A
Abandon
Accreditation Panel
Accredited Independent Entities (AIEs)
Acid Rain
Additionality
Adjustment Bid
Aggregation
Aggregator
Allocated account
Alloy
American-style option
Anodes
Anthracite
API gravity (the American Petroleum Institute gravity)
APX ENDEX
Arbitrage
Arbitrageur
Arbitration
Argus Sour Crude Index (ASCI)
Asian-style option
Ask
Assay
Assayer
Associated Person (AP)
At-The-Money (ATM)
Average strike options
Averaging
B
Backwardation
Barrel (bbl)
Barrels per Stream Day
Barrier option
Base load
Base metals
Basis
Basis price
Basis Risk
BBQ
Be Copper
Bear
Bear call spread
Bear Market
Bear put spread
Bear Spread
Bearish Market Direction
Benchmark (Crude oil benchmark)
Beta
BFOE
Bid
Bid Price
Bid-ask spread
Bid-Offer Spread
Bituminous coal
Black
Blast Furnace
Blending plant
Bonny Light
Borrowing of metal
Brent blend
Brent Crude
Broker
Brokerage fee
Bull
Bull call spread
Bull Market
Bull put spread
Bull Spread
Bullion
Bullish Market Direction
Bunker fuel
Butterfly spread
Buy
Buy signal
Buying hedge
By-product
C
Calendar spread
Call option
Canceling Order
Cap and trade schemes set
Carbon Budget
Carbon Capture and Storage (CCS)
Carbon Cycle
Carbon Dioxide (CO2)
Carbon Dioxide Equivalent (CO2e)
Carbon Intensity
Carbon Output Rate
Carbon Sequestration
Carry
Carrying Broker
Carrying charge (cost of carry)
Carryover
Cash commodity/ physical commodity
Cash Contract
Cash Flow at Risk (CFaR)
Cash Market
Cash price
Cash settlement
Cash/physical contract
Catalytic Cracking
Catalytic Reforming
Cathode
CBOT
CFR (Cost and Freight (named destination port))
CFTC
Charting
Chief Risk Officer
CIF
CIP (Carriage and Insurance Paid (To) (named place of destination))
Circuit Breaker
Clear
Clearing
Clearing
Clearing Margin
Clearing Member
Clearinghouse
Close-out
Closing price
Closing Range
Coal Rank
Coal Stocks Coal
Coalbed Methane
Cogeneration
Coke (Coal)
Coke (Petroleum)
Coke Oven Gas
Coking Coal
Collateral
Collateralized Debt Obligation
COMEX
Commercial silver
Commercial silver
Commission
Commodity
Commodity Exchange Act (CEA)
Commodity Futures Trading Commission (CFTC)
Commodity Pool
Commodity Pool Operator (CPO)
Commodity Risk
Commodity Trading Adviser (CTA)
Common Risk Factors
Compliance
Concentrating
Confirmation Statement
Consignment stocks
Consumer's hedge
Contango
Contract for differences (CFD)
Contract Market
Contract Month
Contract price (CP)
Convergence
Converter
Copper concentrate
Corner the market
Correlation
Cost of freight (CIF)
Counterparty
Covariance
Covenant
Covered call
Covered Option
CPT (Carriage Paid to (named place of destination))
Crack
Crack spread
Cracking
Credit Default Swap
Credit Derivative
Credit Portfolio Risk
Credit Risk
Credit Risk Capital
Credit Risk Management
Credit Spread
Credit Value-at-Risk
Crop (Marketing) Year
Crop Reports
Cross-hedging
Crowded Trade
Crude oil assay
Crude Oil Less Lease Condensate
Crush Spread
CTRM
Currency
Currency future
Currency option
Currency swap
Current Yield
Customer margin
D
Daily price limit
DAP (Delivered at Place (named place of destination))
DAT (Delivered at Terminal)
Dated Brent
Day order
Day traders
Day-ahead and hour-ahead markets
Day-ahead schedule
DDP (Delivered Duty Paid (destination place))
Deadweight tons
Declaration date
Default
Deliverability
Deliverable grade
Delivery
Delivery month
Delivery Points
Delta
Delta hedging
Delta neutral
Demand, Law of
Demurrage
Derivative
Designated Self-Regulatory Organization (DSRO)
Desulphurisation
DGCX
Differentials
Discharged fuel
Disclosure Document
Discount
Discretionary Account
Dispatching
Distillate Fuel Oil
Distillation unit (atmospheric)
Dividend
Dore
Double bottom/ double top
Down trade
Drift mine
Dubai Crude
E
Earnings at Risk
Econometrics
Efficient Markets
EFP
Electronic Order
Embedded Option
Emissions Trading
Ending stocks
Energy Trading and Risk Management
Enterprise Risk Management
Equilibrium Price
Equity
Ethane
Ether
Ethylene
Ethylene dichloride
Eurodollars
European Terms
European-style option
Evening evaluations
Exchange
Exchange For Physical (EFP)
Exchange Open Interest (EOI)
Exchange traded options
Exercise
Exercise of option
Exercise price (strike)
Exit
Exotic instrument
Exotic options
Expected loss
Expiration date
Expiry (options)
Extrinsic value
EXW (Ex Works (named place))
F
F
Fabricated fuel
Fabricator
Face value
Fair value
FAS (Free Alongside Ship (named loading port))
FCA (Free Carrier (named places))
Federal Funds
Federal Funds Rate
