GLOSSARY
A B C D E F G H I L M N O P Q R S T U V W
A
AGDP: Agricultural Gross Domestic Product.
AGMARK: Agricultural Marking.
Arbitrage: Simultaneous buying and selling of the same asset in different markets in order to capitalize on variations in price between those markets.
Ask Price: Lowest price at which a dealer is willing to sell a commodity.
Assayer: Assayer is an authorized entity (person/institution) that certifies and grades the commodities that are delivered in exchange accredited warehouses.
At-the-Market: An order to buy or sell a contract at the best available price upon reaching the trading venue (trading floor or electronic platform)
B
Back Months: Delivery months for futures contracts other than the front or spot month.
Backwardation: In futures market, when a commodity is in shortage, causing near month contract to sell at a premium and distant month contract to sell at a discount i.e. spot price of the commodity is higher than the forward price.
Basis: Basis is price difference between a cash contract and a futures contract.
Bear: An expression for a person who expects prices to decline.
Bear Market: An expression for a market in decline over a period of time.
Bear Spread: A trade design with a simultaneous purchase and sale of related - but not identical contracts – with the intent to benefit from a decline in prices.
Beneficiary Account: A beneficiary account is a Demat account in the name of an Individual (single or jointly). Such an account could also be in the name of a Corporate, a partnership firm, a society and a trust. It is similar to a bank account. This account is to be used for transacting in commodity balances held by the account holder at Exchange accredited warehouses. These commodity balances would have been – in a physical process set up – represented through a warehouse receipt.
Bid Price: The highest price at which a dealer is willing to buy commodities.
Bid – Offer/Ask spread: The difference between the price at which a dealer is willing to buy (Bid) and sell (Offer/Ask) a commodity. Bid will be lower of the two prices and offer price the higher. Also known as impact cost.
Bull: A term to describe a person who expects prices to rise.
Bull Market: A term to describe a market in which prices are rising over a period of time.
Bull Spread: A trade design with a simultaneous purchase and sale of related - but not identical contracts – with the intent to benefit from a rise in prices.
Buy (or Sell) On Close: The designation to execute the order at the end of the trading session within the closing price range.
Buy (or Sell) On Opening: The designation to execute the order at the beginning of the trading session within the opening price range.
Bullion: The generic word for gold and silver.
Buying forward: Buying commodities at a specified price for delivery at a future date.
C
Cash Commodity: The actual physical product on which a futures contract is based. This product can include agricultural commodities, financial instruments and the cash equivalents of index futures.
Calendar Spread: The simultaneous purchase and sale of contracts within the same market, but with different delivery or expiration dates.
Cash Market: A marketplace for the physical commodity
Cash Price: The marketplace price for the physical commodity.
Cash Settlement: A way of settling a futures contract which involves an exchange of cash value rather than a tangible product. Often applied to financial instruments such as a stock index.
Close out price: Close out price is the rate at which settlement of short delivery of commodities is completed.
Closing Price: The price at the end of the day's trading on a commodity market.
Commodity: A physical substance, such as food, grains, and metals, which is interchangeable with other products of the same type.
Commodity exchange: A commodity exchange is an association, or a company or any other body corporate organizing futures trading in commodities. Commodity spreads (or straddles): Commodity spreads measure the price difference between two different contracts, usually futures contracts. Commission: The fee charged by the broker or clearing firm for executing an order.
Contract Grades: Qualities or class of a commodity which conform to the levels set forth within the body of the contract.
Contract Month: The specified month for delivery on a futures contract.
Contract Size: The amount of the particular commodity specified within the contract.
Correction: A temporary change in prices during a significant price trend. Cover: An action to offset a short position within a portfolio.
Convergence: The tendency of difference between spot and futures contract to decline continuously, so as to become zero on the date of maturity.
Crop Year: A term for the time period between one harvest and the next in agricultural commodities.
CIF: Cost, Insurance & Freight
D
Daily Price Limit: The maximum price movement allowed above or below the previous session’s settlement price.
Day Order: An order which is good only for the trading session in which it was first placed and one which expires at the end of that session.
Day Trader: An individual who buys or sells a contract and offsets the position within the same trading session.
Delivery: The issue and receipt of the actual commodity or delivery instrument in order to settle a futures contract.
