Commodities

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United Futures Trading Company, Inc. Suite Chicago, IL The act of an option holder in electing not to exercise or offset an option. The policy commodity trading meaning which all futures positions owned or controlled by one trader or a group of traders are combined to determine reportable positions and speculative limits. Any bank, stockyard, mill, storehouse, plant, elevator or other depository that is authorized by an exchange for the delivery of commodities tendered on futures contracts.

The simultaneous purchase and sale of similar commodities in different markets to take advantage of a price discrepancy. The process of resolving disputes between parties by a person or persons arbitrators chosen or agreed to by them. NFA's arbitration program provides a forum for resolving futures-related disputes between NFA Members or between Members and customers. An option whose strike price is equal—or approximately equal—to the current market price of the underlying futures contract.

The difference between the spot or commodity trading meaning price of a commodity and the price of the nearest futures contract for the same or a related commodity. Basis is usually computed in relation to the futures contract next to expire and may reflect different time periods, product forms, qualities, or locations.

A market in which prices are declining. An expression of willingness to buy a commodity at a given price; the opposite of Offer. A market in commodity trading meaning prices are rising. 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 commodity trading meaning contract based on the physical commodity. Also referred to as Actuals. A place where people buy and sell the actual commodity trading meaning i. See also Forward Cash Contract and Spot. A method of settling certain futures or options contracts whereby the market participants settle commodity trading meaning cash payment of money rather than delivery of the commodity.

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 commodity trading meaning 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 commodity trading meaning 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 commodity trading meaning. All trades of a non-clearing member commodity trading meaning be registered and eventually settled through a clearing member.

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. The federal act that provides for federal regulation of futures trading. The federal regulatory agency established in that administers the Commodity Exchange Act. 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. An individual or organization which operates or solicits funds for a commodity pool. A person who, for compensation or profit, directly or indirectly advises others as to the advisability of buying or selling futures or commodity options. A statement sent by a Futures Commission Commodity trading meaning 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 trading meaning. Commonly used to mean any exchange on which futures are traded.

Also referred to as an Exchange. 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 commodity trading meaning is no futures contract for the cash commodity being hedged and the cash and futures market follow similar price trends e.

The futures commodity trading meaning which matures and becomes deliverable during the present month. Also called Spot Month. An order that if not executed expires automatically at the end of the trading session on the day it was entered. A speculator who will normally initiate and offset a position within a single trading session.

The failure to perform on commodity trading meaning futures contract as required by exchange rules, such as a failure to meet a margin call or to make or take delivery.

The distant delivery months in which futures trading is taking place, as distinguished from the nearby futures delivery month. The transfer of the cash commodity from the seller of a futures contract to the buyer of a futures contract. Each futures exchange has specific procedures for delivery of a cash commodity. Some futures contracts, such as stock index contracts, are cash settled. A financial instrument, traded on or off an exchange, the price of which is directly dependent upon the value of one or more underlying securities, equity indices, debt instruments, commodities, other derivative instruments, or any agreed upon pricing index or arrangement.

Derivatives involve the trading of rights or obligations based on the underlying product but do not directly transfer that product. They are generally used to hedge risk. See also Self-Regulatory Organization. The statement that some CPOs must provide to customers. It describes trading strategy, commodity trading meaning, performance, etc.

An arrangement by which the owner of the account gives written power of attorney to someone else, usually the broker or a Commodity Trading Advisor, to buy and sell without prior approval of the account owner.

Also referred to as a Managed Account. An order placed electronically without the use of a broker either via the Internet or an electronic trading system. Systems that allow participating exchanges to list their products for trading electronically. These systems may replace, supplement or run along side of the open outcry trading. The action taken by the holder of a call option if he wishes to purchase the underlying futures contract or by the holder of a put option if he wishes to sell commodity trading meaning underlying futures contract.

Generally the last date on which an option may be exercised. It is not uncommon for an option to expire on a specified date during the month prior to the delivery month for the underlying futures contracts. The first day on which notice of intent to deliver a commodity in fulfillment of an expiring futures contract can be given to the clearinghouse by a seller and assigned by the clearinghouse to a buyer.

Varies from contract to contract. An individual who executes orders on the trading floor of an exchange for any other person. An individual who is a member of an exchange and trades for his own account on the floor of the exchange. A contract which requires a seller to agree to deliver a specified cash commodity to a buyer sometime in the future, where the parties expect delivery to occur. All terms of the contract may be customized, in contrast to futures contracts whose terms are standardized.

An account carried by a Futures Commission Merchant in the commodity trading meaning of an individual customer; the opposite of an Omnibus Account. A method of anticipating future price movement using supply and demand information. An individual or organization which solicits or accepts orders to buy or sell futures contracts or commodity options and accepts money or other assets commodity trading meaning customers in connection with such orders. A legally binding agreement to buy or sell a commodity or financial instrument at a later date.