Federal Reserve System
Fill order
Fill-or kill
Financial Instrument
Fine weight
Fineness
First Notice Day
Fix
Flag
Flat Price Trading
Flat rate forwards
Float/ flotation
Floor
Floor Broker
Floor Trader
FOB
Forex Market
Forward (cash) contract
Forward Curve
Forward premium
Forward Price
Forward Rate Agreement
Forward Transaction
Fractionation
Fuel ethanol
Full Carrying Charge Market
Fully Disclosed
Fundamental analysis
Futures Commission Merchant (FCM)
Futures Contract
Futures curve
Futures Exchange
G
G
Gallon
Gamma
Gap through
Gas to liquids
Gasification
Gasoil
Gasoline
Gasoline blending components
GlobalCOAL
GLOBEX
GOFO
Gold loan
Good delivery bars
Good delivery standard
Governance
Grade
Grain
Grain Terminal
Greenhouse effect
Greenhouse gases
Gross Domestic Product (GDP)
Gross National Product
Gross Processing Margin
GTC (Good 'Til Cancelled)
Guaranteed Introducing Broker
H
H
Haircut
Hallmark
Head
Hedge
Hedger
High
High grade
Historical volatility
Hog/Corn Ratio
Holder
Horizontal spread
House account
I
ICMM
Implied volatility
In-The-Money (ITM)
Independent Introducing Broker
Indicative bid
Ingot
Initial deposit/ Margin
Initial margin
Integrated metals producer
Intercommodity spread
Intercontinental Exchange (ICE)
Interdelivery Spread
Interest yield
Intermarket Spread
Intrinsic value
Introducing broker
Inverted market
Investment
Invisible Supply
ISDA Master Agreement
J
Joint venture
K
Karat
Kerb
Key reversal
Key Risk Indicator
Kilo Bar
Knock-in
Knock-out
Kyoto Protocol
L
L.C.H.Clearnet
Last Trading Day
LBMA
Leaching
Lending
Leverage
Lifting a leg
Limit order
Limit up
Liquidate
Liquidity
Liquidity risk
LME
LMESELECT
Loan Program
Loan Rate
Local
Long hedge
Long Position
Long straddle
Lookback option
Lot
Low
M
Maintenance Margin
Margin
Margin call
Marginal cost pricing
Mark-to-market
Market liquidity risk
Market maker
Market Open Interest (MOI)
Market order
Market Profile
Market Reporter
Market risk
Market squeeze
Market-if-touched
MASP
Matching
Matching period
Maturity
Merchant
Merger
Metallurgy
Milling
Min/ Max
Mining
Mining
Money Supply
Moulds
Moving average
Municipal Bonds
N
Naked option
National
Natural long
Natural short
Nearby Delivery Month
Net Asset Value
Net change
Net Performance
Netting
Noise
Noise
NYMEX
O
Offer
Offer Price
Official Prices
Offset
Oil trading
Omnibus Account
OPEC
Open interest
Open Market Operation
Open outcry
Open pit
Open position
Opening range
Option
Option buyer
Option premium
Option price
Option seller
Option spread
Option writer
Original margin
Out-the-money (OTM)
Over-the-counter (OTC)
Overbought
Oversold
P
Panning
Paper gold
Par
Petroleum or crude oil
Physical delivery
Physical trade
Pit
Plain vanilla
Platinum Group Elements (PGE) / Platinum Group Metals (PGM)
Platts
Point-and-Figure Charts
Position
Position limit
Precious metals
Premium
Price discovery
Price Limit
Price Limit Order
Primary Market
Prime Rate
Principal to Principal
Producer Price Index (PPI)
Producer's hedge
Production standstill
Prompt date
Pulpit
Purchase and Sale Statement (P&S)
Purchasing (long) hedge
Put option
Put spread
Puts/Calls ratio
Q
Quotation
R
Range
Reciprocal of European Terms
Refinery
Refining
Regulations (CFTC)
Reparations
Reportable Positions
Repurchase Agreements (or Repo)
Resistance level
Reverse Crush Spread
RHO
Ring
Ring dealer
Risk
Risk appetite
Risk factor mapping
Risk management
Risk policy
Risk transfer
Rogue trader
Roll
Roll over
Round
Rules NFA
Runners
S
Sampling
Scalper
Secondary metal
Segregated Account
Self-Regulatory Organization (SRO)
Sell
Sell signal
Selling (short) hedge
Semi-fabricator
Settlement price
Settlement risk
Short covering
Short hedge
Short Position
Short Term Level Carries
Short-covering
Silver
Smelting
Spark spread
Speculation
Speculative long
Speculative short
Speculator (characteristics)
Spot market
Spot month
Spot price
Spot settlement
Spread
Spread
Spread-trading
Spreading
Standard Bar
Standard deviation
Steer/Corn Ratio
Stocklist
Stop loss
Stop or loss order
Stop order
Storage
Straddle
Strangle
Strike price
Supply, Law of
Support
Swap
Switch
Synthetic
T
TAEL
Tailings
Tapis crude
TAPO
Technical analysis
The Carbon Capture & Storage Association (CCSA)
The International Swaps and Derivatives Association (ISDA)
Theta
Tick
Time Limit Order
Time value
Time-Stamped
TOCOM
TOLA
Tolling Agreement
TOM
Total Return Swap
TOUCHED
Transaction cost
Transfer
Transparency
Treatment Charge (TC)
Troy Ounce
U
U.S. Treasury Bill
U.S. Treasury Bond