Delivery: The tender and receipt of the actual commodity or in the case of agricultural commodities, warehouse receipts covering such commodity, in settlement of a futures contract. Some contracts settle in cash (cash delivery); in which case open positions are marked to market on the last day of the contract based on the cash market close.
Delivery date: The day in the month that commodities on a futures contract have to be delivered.
Delivery month: Specified month within which delivery may be made under the terms of a futures contract.
Delivery notice: A notice of a clearing member's intention to deliver a stated quantity of a commodity in settlement of a short futures position.
E
Electronic Trading Facility: A trading venue which operates solely via telecommunication or electronics rather than floor trading.
Exchange: The central marketplace which has been designated as the location on which to trade contracts.
F
F.A.O. - Food and Agriculture Organisation
FMC: Forward Market Commission is the Regulatory Authority in India for commodity futures trading.
Fill or Kill Order: A designation for an order which demands immediate execution or cancellation.
Financial Instruments: As it refers to futures trading, any market which has not been designated as a tangible or agricultural commodity.
First Notice Day: The first day on which sellers may tender notices of delivery to buyers.
Floor Broker: An individual with the rights to trade contracts within the trading ring or pit for another person.
Floor Trader: An individual with the rights to trade contracts within the trading ring or pit for his own account. Also know as a local.
Forward price: The fixed price at which a specified amount of a commodity is to be delivered on a fixed date in the future.
Fundamental Analysis: The study of the underlying supply and demand issues as they may relate to the futures price.
Futures contract: An agreement to buy or sell a fixed quantity of a specified commodity, for delivery at a fixed date in the future at a fixed price. Futures contracts are standardized agreements traded on Futures Exchanges.
G
GDP - Gross Domestic Product
GNP - Gross National Product
Good 'Till Canceled Order (GTC): An order which is valid for each trading session until the relative contract expires or the order is cancelled.
H
Hedging: Taking a position in a futures market opposite a current or future position in the cash market to minimize the risk of financial loss.
Historical Volatility: A statistical measure of the rate of price change of a futures contract over a specified period in the past.
I
ISIN: ISIN is the Commodity Identification Number by which each commodity along with its specific details is uniquely represented.
Initial Margin: The funds required within an account when a position is initiated.
L
Last Trading Day: The day on which trading ceases for the contract month.
Limit (Up or down): The maximum price movement allowed above or below the previous session’s settlement price.
Liquidation: The action of closing a long position.
Liquid Market: A designation for a market in which buying and selling can be easily conducted with minimal effect on the price.
Locked Limit: A market which has reached the maximum price movement allowed above or below the previous session’s settlement price.
Long: A term describing someone who holds or buys a contract.
M
MSP - Minimum Support Prices.
Maintenance Margin: The minimum price level to which an account with an open position can fall without being required to deposit additional funds.
Margin: Funds or other collateral within a trading account used as a performance bond for trading positions. The margin requirements are established by the exchange (using the SPAN margining system), but Futures Commission Merchants may require a higher amount.
Margin Call: A request to bring account deposits up to initial margin levels, normally due to adverse price movements within positions which cause the account to drop below maintenance margin levels.
Market-if-Touched (MIT) Order: A type of order which specifies a price level at which the order will become a market order. Sell MIT orders are placed above the market price, buy MIT orders are placed below.
Market-on-Close: An order which stipulates execution at the close of the trading session within the closing price range.
Market-on-Opening: An order which stipulates execution at the open of the trading session within the opening price range.
Market Order: An order to buy or sell a contract at the best available price when the order enters the trading venue.
Minimum Tick: Smallest possible price movement up or down for a contract.
O
Offer price: Lowest price at which a dealer is willing to sell a commodity. Offset: A term to describe an action or contract which closes other positions within the account.
Opening Price (or Range): A price or price range which occurs at the beginning of the trading session.
Opening: The start of the trading session as designated by rules or the exchange.
Open Outcry: Trading which occurs on the trading floor of an exchange in which participants make bids and offers simultaneously during the designated trading hours for the particular contract.
Outright: An order to buy or sell a contract not within a spread.
Open interest: The number of open or outstanding contracts on a commodity exchange for which the holders are still obligated to the commodity exchange concerned. No offsetting sale or purchase has yet been made against it. Open interest is used as an indicator of the level of commercial activity in a particular futures contract.
Open position: A long or short trading position that is not yet closed.
