Accumulate
When traders buy a commodity heavily and “take it out of the market.”
Actuals
Commodities on hand, ready for shipment, storage, or manufacture.
Afloats
Commodities loaded on vessels and on way to the destination. It may refer to loaded boats in harbour and about to sail, but not to cargoes already at the destination.
Arbitrage
Simultaneous purchase and sale of the same quantity of the same commodity in two different markets, either in the same country or in different countries. Used to take advantage of what is believed to be a temporary disparity in prices.
At the market
An order to buy or sell at the best price obtainable at the time the order reached the trading pit or ring.
Basis
The price difference over or under a designated future at which a commodity of a certain description is sold or quoted.
Basis grade
Specified grade, or grades, named in the exchange’s futures contract. Other grades are tenderable, subject to price differentials from the basis, or “contract” grade.
Bid
A bid subject to immediate acceptance, made on the floor of an exchange to buy a definite quantity of a commodity future at a specified price; opposite of offer. See also Offer.
Break
A quick, extensive decline in prices.
Bulge
A rapid advance in prices.
Buy on close
To buy at the end of a trading session at a price within the closing range.
Buy on opening
To buy at the beginning of a trading session at a price within the opening range.
C&F (cost and freight)
Cost and freight paid to the port of destination.
Carrying charge
Usually refers to warehouse charges, insurance, and other incidentals, often including interest charge and estimated loss (or gain) in weight. When used in connection with delivery against futures, this term includes weighing, sampling, taring, checking of weights, repairing, repiling, labour to scales, and so on.
Cash commodity
The actual physical product, as distinguished from the “future.” See also Spot commodity.
CCC
Commodity Credit Corporation.
Certified stocks or certified supplies
Supplies that have been approved as deliverable grades and often graded as to quality. Such gradings hold good for a specified period or for an indefinite time. Some exchanges list established deterioration schedules.
CFTC
Commodities Futures Trading Commission.
CIF
Cost, insurance, and freight paid or included to the port of destination.
Clearances
Total marine shipments of a specified commodity as of a given date from domestic and foreign ports.
Close
The period at the end of the trading session officially designated by the exchange during which all transactions are considered made “at the close.”
Closing price or range
The price or price range recorded during the period designated by the exchange as the official close.
Commission house
A concern that buys and sells actual commodities or futures contracts for the accounts of customers.
Contract grades
Those grades of a commodity that have been officially approved by an exchange as deliverable in the settlement of a futures contract.
Cover
The cancellation of a short position in any future by the purchase of an equal quantity of the same future. See also Liquidation.
Crop year
Period from the harvest of a crop to the corresponding period in the following year, as used statistically. U.S. wheat crop year begins June 1 and ends May 31; cotton, August 1 to July 31; varying dates for other commodities.
Day orders
Orders at a limited price are understood to be good for the day only unless expressly designated as an open order or good till cancelled order.
Deliverable grades
See Contract grades.
Delivery
The tender and receipt of the actual commodity, or warehouse receipts covering such commodity, in settlement of a futures contract.
Delivery month
A 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 futures contract.
Delivery points
Those points designated by futures exchanges at which the physical commodity covered by a futures contract may be delivered in fulfilment of such contract.
Differentials
The premiums paid for the grades better than the basis grade, and the discounts allowed for the grades lower than the basis grades. These differentials are fixed by the contract terms on most exchanges, but in cotton, commercial differentials or differences apply.
Evening up
When for any reason, traders are completing their transactions by selling in the case of longs or by purchasing in the case of shorts, they are said to be “evening up.”
EX-store
Selling term for commodities in the warehouse.
FAQ
Fair average quality.
Farm prices
The prices received by farmers for their products, as published by the U.S. Department of Agriculture, as of the 15th of each month.
First notice day
First day on which transferable notices can be issued for delivery in specified delivery month.
FOB
Free on board. Usually covers cost of putting commodities on board whatever shipment conveyance is being used.
Forward shipment
This type of contract covers actual commodities to be shipped at some future specified date.
Futures
A term used to designate any or all contracts covering the sale of commodities for future delivery made on an exchange and subject to its rules.
Grades
Various qualities according to accepted trade usage.
Grading certificates
Certificates attesting to the quality of a commodity graded by official inspectors, testers, graders, and so on.
Growths
Description of a commodity according to the area of growth; refers to the country, district, or place of semimanufacture.
GTC
Good till cancelled. Usually refers to open orders to buy or sell at a fixed price.
Hedge
A sale of any commodity for further delivery on or subject to the rules of any futures market to the extent that such sales are offset in quantity by the ownership or purchase of the same cash commodity; or, conversely, purchases of any commodity for future delivery on or subject to the rules of any futures market to the extent that such purchases are offset by sales of the same cash commodity.
Invisible supply
Usually refers to uncounted stocks in hands of wholesalers, manufacturers, and ultimate consumers; sometimes to producers’ stocks that cannot be accurately counted.