U.S. Treasury Note
Unallocated account
Uncovered Option
Underlying
Underlying asset
Underlying Futures Contract
Up trade
V
Value at risk(VaR)
Vanilla option
Variable Limit
Variation margin
Vega
Vertical spread
Volatility (historical volatility)
Volatility (options)
Volume
W
Wafer
Warehouse receipt
Warehouse stocks
White gold
Window option
Wire House
Writer
WTI
Y
Yield
Yield curve
Yield to Maturity
Z
Zero-cost option
A
Abandon — to let an option to expire without exercising it
Accreditation Panel — entity that prepares the decision-making of the CDM Executive Board in accordance with the procedure for accrediting operational entities
Accredited Independent Entities (AIEs) — are independent auditors that assess whether a potential project meets all the eligibility requirements of the JI (determination) and whether the project has achieved greenhouse gas emission reductions (verification)
Acid Rain — also called acid precipitation or acid deposition, acid rain is precipitation containing harmful amounts of nitric and sulfuric acids formed primarily by sulfur dioxide and nitrogen oxides released into the atmosphere when fossil fuels are burned. It can be wet precipitation (rain, snow, or fog) or dry precipitation (absorbed gaseous and particulate matter, aerosol particles or dust).Acid rain has a pH below 5.6. Normal rain has a pH of about 5.6, which is slightly acidic. The term pH is a measure of acidity or alkalinity and ranges from 0 to 14. A pH measurement of 7 is regarded as neutral. Measurements below 7 indicate increased acidity, while those above indicate increased alkalinity
Additionality — a project activity is additional if anthropogenic GHG emissions are lower than those that would have occurred in the absence of the project activity
Adjustment Bid — a bid auction conducted by the independent system operator or power exchange to redirect supply or demand of electricity when congestion is anticipated
Aggregation — the grouping of futures positions by one particular trading entity in order to determine the combined value and potential future speculative limits
Aggregator — any marketer, broker, public agency, city, county, or special district that combines the loads of multiple end-use customers in negotiating the purchase of electricity, the transmission of electricity, and other related services for these customers
Allocated account — an account in which the client's metal is individually identified as his, and physically segregated from all the other gold in the vault; in the event of a default by the holding bank, the investor becomes a secured creditor
Alloy — a mixture of two or more chemical elements, including at least one metals. In the ase of gold, it is mixed with a baser metal or metals to lower the purity, influence the colour or add durability
American-style option — an option which can be exercised at any stage during its life, at or before expiration date
Anodes — positively polarised electrodes in an electrolytic cell; copper content about 99.5%
Anthracite — the highest rank of coal; used primarily for residential and commercial space heating. It is a hard, brittle, and black lustrous coal, often referred to as hard coal, containing a high percentage of fixed carbon and a low percentage of volatile matter. The moisture content of fresh-mined anthracite generally is less than 15 percent. The heat content of anthracite ranges from 22 to 28 million Btu per ton on a moist, mineral-matter-free basis. The heat content of anthracite coal consumed in the United States averages 25 million Btu per ton, on the as-received basis (i.e., containing both inherent moisture and mineral matter). Note: Since the 1980’s, anthracite refuse or mine waste has been used for steam electric power generation. This fuel typically has a heat content of 15 million Btu per ton or less
API gravity (the American Petroleum Institute gravity) — is a measure of how heavy or light a petroleum liquid is compared to water. If its API gravity is greater than 10, it is lighter and floats on water; if less than 10, it is heavier and sinks. API gravity is thus an inverse measure of the relative density of a petroleum liquid and the density of water, but it is used to compare the relative densities of petroleum liquids. API gravity is graduated in degrees on a hydrometer instrument. The API scale was designed so that most values would fall between 10 and 70 API gravity degrees.