P
PDS: Public Distribution System.
Position Trader: A trader who buys or sells a contract and holds for an extended period of time or over more than one trading session.
Positive Carry: A description of a state in which the cost of financing a financial instrument is less than the current return.
Pyramiding: A term for a strategy which uses gains on existing positions to increase the size of the overall position, usually in successively smaller increments.
R
Rally: A considerable rise in the value of a commodity market after a decline.
Range: A term for the high and low price of a contract over a time frame
S
Short position: Position resulting from a short selling strategy.
Short selling: A strategy in which a speculator sells a commodity that he or she does not own in order to profit from a falling market. The speculator will borrow the commodity from a third party and then immediately sell on to the buyer.
Speculator: A trader who takes an outright long or short position in the market.
Spot market: A market in which commodities are bought and sold for cash and immediate delivery.
Spread: The difference between current bid and offer (ask) prices for a commodity.
Settlement date: The date on which a contract must be fully paid for and delivered.
Settlement price: In futures markets, the price that is set by the exchange at the end of each trading day and which is used by the clearing house to market open positions and assess margin calls.
Systematic Risk: Risk which cannot be eliminated with diversification. Risk which is common to a whole market and has wide ranging effects.
T
Technical Analysis: A trading approach in which future price forecasts are attempted based on analysis of patterns in price changes, rates of change, and changes in volume and open interest without regard for the fundamental factors.
Tick: The minimum price change in a market
Trend: A general upward or downward direction in market price over an extended time frame.
Trend line: In technical analysis, a line which can be drawn across the top or bottom of prices.
Trade date: The date on which a trade is executed for a specified value date
U
Unique Client Code: This code is allotted to all members of exchange that will tell you about all details of clients.
V
Variable Price Limit: A schedule for limit price as determined by the exchange which varies from the normal allowable price movement.
Visible Supply: The available commercial stocks of a commodity.
Volatility: The statistical measurement of the rate of change in the price of a market.
Volume of Trade: The number of contracts traded during a specified period of time.
W
Warehouse receipt: A warehouse or depository receipt is issued when delivery takes place on a commodity exchange. It specifies the grade and quantity of commodities.
A
AGDP: Agricultural Gross Domestic Product.
AGMARK: Agricultural Marking.
Arbitrage: Simultaneous buying and selling of the same asset in different markets in order to capitalize on variations in price between those markets.
Ask Price: Lowest price at which a dealer is willing to sell a commodity.
Assayer: Assayer is an authorized entity (person/institution) that certifies and grades the commodities that are delivered in exchange accredited warehouses.
At-the-Market: An order to buy or sell a contract at the best available price upon reaching the trading venue (trading floor or electronic platform)
B
Back Months: Delivery months for futures contracts other than the front or spot month.
Backwardation: In futures market, when a commodity is in shortage, causing near month contract to sell at a premium and distant month contract to sell at a discount i.e. spot price of the commodity is higher than the forward price.
Basis: Basis is price difference between a cash contract and a futures contract.
Bear: An expression for a person who expects prices to decline.
Bear Market: An expression for a market in decline over a period of time.
Bear Spread: A trade design with a simultaneous purchase and sale of related - but not identical contracts – with the intent to benefit from a decline in prices.
Beneficiary Account: A beneficiary account is a Demat account in the name of an Individual (single or jointly). Such an account could also be in the name of a Corporate, a partnership firm, a society and a trust. It is similar to a bank account. This account is to be used for transacting in commodity balances held by the account holder at Exchange accredited warehouses. These commodity balances would have been – in a physical process set up – represented through a warehouse receipt.
Bid Price: The highest price at which a dealer is willing to buy commodities.
Bid – Offer/Ask spread: The difference between the price at which a dealer is willing to buy (Bid) and sell (Offer/Ask) a commodity. Bid will be lower of the two prices and offer price the higher. Also known as impact cost.
Bull: A term to describe a person who expects prices to rise.
Bull Market: A term to describe a market in which prices are rising over a period of time.
Bull Spread: A trade design with a simultaneous purchase and sale of related - but not identical contracts – with the intent to benefit from a rise in prices.
Buy (or Sell) On Close: The designation to execute the order at the end of the trading session within the closing price range.
Buy (or Sell) On Opening: The designation to execute the order at the beginning of the trading session within the opening price range.
Bullion: The generic word for gold and silver.