Life of delivery
Period between first and last trade in any futures delivery contract.
Limited order
An order given to a broker by a customer that has some restrictions upon its execution, such as price or time.
Liquidation
A transaction made in reducing or closing out a long or short position, but more often used by the trade to mean a reduction or closing out of a long position. See also Cover.
Loan prices
The prices at which producers may obtain loans from the government for their crops.
Long
(1) The buying side of an open futures contract. (2) A trader whose net position in the futures market shows an excess of open purchases over open sales.
Lot
Usually, any definite quantity of a commodity of uniform grade; the standard unit of trading in the futures market.
Margin
Cash or equivalent posted as a guarantee of fulfilment of a futures contract (not a part payment or purchase). Can be designated as original or variation margin.
Margin call
Demand for additional funds, or equivalent, because of adverse price movement or some other contingency.
Market order
An order for immediate execution at the best available price.
Negotiable warehouse receipt
Document issued by warehouse, which guarantees existence and often specifies grade of commodity stored. Facilitates transfer of ownership by endorsement of receipt’s owner.
Net position
The difference between the open contracts long and the open contracts short held in any one commodity by any individual or group.
Nominal price or nominal quotation
Price quotations on a future and for a period in which no actual trading took place.
Offer
The willingness to sell at a given price; the opposite of bid. See also Bid.
On opening
A term used to specify the execution of an order during the opening.
Open contracts
Contracts that have been bought or sold without the transaction having been completed by subsequent sale, or repurchase, or actual delivery or receipt of commodity.
Open interest
The number of “open contracts.” It refers to unliquidated purchases or sales and never to their combined total.
Open order
An order that is good until cancelled.
Opening, The
The period at the beginning of the trading session officially designated by the exchange during which all transactions are considered made “at the opening.”
Opening price or range
The price or price range recorded during the period designated by the exchange as the official opening.
Pit
An octagonal platform on the trading floor of an exchange, consisting of steps upon which traders and brokers stand while executing futures trades. See also Ring.
Point
The minimum unit in which changes in futures price may be expressed. (Minimum price fluctuation may be in multiples of points.)
Position
An interest in the market in the form of open commitments.
Premium
The amount by which a given future or quality of a spot commodity sells over another future or quality of a spot commodity.
Price limit
The maximum fluctuation in price of a futures contract permitted during one trading session, as fixed by the rules of a contract market.
Primary markets
When used in connection with foreign-produced commodities, refers to the country of production. In domestic commodities refers to centres that receive commodities directly from country shippers.
Purchase and sale statement (P&S)
A statement sent by a commission merchant to a customer when his or her futures position has been reduced to closed out. It shows the amount involved; the price at which the position was acquired and reduced or closed out, respectively; the gross profits or loss; the commission charged; and the net profit or loss on the transaction.
Range
The difference between the high and the low price of the future during a given period.
Reaction
The downward tendency of a commodity after an advance.
Realizing
When a profit is realized either by a liquidating sale or the repurchase of a short sale.
Resting order
Instruction to buy or sell at figures away from the current level.
Ring
A circular platform on the trading floor of an exchange, consisting of steps upon which traders and brokers stand while executing futures trades. See also Pit.
Round lot
The trading unit in which the major portion of trading occurs on those exchanges that make provisions for trading in two different units; prices of transactions in such units only are registered as official quotations.
Round turn
The execution for the same principal of a purchase transaction and a sales transaction that offset each other.
Short
(1) The selling of an open futures contract.
(2) A trader whose net position in the futures market shows all excess of open sales over open purchases. See also Long.
Spot commodity
The actual physical commodity, as distinguished from the futures. See also Cash commodity.
Spot price
The price at which the spot or cash commodity is selling. In grain trading, it is called the “cash” price.
Stop loss order or stop
An order that only takes place when the market reaches the level mentioned in the order. Its purpose is to limit losses. It may be either a buying order or a selling order An example would be “Sell Two October Cotton at 37.50 Stop.” This indicates the person has bought at a price higher than 37.50 and wants to limit his or her loss to around the 37.50 level.
Straddle
Usually refers to purchase in one market and simultaneous sale of the same commodity in some other market. It can refer to the purchase of one commodity against the sale of a different commodity, both of which should normally be closely allied in price movements.
Switching
Simultaneously buying a contract for futures delivery in one month while selling a contract of the same commodity in another delivery month on the same exchange.
Tenders
Issuance of transferable notices announcing the intention of tendering or delivering actual commodity.
Transferable notice
Notice given by the seller of a futures contract that he or she has made preparation for actual delivery.
Visible supply
Usually refers to supplies of a commodity in recognized distribution centres, which have been moved from production areas to shipping centres. It varies with different commodities and often includes afloats and all other supplies “in sight.”
Volume of trading or sales
Represents a simple addition of successive futures transactions. (A transaction consists of a purchase and a matching sale.)
Wire house
A firm operating a private wire to its own branch offices or to other firms.