APX ENDEX — is Europe's premier provider of power and gas exchange services for the wholesale market, operating transparent Platforms for short term and futures trading in the Netherlands, the United Kingdom and Belgium. Established in 1999, APX-ENDEX provides exchange trading , central clearing & settlement and data distribution services. APX-ENDEX has over 300 memberships from more than 15 countries. APX-ENDEX offers benchmark data and provides industry indices. APX-ENDEX's offices are located in Amsterdam, London and Nottingham
Arbitrage — trading activity resulting in a riskless profit, usually arising from participants exploiting inefficiencies in a market. The forces of supply and demand usually ensure these price mismatches subsequently disappear as a result of the trade being executed.
Arbitrageur — takes offsetting positions in two or more instruments/markets to lock in profit; Exploit inefficiency in different markets/locations; Take advantage of mis-pricing of certain financial instruments; "Riskless" profit (from a price perspective).
Arbitration — a process whereby two parties ask a neutral third party to resolve a dispute for them. In this way, the two parties will respect the decision of the third party as being unbiased and inherently fair. Generally, the NFA handles commodities disputes.
Argus Sour Crude Index (ASCI) — a pricing tool used by buyers, sellers and traders of imported crude oil for use in long-term contracts. The ASCI methodology creates a single daily volume-weighted average price index of aggregate deals done for three component crude grades as if they were one grade of crude oil. The three crude oil grade components are; Mars, Poseidon and Southern Green Canyon. Thus the daily ASCI price published by Argus Media Ltd represents the value of US Gulf coast medium sour crude oil. The Argus Sour Crude Index (“ASCI”) has been adopted as the benchmark price for sales of crude oil by Saudi Aramco (in 2009), Kuwait (in 2009) and Iraq (in 2010). Contracts based upon ASCI are listed on the world's two largest oil exchanges, the CME Group New York Mercantile Exchange (NYMEX) and the Intercontinental Exchange (ICE).
Asian-style option — an option which, if it expires in-the-money, is automatically settled on the basis of the difference between the strike price and the average price of the underlying asset in a given period prior to expiration
Ask — the price a seller asks for the commodity. (also see "offer")
Assay — the testing and evaluation of a metal to determine its fineness or purity. There are often minimum standards that must be met
Assayer — a tester of precious metals to determine their purity
Associated Person (AP) — as long as the individual is affiliated with a registered member of the Commodity Futures Trading Commission, the associated person may handle customers, customer funds, or orders for an Introducing Broker, Commodity Pool Operator, or Futures Commission Merchant
At-The-Money (ATM) — an option in which the strike price which is equal to the current market price of the underlying asset
Average strike options — Asian-style options where the ultimate settlement depends on an average strike price rather than an average underlying asset price
Averaging — a method whereby a smoothing of the fluctuations in price movements may be achieved by agreeing to buy or sell a specified total quantity of metal on the basis of the average price of the metal fixings over an agreed period of time
B
Backwardation — is the prompt price is greater than the sustainable long term price of oil in the future
Barrel (bbl) — a unit of volume equal to 42 U.S. gallons
Barrels per Stream Day — is the maximum number of barrels of input that a distillation facility can process within a 24-hour period when running at full capacity under optimal crude and product slate conditions with no allowance for downtime
Barrier option — an exotic option that either comes to life (is knocked-in) or is extinguished (knocked-out) under conditions stipulated in the options contract. The conditions are usually defined in terms of a price level (barrier, knock-out or knock-in price) that may be reached at any time during the lifetime of the option. There are four major types of barrier options: up-and-out, up-and-in, down-and-out and down-and-in. The extinguishing or activating features of these options mean they are usually cheaper than ordinary options, making them attractive to purchasers looking to avoid high premium
Base load — the minimum amount of electric power delivered or required over a given period of time at a steady rate
Base metals — non-ferrous metal, excluding precious metals
Basis — this refers to the difference between the agreed to futures price of a particular commodity and the actual current cash price of the commodity. Frequently, a basis is used to settle cash payouts
Basis price — the reference price used for establishing a physical contract. In option trading it is the price agreed for the underlying should an option be declared, more commonly referred to as the strike price or exercise price
Basis Risk — difference between a hedge's actual underlying reference point and the needed fundamental hedge. E.g. the basis for the Nord Pool market is the systems spot price. If, however, a power producer in the north of Sweden hedges his production (hedges his risk) by using system price based derivatives – he might encounter a basis risk. This is because there might be constraints in the transmission system – and hence the price he can sell his physical power at might not be the same as the systems price. (The system price might not be the same as the price in northern Sweden)
BBQ — a composite of Bonny, Brass River and Qua Ibo crudes from Nigeria
Be Copper — best electrolytic copper; features particular electrical conductivity, good brazing properties and excellent hydrogen resistance
Bear — someone who anticipates that prices market will fall
Bear call spread — the purchase and sale of call options at different exercise prices but with the same expiry date. The purchased (or long) calls have a higher exercise price than the written (or short) calls. The investor expects a fall in the price of the underlying asset
Bear Market — when the price is falling
Bear put spread — the purchase and sale of put options at different exercise prices but with the same expiry date. The puts purchased have a higher exercise price than the puts written. The investor expects a fall in the price of the underlying asset
Bear Spread — a tricky financial maneuver wherein a party sells a futures contract only to purchase the deferred contract in order to profit from the lower sales price
Bearish Market Direction — is having the belief that prices will fall. A 'Bear' is someone who thinks market prices are going down
Benchmark (Crude oil benchmark) — is used because there are many different varieties and grades of crude oil. Using benchmarks makes referencing types of oil easier for sellers and buyers. There are three primary benchmarks, WTI, Brent Blend, and Dubai. Other well known blends include the Opec basket used by OPEC, Tapis Crude which is traded in Singapore, Bonny Light used in Nigeria and Mexico's Isthmus.