Buying forward: Buying commodities at a specified price for delivery at a future date.
C
Cash Commodity: The actual physical product on which a futures contract is based. This product can include agricultural commodities, financial instruments and the cash equivalents of index futures.
Calendar Spread: The simultaneous purchase and sale of contracts within the same market, but with different delivery or expiration dates.
Cash Market: A marketplace for the physical commodity
Cash Price: The marketplace price for the physical commodity.
Cash Settlement: A way of settling a futures contract which involves an exchange of cash value rather than a tangible product. Often applied to financial instruments such as a stock index.
Close out price: Close out price is the rate at which settlement of short delivery of commodities is completed.
Closing Price: The price at the end of the day's trading on a commodity market.
Commodity: A physical substance, such as food, grains, and metals, which is interchangeable with other products of the same type.
Commodity exchange: A commodity exchange is an association, or a company or any other body corporate organizing futures trading in commodities. Commodity spreads (or straddles): Commodity spreads measure the price difference between two different contracts, usually futures contracts. Commission: The fee charged by the broker or clearing firm for executing an order.
Contango: Market scenario when the forward price of a commodity is higher than the spot price.
Contract: An agreement to buy or sell something according to the specifications set forth.Contract Grades: Qualities or class of a commodity which conform to the levels set forth within the body of the contract.
Contract Month: The specified month for delivery on a futures contract.
Contract Size: The amount of the particular commodity specified within the contract.
Correction: A temporary change in prices during a significant price trend. Cover: An action to offset a short position within a portfolio.
Convergence: The tendency of difference between spot and futures contract to decline continuously, so as to become zero on the date of maturity.
Crop Year: A term for the time period between one harvest and the next in agricultural commodities.
CIF: Cost, Insurance & Freight
D
Daily Price Limit: The maximum price movement allowed above or below the previous session’s settlement price.
Day Order: An order which is good only for the trading session in which it was first placed and one which expires at the end of that session.
Day Trader: An individual who buys or sells a contract and offsets the position within the same trading session.
Delivery: The issue and receipt of the actual commodity or delivery instrument in order to settle a futures contract.
Delivery: The tender and receipt of the actual commodity or in the case of agricultural commodities, warehouse receipts covering such commodity, in settlement of a futures contract. Some contracts settle in cash (cash delivery); in which case open positions are marked to market on the last day of the contract based on the cash market close.
Delivery date: The day in the month that commodities on a futures contract have to be delivered.
Delivery month: Specified month within which delivery may be made under the terms of a futures contract.
Delivery notice: A notice of a clearing member's intention to deliver a stated quantity of a commodity in settlement of a short futures position.
E
Electronic Trading Facility: A trading venue which operates solely via telecommunication or electronics rather than floor trading.
Exchange: The central marketplace which has been designated as the location on which to trade contracts.
F
F.A.O. - Food and Agriculture Organisation
FMC: Forward Market Commission is the Regulatory Authority in India for commodity futures trading.
Fill or Kill Order: A designation for an order which demands immediate execution or cancellation.
Financial Instruments: As it refers to futures trading, any market which has not been designated as a tangible or agricultural commodity.
First Notice Day: The first day on which sellers may tender notices of delivery to buyers.
Floor Broker: An individual with the rights to trade contracts within the trading ring or pit for another person.
Floor Trader: An individual with the rights to trade contracts within the trading ring or pit for his own account. Also know as a local.
Forward price: The fixed price at which a specified amount of a commodity is to be delivered on a fixed date in the future.
Fundamental Analysis: The study of the underlying supply and demand issues as they may relate to the futures price.
Futures contract: An agreement to buy or sell a fixed quantity of a specified commodity, for delivery at a fixed date in the future at a fixed price. Futures contracts are standardized agreements traded on Futures Exchanges.
G
GDP - Gross Domestic Product
GNP - Gross National Product
Good 'Till Canceled Order (GTC): An order which is valid for each trading session until the relative contract expires or the order is cancelled.
H
Hedging: Taking a position in a futures market opposite a current or future position in the cash market to minimize the risk of financial loss.
Historical Volatility: A statistical measure of the rate of price change of a futures contract over a specified period in the past.
I
ISIN: ISIN is the Commodity Identification Number by which each commodity along with its specific details is uniquely represented.
Initial Margin: The funds required within an account when a position is initiated.
