded on more than one market. For example, a typical
intermarket spread might be made between Chicago wheat and Kansas City
IN-THE-MONEY (CALL OPTIONS) � The underlying futures price is greater
than the strike price of an option.
IN-THE-MONEY (PUT OPTIONS) � The strike price of an option is greater
then the price of the underlying futures contract.
LAST TRADING DAY (LTD) � The final day in which
trading may occur for a particular delivery month. After the last trading
day, any remaining commitment must be settled for delivery.
LIMIT ORDER � An order in which the trader sets a limit to the price,
as contrasted with a market order on which no limit is set.
LIQUIDATION � The closing out of a previous position by taking an
opposite position in the same contract.
LIQUIDITY � The degree to which a given market is liquid.
LONG � A position established by owning the actual commodity unhedged
or by purchasing futures.
MARGIN � Initial margin is a good
faith deposit a speculator gives to his broker prior to initiating his
first trade. If and when the funds remaining available in your margin
account are reduced by losses to below a certain level, a call is made for
MARGIN CALL � A demand by a broker for additional funds sufficient to
raise your deposit on a commodity futures contract above the minimum
acceptable level required by the FCM.
MARKET IF TOUCHED (MIT) � An order that may be executed only if the
market reaches a specified point. (NOTE: Not all exchanges accept MIT
MARKET ORDER � An order that is to be filled as soon as possible at the
best possible price.
MOVING AVERAGE � A method of smoothing prices to more easily discern
NEW YORK MERCANTILE EXCHANGE (NYMEX) � Founded in 1872 as
a market for cheese, butter, eggs, its principle commodities today include
heating oil and petroleum products.
OFFER � An indication of a willingness to sell at
a certain price, as opposed to a bid.
OPEN INTEREST � The total number of futures contracts entered into
during a specified period of time that have not been liquidated either by
offsetting futures transactions or by actual delivery.
OPENING RANGE � Range of closely related prices at which transactions
took place at the opening of the market; buying and selling orders at the
opening might be filled at any point within such a range.
OPTION HOLDER � The buyer of an option.
OPTION PREMIUM � The dollar amount paid by an option buyer to the
OUT-OF-THE-MONEY (CALL OPTIONS) � The strike price of an option is
greater than the underlying futures price.
OUT-OF-THE-MONEY (PUT OPTIONS) � The underlying futures price is
greater then the strike price of an option.
PIT � The area on an exchange floor where futures
trading takes place.
POSITION LIMIT � Limit established on the maximum speculative position
that any one person can have at one time in any one futures contract. The
purpose is to prevent one buyer or seller from being able to exert undue
influence. Stated in number of contracts or total units of the
PRICE LIMIT � The maximum price advance or decline from the previous
day�s settlement price permitted for a commodity in one trading session by
the rules of the exchange.
PUT OPTION � Gives the buyer the right, but not the obligation, to sell
a specific futures contract at a predetermined price within a limited
period of time.
PYRAMIDING � The practice of using accrued paper profits to margin
RALLY � Quick advance in prices following a
RANGE � The difference between the highest and lowest prices recorded
during a given trading session, week, month, or year.
RISK CAPITAL � Money which, if lost, would not materially affect one�s
living habits or deny one the necessities and comforts of normal life.
SELLING HEDGE � Selling futures contracts to
protect against possible decreased prices of commodities which will be
sold in the future.
SETTLEMENT PRICE � The price at which the clearing house clears all
transactions at the close of the day.
SHAKEOUT � A healthy technical correction of an overbought situation,
characterized by a comparatively short but sharp decline in prices.
SHORT � A trader who has sold futures, speculating that prices will
SHORT SQUEEZE � A situation in which futures traders are unable to buy
the cash commodity to deliver against their positions, and so are forced
to buy offsetting futures at prices much higher than they�d ordinarily be
willing to pay.
SPECULATION � Buying or selling in hopes of making a profit.
SPECULATOR � One who is interested in profiting from a price change in
a commodity futures contract. Speculators may trade from the floor of an
exchange if they are members, or through a broker if they are not.
SPOT DELIVERY MONTH � The nearest delivery month among all those traded
at any point in time. The actual contract month represented by the spot
delivery month is constantly changing throughout the calendar year as each
contract month reaches its last trading day.
SPOT PRICE � The price quoted for the actual commodity same; same as
cash commodity price.
SPREAD � The purchase of one futures contract and sale of another, in
the expectation that the price relationships between the two will change
so that a subsequent offsetting sale and purchase will yield a net
STOP ORDER � A buy order placed above the market (or sell order placed
below the market) that becomes a market order when the specified price is
STRIKE PRICE � In options, the predetermined price at which a given
futures contract can be bought or sold. Also called the exercise price,
these levels are set at regular intervals.
SUPPORT � Any barrier to a price decline.
TICK � Minimum amount that the price can fluctuate
upward or downward.
TOPPING OUT � A term employed to denote loss of upside energy at the
top after a long price run-up.
TRADING RANGE � The amount that futures prices can fluctuate during one
trading session�essentially, the price "distance" between limit up and
VOLUME � The number of purchases and sales of a
commodity made during a specified period of time.
VOLATILITY � Degree of price fluctuation in the market.
WHIPSAW � term used to describe what has happened
to traders that have had stop orders executed as a result of volatile
market swings. The traders' intentions were for the stop orders to be
executed on market movements indicative of a sustained trend.
This information is obtained from sources believed
to be reliable. However, Delta Trading (www.d-trading.net) cannot guarantee
its completeness or accuracy.
Disclaimer and Important Risk Warning:
You should understand that trading in the futures
and or options markets is not for everyone. There is substantial risk
of loss when trading futures and or options. Carefully evaluate whether
trading in the futures and or options markets is appropriate, as such
trading is speculative in nature. When trading futures, you may sustain
losses which exceed your margin deposits. Purchasing options may result
in the entire loss of premiums paid for such options. Options sellers
should understand that they may be at risk of assuming a long futures
position in the case of selling a put or a short futures position
in the case of selling a call from the respective strike prices of
such options. Past results are not necessarily indicative of future