Beta — the beta of a rate or price is the extent to which that rate or price follows movements in the overall market. If the beta is greater than one, it is more volatile than the market; if the beta is less than one, it is less volatile
BFOE — Brent, Forties, Ekofisk, Oseberg
Bid — a proposal to buy a commodity/derivative at a specified price
Bid Price — is the price at which you can sell
Bid-ask spread — is the difference between the buy price or rate (bid) and sell price or rate (ask) of an financial instrument
Bid-Offer Spread — is the difference between the selling price and the purchase price
Bituminous coal — a dense coal, usually black, sometimes dark brown, often with well-defined bands of bright and dull material, used primarily as fuel in steam-electric power generation, with substantial quantities also used for heat and power applications in manufacturing and to make coke. Bituminous coal is the most abundant coal in active U.S. mining regions. Its moisture content usually is less than 20 percent. The heat content of bituminous coal ranges from 21 to 30 million Btu per ton on a moist, mineral-matter-free basis. The heat content of bituminous coal consumed in the United States averages 24 million Btu per ton, on the as-received basis (i.e., containing both inherent moisture and mineral matter).
Black — scholes model – an option-pricing model initially derived by Fischer Black and Myron Scholes in 1973 for securities options and later refined by Black in 1976 for options on futures
Blast Furnace — is a type of metallurgical furnace used for smelting to produce industrial metals, generally iron
Blending plant — a facility that has no refining capability but is either capable of producing finished motor gasoline through mechanical blending or blends oxygenates with motor gasoline
Bonny Light — oil is a high grade of Nigerian crude oil with high API gravity (low specific gravity), produced in the Niger Delta basin and named after the prolific region around the city of Bonny.
Borrowing of metal — one form of trading the metals carry. In this case the simultaneous buying of metal for a near dated prompt and the selling of that metal for a later dated prompt. In effect the party is borrowing the metal for the period
Brent blend — the most commonly traded North Sea crude oil. Brent has an API of about 37.5. The blend is technically a mix of crude from the Shell UK-operated Brent field and the BP-operated Ninian field. The blend is, however, commonly referred to simply as Brent
Brent Crude — is used primarily in Europe and the OPEC market basket, used around the world. This benchmark is a mix of crude oil from 15 different oil fields in the North Sea.
Broker — in commodity markets, an intermediary between traders for physical, futures and over-the-counter deals. Brokers receive a fixed commission predetermined between the broker and the client
Brokerage fee — a fee charged by a broker for executing a transaction
Bull — someone who anticipates that prices will rise
Bull call spread — The purchase and sale of call options at different exercise prices but with the same expiry date. The purchased (or long) calls have a lower price than the written (or short) calls. The investor expects a rise in the price of the underlying asset
Bull Market — when the price is rising
Bull put spread — the purchase and sale of put options at different exercise prices but with the same expiry date. The puts purchased have a lower exercise price than the puts written. The investor expects the price of the underlying asset to rise
Bull Spread — another tricky financial maneuver, similar to a bear spread, wherein a party buys a nearby futures month and then sells a deferred month in order to profit from price differences
Bullion — the generic word for gold and silver in bar or ingot form. The original meaning is from the old French word bouillon, which means boiling
Bullish Market Direction — is having the belief that prices will rise. A 'Bull' is someone who thinks market prices are going up
Bunker fuel — fuel supplied to ships and aircraft, both domestic and foreign, consisting primarily of residual and distillate fuel oil for ships and kerosene-based jet fuel for aircraft. The term “international bunker fuels” is used to denote the consumption of fuel for international transport activities
Butterfly spread — the simultaneous purchase of an out-of-the-money strangle and sale of an at-the-money-straddle. The buyer profits if the underlying remains stable and has limited risk in the event of a large move in either direction
Buy — to place an opening trade at the offer price of a spread in anticipation of the underlying market rising, commonly referred to as an "up trade", "taking a long position", or "going long". You can also buy at the offer price to close an existing short position
Buy signal — in technical analysis, a chart pattern which indicates a key reversal upwards in price and the time to buy
Buying hedge — buyer futures contracts to protect against a possible price increase of cash commodities that will be purchased in the future. At the time the cash commodities are bought, the open futures position is closed by selling an equal number and type of futures contracts as those that were initially purchased
By-product — material of some economic value produced in a process which is focused on extracting another material. For example silver is often produced as a by-product of copper and lead
C
Calendar spread — the simultaneous purchase and sale (or vice versa) of an option of the same strike for different months
Call option — an option that gives the buyer (holder) the right but not the obligation to buy a specified quantity of an underlying futures at a fixed price, on or before a specified date. The grantor of the option is obliged to deliver the future at the fixed price if the holder exercises the option
Canceling Order — this order removes a prior order by the same customer.
