Call Option (American Style)
An option which gives the buyer the right, but not the obligation, to purchase (“go long”) the underlying futures contract at the strike price on or before the expiration date.
A member of a futures exchange, usually a clearinghouse member, through which another firm, broker or customer chooses to clear all or some trades.
The actual physical commodity as distinguished from the futures contract based on the physical commodity. Also referred to as Actuals.
A place where people buy and sell the actual commodities (i.e., grain elevator, bank, etc.).
See also Forward (Cash) Contract and Spot.
A method of settling certain futures or options contracts whereby the market participants settle in cash (payment of money rather than delivery of the commodity).
Certificated or Certified Stocks
Stocks of a commodity that have been inspected and found to be of a quality deliverable against futures contracts, stored at the delivery points designated as regular or acceptable for delivery by a commodity exchange. In grain, called "stocks in deliverable position."
The use of graphs and charts in the technical analysis of futures markets to plot price movements, volume, open interest or other statistical indicators of price movement.
See also Technical Analysis.
Excessive trading that results in the broker deriving a profit from commissions while disregarding the best interests of the customers.
A system of trading halts and price limits on equities and derivatives markets designed to provide a cooling-off period during large, intraday market declines or rises.
The process by which a clearinghouse maintains records of all trades and settles margin flow on a daily mark-to-market basis for its clearing members.
A corporation or separate division of a futures exchange that is responsible for settling trading accounts, collecting and maintaining margin monies, regulating delivery and reporting trade data. The clearinghouse becomes the buyer to each seller (and the seller to each buyer) and assumes responsibility for protecting buyers and sellers from financial loss by assuring performance on each contract.
A member of an exchange clearinghouse responsible for the financial commitments of its customers.All trades of a non-clearing member must be registered and eventually settled through a clearing member.
See Settlement Price.
A range of prices at which futures transactions took place during the close of the market.
A fee charged by a broker to a customer for executing a transaction.
See Futures Commission Merchant.
Commodity Exchange Act (CEA)
The federal act that provides for federal regulation of futures trading.
Commodity Futures Trading Commission (CFTC)
The federal regulatory agency established in 1974 that administers the Commodity Exchange Act.The CFTC monitors the futures and options on futures markets in the United States.
An enterprise in which funds contributed by a number of persons are combined for the purpose of trading futures or options contracts.The concept is similar to a mutual fund in the securities industry. Also referred to as a Pool.
Commodity Pool Operator (CPO)
An individual or organization which operates or solicits funds for a commodity pool.A CPO may be required to be registered with the CFTC.
Commodity Trading Advisor (CTA)
A person who, for compensation or profit, directly or indirectly advises others as to the advisability of buying or selling futures or commodity options. Providing advice includes exercising trading authority over a customer’s account. A CTA may be required to be registered with the CFTC.
A statement sent by a Futures Commission Merchant to a customer when a futures or options position has been initiated.The statement shows the price and the number of contracts bought or sold. Sometimes combined with a Purchase and Sale Statement.
A board of trade designated by the CFTC to trade futures or options contracts on a particular commodity. Commonly used to mean any exchange on which futures are traded.Also referred to as an Exchange.
he month in which delivery is to be made in accordance with the terms of the futures contract.Also referred to as Delivery Month.
The tendency for prices of physical commodities and futures to approach one another, usually during the delivery month.
A short call or put option position which is covered by the sale or purchase of the underlying futures contract or physical commodity.
Hedging a cash commodity using a different but related futures contract when there is no futures contract for the cash commodity being hedged and the cash and futures market follow similar price trends (e.g., using soybean meal futures to hedge fish meal).
Customer Segregated Funds
See Segregated Account.
Current Delivery Month
The futures contract which matures and becomes deliverable during the present month. Also called Spot Month.