Futures contracts are normally standardized according to the quality, quantity, delivery time and location for each commodity, with price as the only variable. An international electronic trading system for futures and options that allows participating exchanges to list their products for trading after the close of the exchanges' open outcry trading hours. A Guaranteed Introducing Broker is an IB that has a written agreement with a Futures Commission Merchant that obligates the FCM to assume financial and disciplinary responsibility for the performance of the Guaranteed Introducing Broker in connection with futures and options customers.

A Guaranteed Introducing Broker is not subject to minimum financial requirements. The practice of offsetting the price risk inherent in any cash market position by taking an opposite position in the futures market.

Commodity trading meaning long hedge involves buying futures contracts to protect against possible increasing prices of commodities. A short hedge involves selling futures contracts to protect against possible declining prices of commodities. The highest price of the day for a particular futures or options on futures contract. An option that has intrinsic value. A call option is in-the-money if its strike price is below the current price of the underlying futures commodity trading meaning.

A put option is in-the-money if its strike price is above the current price of the underlying futures contract. The amount a futures market participant must deposit into a margin account at the time an order is placed commodity trading meaning buy or sell a futures contract. A firm or individual that solicits and accepts commodity futures orders from customers but does not accept money, securities or property from the customer. The last day on which trading may occur in a given futures or option.

The ability to control large dollar amounts of a commodity with a comparatively small amount of capital. To sell a previously purchased futures commodity trading meaning options contract or to buy back a previously sold futures commodity trading meaning options position.

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Glossary Please note that these definitions are for guidance purposes only. This Glossary is also not intended to be comprehensive, and comprises mainly terms that relate to the sphere of operation of FCLtrading's business.

No responsibility whether direct or indirect can be accepted in the event or incomplete, erroneous or misleading definitions provided here. Exporters and Importers are recommended to take legal advice when dealing with commercial documentation. ATB Authority To Board Used for oil shipments - issued by the seller, it provides the authority to enable the buyer to board the vessel to confirm cargo availability, quantity and quality.

It should however be understood that this does not imply any guarantee of payment. This is an important document and gives title to the goods. It is needed by the buyer to obtain the goods from the port. This does not include unloading charges. These are old terms and should not be used. Some countries have different types of CO e.

All delivery charges and duties to the named destination are paid by the exporter. Documents should therefore be thoroughly checked.

Loading and shipment are then the responsibility of the buyer. However the supplier must clear the goods for export. FOB Free on Board This means that the supplier pays only to the point where the goods are loaded on board the carrying vessel. The seller must clear the goods for export. As soon as the goods are over the ship's rail they become the responsibility of the buyer. FCA Free Carrier The supplier must deliver the goods, cleared for export, to the carrier nominated by the buyer at the named place.

Often suppliers will not supply less then one full container. LCL would denote less than one container load. Also short for FCLtrading. These terms Incoterms are internationally accepted and should always be used in order to avoid misunderstandings between trading partners.

All terms in this glossary are Incoterms. Effectively it is a method of payment where the buyer's bank guarantees payment to the supplier. The various types can be defined as follows: The Documentary Letter of Credit provides a more secure means of carrying out transactions in import-export trade than by documentary bills collection see Bill of Exchange.

A letter of credit when transmitted through a bank, usually in the seller's country, becomes the means by which the seller obtains payment. The necessary documents, correctly completed, are presented to a bank by an agreed date. If the terms of the credit are met, a seller can receive payment from a bank immediately.

The payment is guaranteed by the bank if the credit terms and conditions are fully met by the beneficiary. It means that once the buyer's conditions in the letter have been agreed to by the seller, they constitute a definite undertaking by the buyer's bank and cannot be revoked without the seller's agreement. Revocable Letters of Credit are rarely used as the terms of the credit can be cancelled or amended by an overseas buyer at any time without notice to the seller.

This saves administration when multiple shipments are involved. The goods do not fill the complete space of a container. Often containers are consolidated, i.

LOI Letter of Intent A document by which the buyer states that he intends to enter into a transaction. POP Proof of Product A Proof of Product 'POP' is often requested by customers or agents who believe it will give them some guarantee of the existence of the product and ability of the supplier to deliver.

In practice many POPs are produced which are false. In practice it offers no proof at all, because once a POP has been drafted it is automatically out of date - the product could have been sold to another buyer and therefore no longer exists. A POP for large quantities is often not genuine as it is unlikely that a manufacturer has stockpiled possibly millions of tonnes of a product.

Large quantities of a products are made to order to match the terms of a specific contract, in this case a proof of allocation would be more relevant. A POP without a contract reference is also worthless, a POP with a contract reference can and will only be issued once a financial instrument has been put in place, so is therefore superfluous.

Then the seller's bank can check the availability of funds in the buyer's bank and issue a POP to the buyer's bank within an agreed time period e. In reality, the best and only real proof of product is when the seller can demonstrate the products in his possession at the dock side.

Their certificates are internationally accepted.