Cap and trade schemes set — a desired maximum ceiling for emissions (or cap) and let the market determine the price for keeping emissions within that cap. To comply with their emission targets at least cost, regulated entities can either opt for internal abatement measures or acquire of allowances or emission reductions in the carbon market, depending on the relative costs of these options
Carbon Budget — the balance of the exchanges (incomes) and losses) of carbon between carbon sinks (e.g., atmosphere and biosphere) in the carbon cycle
Carbon Capture and Storage (CCS) — is the process by which CO2 emissions are captured from large scale energy conversion and industrial processes, transported by pipeline or other means, and injected into secure geological structures for permanent storage. CCS is a relatively young climate change mitigation option which has received increasing media attention over the past 18 months. However, CCS is ready to be deployed today. The different types of capture technology; pre- and post-combustion as well as oxyfuel have all been proven to differing degrees. Post- and pre-combustion are closer large scale deployment
Carbon Cycle — all carbon sinks and exchanges of carbon from one sink to another by various chemical, physical, geological, and biological processes
Carbon Dioxide (CO2) — a colorless, odorless, non-poisonous gas that is a normal part of Earth's atmosphere. Carbon dioxide is a product of fossil-fuel combustion as well as other processes. It is considered a greenhouse gas as it traps heat (infrared energy) radiated by the Earth into the atmosphere and thereby contributes to the potential for global warming. The global warming potential (GWP) of other greenhouse gases is measured in relation to that of carbon dioxide, which by international scientific convention is assigned a value of one (1)
Carbon Dioxide Equivalent (CO2e) — the universal unit of measurement used to indicate the global warming potential of each of the six greenhouse gases regulated under the Kyoto Protocol. Carbon dioxide—a naturally occurring gas that is a byproduct of burning fossil fuels and biomass, land-use changes, and other industrial processes—is the reference gas against which the other greenhouse gases are measured, using their global warming potential
Carbon Intensity — the amount of carbon by weight emitted per unit of energy consumed. A common measure of carbon intensity is weight of carbon per British thermal unit (Btu) of energy. When there is only one fossil fuel under consideration, the carbon intensity and the emissions coefficient are identical. When there are several fuels, carbon intensity is based on their combined emissions coefficients weighted by their energy consumption levels
Carbon Output Rate — the amount of carbon by weight per kilowatt hour of electricity produced
Carbon Sequestration — the fixation of atmospheric carbon dioxide in a carbon sink through biological or physical processes
Carry — in metals market, a simultaneous purchase and sale of the same tonnage of the same metal for delivery on different dates. See "borrowing" and "lending"
Carrying Broker — this individual clears all trades, and is usually part of a clearinghouse. The individual is also always a member of a futures exchange.