L
Last Trading Day: The day on which trading ceases for the contract month.
Limit (Up or down): The maximum price movement allowed above or below the previous session’s settlement price.
Liquidation: The action of closing a long position.
Liquid Market: A designation for a market in which buying and selling can be easily conducted with minimal effect on the price.
Locked Limit: A market which has reached the maximum price movement allowed above or below the previous session’s settlement price.
Long: A term describing someone who holds or buys a contract.
M
MSP - Minimum Support Prices.
Maintenance Margin: The minimum price level to which an account with an open position can fall without being required to deposit additional funds.
Margin: Funds or other collateral within a trading account used as a performance bond for trading positions. The margin requirements are established by the exchange (using the SPAN margining system), but Futures Commission Merchants may require a higher amount.
Margin Call: A request to bring account deposits up to initial margin levels, normally due to adverse price movements within positions which cause the account to drop below maintenance margin levels.
Market-if-Touched (MIT) Order: A type of order which specifies a price level at which the order will become a market order. Sell MIT orders are placed above the market price, buy MIT orders are placed below.
Market-on-Close: An order which stipulates execution at the close of the trading session within the closing price range.
Market-on-Opening: An order which stipulates execution at the open of the trading session within the opening price range.
Market Order: An order to buy or sell a contract at the best available price when the order enters the trading venue.
Minimum Tick: Smallest possible price movement up or down for a contract.
O
Offer price: Lowest price at which a dealer is willing to sell a commodity. Offset: A term to describe an action or contract which closes other positions within the account.
Opening Price (or Range): A price or price range which occurs at the beginning of the trading session.
Opening: The start of the trading session as designated by rules or the exchange.
Open Outcry: Trading which occurs on the trading floor of an exchange in which participants make bids and offers simultaneously during the designated trading hours for the particular contract.
Outright: An order to buy or sell a contract not within a spread.
Open interest: The number of open or outstanding contracts on a commodity exchange for which the holders are still obligated to the commodity exchange concerned. No offsetting sale or purchase has yet been made against it. Open interest is used as an indicator of the level of commercial activity in a particular futures contract.
Open position: A long or short trading position that is not yet closed.
P
PDS: Public Distribution System.
Position Trader: A trader who buys or sells a contract and holds for an extended period of time or over more than one trading session.
Positive Carry: A description of a state in which the cost of financing a financial instrument is less than the current return.
Pyramiding: A term for a strategy which uses gains on existing positions to increase the size of the overall position, usually in successively smaller increments.
R
Rally: A considerable rise in the value of a commodity market after a decline.
Range: A term for the high and low price of a contract over a time frame
S
Short position: Position resulting from a short selling strategy.
Short selling: A strategy in which a speculator sells a commodity that he or she does not own in order to profit from a falling market. The speculator will borrow the commodity from a third party and then immediately sell on to the buyer.
Speculator: A trader who takes an outright long or short position in the market.
Spot market: A market in which commodities are bought and sold for cash and immediate delivery.
Spread: The difference between current bid and offer (ask) prices for a commodity.
Settlement date: The date on which a contract must be fully paid for and delivered.
Settlement price: In futures markets, the price that is set by the exchange at the end of each trading day and which is used by the clearing house to market open positions and assess margin calls.
Systematic Risk: Risk which cannot be eliminated with diversification. Risk which is common to a whole market and has wide ranging effects.
T
Technical Analysis: A trading approach in which future price forecasts are attempted based on analysis of patterns in price changes, rates of change, and changes in volume and open interest without regard for the fundamental factors.
Tick: The minimum price change in a market
Trend: A general upward or downward direction in market price over an extended time frame.
Trend line: In technical analysis, a line which can be drawn across the top or bottom of prices.
Trade date: The date on which a trade is executed for a specified value date
U
Unique Client Code: This code is allotted to all members of exchange that will tell you about all details of clients.
V
Variable Price Limit: A schedule for limit price as determined by the exchange which varies from the normal allowable price movement.
Visible Supply: The available commercial stocks of a commodity.
Volatility: The statistical measurement of the rate of change in the price of a market.
Volume of Trade: The number of contracts traded during a specified period of time.
W
Warehouse receipt: A warehouse or depository receipt is issued when delivery takes place on a commodity exchange. It specifies the grade and quantity of commodities.