Carrying charge (cost of carry) — for physical commodities such as grains and metals, the cost of storage space, insurance, and finance charges incurred by holding a physical commodity
Carryover — commodities not consumed during the marketing year and remaining in storage at the end of a period. These stocks are “carried over” into the next marketing year
Cash commodity/ physical commodity — an actual physical commodity someone is buying or selling, e.g., Co2e, power, soybeans, corn, gold, silver, Treasury bonds, etc. Also referred to as actuals
Cash Contract — this contract is a guarantee of the immediate or future delivery of the commodity in question
Cash Flow at Risk (CFaR) — measures the potential variability of cash inflows and outflows at multiple time horizons as a result of the firm’s operation as well as changes in the value of the hedging portfolio
Cash Market — a place where people buy and sell the actual commodities, i.e., grain elevator, bank, etc
Cash price — the current price in the market for cash/spot contracts
Cash settlement — transactions generally involving index-based futures contracts that are settled in cash based on the actual value of the index on the last trading day, in contrast to those that specify the delivery of a commodity or financial instrument
Cash/physical contract — a sales agreement for either immediate or future delivery of the actual product
Catalytic Cracking — the refining process of breaking down the larger, heavier, and more complex hydrocarbon molecules into simpler and lighter molecules. Catalytic cracking is accomplished by the use of a catalytic agent and is an effective process for increasing the yield of gasoline from crude oil. Catalytic cracking processes fresh feeds and recycled feeds
Catalytic Reforming — a refining process using controlled heat and pressure with catalysts to rearrange certain hydrocarbon molecules, thereby converting paraffinic and naphthenic type hydrocarbons (e.g., low-octane gasoline boiling range fractions) into petrochemical feedstocks and higher octane stocks suitable for blending into finished gasoline
Cathode — the negative pole in electrolysis
CBOT — Chicago Board of Trade (CBOT). An exchange where grain, gold, and Treasury Bond futures and options are traded
CFR (Cost and Freight (named destination port)) — seller must pay the costs and freight to bring the goods to the port of destination. However, risk is transferred to the buyer once the goods are loaded on the ship (this rule is new since 2010!). Maritime transport only and Insurance for the goods is NOT included. Insurance is at the Cost of the Buyer
CFTC — Commodity Futures Trading Commission, the regulatory body in the US covering futures markets
Charting — also known as technical analysis. Charting is essentially a graphical display of data in the form of charts or graphs that allow traders to plot out potential future movements of a commodity based on its past performance, total volume, and other factors like open interest. The data that goes into the charting can take a significant amount of time to compile
Chief Risk Officer — plans, leads, and manages the risk management activities of an organisation
CIF — cost, insurance and freight, whereby the quoted price for physical material includes all costs incurred in shipping the metal to the customer's location including insurance
CIP (Carriage and Insurance Paid (To) (named place of destination)) — the containerized transport/multimodal equivalent of CIF. Seller pays for carriage and insurance to the named destination point, but risk passes when the goods are handed over to the first carrier
Circuit Breaker — much like it sounds, a circuit breaker helps keep the market from financially overheating by halting trades setting price limits on exceedingly high volume intra-day market sessions which either show exceptional growth or exceptional losses.
Clear — generally, this is performed on a daily basis, and allows clearinghouses to rectify all their records and make any necessary margin adjustments, whether owed or owing. Another way to think of a ‘clear’ is a kind of massive checkbook balancing performed on all trades and transactions
Clearing — 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 member. A trade can either be a bilateral trade between a buyer and a seller. Or it might involve a third party “clearing” the trade. In the first instance the parties to the trade will have to assess and manage the Credit Risk (the risk that the other party will default on its obligations of the trade). Using a Clearinghouse – the clearinghouse is the counterpart of the trade – both for the buyer and the seller. The advantages are twofold: a) Most often the Clearinghouse is more financially sound b) The Clearinghouse has a more advanced system for monitoring risk exposure for each clearing house member. c) The buyer and seller saves the resources needed to maintain a separate credit department
Clearing — the process of matching trades, settling trades and provision of a guarantee for traded contracts, often a service performed by exchanges
Clearing Margin — financial safeguards to ensure that clearing members (usually companies or corporations) perform on their customers’ open futures and options contracts. Clearing margins are distinct from customer margins that individual buyers and sellers of futures and options contracts are required to deposit with brokers
Clearing Member — the individual who is ultimately responsible for making sure that everyone lives up to their agreements, especially when it comes to customers of a particular financial institution or company. The clearing member is also described as being a member of the exchange’s clearinghouse division
Clearinghouse — an independent house settles trades acting as a guarantor for all trades cleared by it. The clearinghouse is responsible for settling trading accounts, clearing trades, collecting and maintaining margin monies, regulating delivery, and reporting trading data
Close-out — in trading, to undertake an opposite position, i.e. if the initial transaction was a purchase, the closing out activity is to sell the same tonnage for the same prompt date
Closing price — the last price paid for a commodity on any trading day. Also referred to as settle price
Closing Range — a span of prices at which various trades were conducted right at the very end, or close, of the market
Coal Rank — the classification of coals according to their degree of progressive alteration from lignite to anthracite. In the United States, the standard ranks of coal include lignite, subbituminous coal, bituminous coal, and anthracite and are based on fixed carbon, volatile matter, heating value, and agglomerating (or caking) properties
Coal Stocks Coal — quantities that are held in storage for future use and disposition. Note: When coal data are collected for a particular reporting period (month, quarter, or year), coal stocks are commonly measured as of the last day of this period
Coalbed Methane — is a methane produced from coalbeds in the same way that natural gas is produced from other strata
Cogeneration — (also combined heat and power, CHP) is the use of a heat engine or a power station to simultaneously generate both electricity and useful heat
Coke (Coal) — a solid carbonaceous residue derived from low-ash, low-sulfur
Coke (Petroleum) — a residue high in carbon content and low in hydrogen that is the final product of thermal decomposition in the condensation process in cracking. This product is reported as marketable coke or catalyst coke. The conversion is 5 barrels (of 42 U.S. gallons each) per short ton. Coke from petroleum has a heating value of 6.024 million Btu per barrel
Coke Oven Gas — the gaseous portion of volatile substances driven off in the coking process after other coal chemicals are removed
Coking Coal — is a bituminous coal suitable for making coke
Collateral — is an asset pledged by a borrower to secure a loan or other credit and is forfeited to the lender in the event of the borrower's default
Collateralized Debt Obligation — is a type of structured asset-backed security; its value is determined by payments derived from a specific portfolio of fixed-income generating assets or instruments
COMEX — the New York Commodity Exchange, now a division of NYMEX, the New York Mercantile Exchange. The contracts in the COMEX gold market consist of 100 ounces each
Commercial silver — a silver that is .999 fine (99.9%) or higher. Usually sold and shipped in 1000 oz. bars
Commercial silver — a silver that is .999 fine (99.9%) or higher. Usually sold and shipped in 1000 oz. bars
Commission — fee charged by a broker for executing an order
Commodity — is generally physical item such as food, oil, metal or other object with no differences in its makeup irrespective of the geographical or physical market where they are being sold
Commodity Exchange Act (CEA) — a federal law which puts forth and authorizes the basic structure of federal regulation of all trades on futures
Commodity Futures Trading Commission (CFTC) — established in 1974, this body oversees all exchange markets, and provides the administration and general upkeep of the Commodity Exchange Act
Commodity Pool — an enterprise in which funds contributed by a number of persons are combined for the purpose of trading futures contracts or commodity options
Commodity Pool Operator (CPO) — the person in charge of overseeing the commodity pool funds, and making adjustments as necessary
Commodity Risk — is the potential loss from an adverse change in commodity prices
Commodity Trading Adviser (CTA) — this individual is paid to spout useful advice about the feasibility of investing in any particular futures commodity contract or option, and frequently has the additional power of being able to make changes to a customer’s account. Generally, a qualified CTA has years of investing experience of his or her own, and can therefore offer helpful insights and tips into how to best to approach a new offer or bid
Common Risk Factors — are risk factors that may impact several obligors with similar exposures, financial instruments, or financial assets in a similar fashion at the same time
Compliance — is the process to ensure that the organization operates by conforming to rules, policies, or legal standards
Concentrating — the process of separating milled ore into two streams; one greatly enriched in the valuable mineral (concentrate) and another of waste material (tailings). Concentration is a vital economic step in the production process because it reduces the volume of material which must be transported to and processed in a smelter and refinery
Confirmation Statement — the Futures Exchange Merchant is responsible for sending this statement to the customer advising them of the number of contracts and the price of the contracts that were traded in a given period
Consignment stocks — a physical metals trader may hold metal on consignment at a client's premises. It is the trader's property until the client withdraws it and pays the prevailing price. Alternatively, it may be held by the trader at la local warehouse (or a bank vault in case of precious metals), until the clients come forward to purchase and take delivery
Consumer's hedge — the purchase of futures or options (or both) as protection against a rise in raw material prices
Contango — occurs when the price of futures with longer maturities are higher than prices of futures with shorter maturities; it is the opposite of backwardation
Contract for differences (CFD) — crude oil swap, tied to published price assessments, which exchanges floating short-term risk for fixed risk
Contract Market — grouped around a particular commodity, contract markets are picked by the Commodity Futures Trading Commission to handle all futures contracts. This trade board is also frequently referred to as an exchange
Contract Month — a specific month in which delivery may take place under the terms of a futures contract
Contract price (CP) — periodic (monthly/quarterly/annual) price agreed between sellers and buyers of commodities for term business. Often abbreviated to CP. Most oil contract prices are "floating", that is they are tied to spot market assessments published by Platts or other market pricing services rather than set at outright levels
Convergence — the somewhat unpredictable but occasionally pleasing trend of futures contract prices and actual commodity market prices to approach each other as the futures contract is due to expire
Converter — a furnace in which metal production or refining processes are typically carried out through oxidation
Copper concentrate — a product resulting from the processing (enriching) of copper ore
Corner the market — when one trader owns or controls an excessive amount of physical stocks enabling him to control the supply of material and in consequence to control the price
Correlation — is a single measure of association between two variables, and establishes the strength of a statistical relationship and also forms the basis for statistical regression
Cost of freight (CIF) — whereby the quoted price for physical material includes all costs incurred in shipping the metal to the customer's location but not including insurance
Counterparty — is a party to a contract who is contractually bound and is expected to perform - deliver securities, make payments, or similar - sometime in the future
Covariance — is a measure of association between two variables that quantifies the change between these variables
Covenant — is an agreement that requires one party to refrain from specified actions and is imposed on the borrower by a lender to prevent a potential deterioration in the borrower's financial and business condition
Covered call — the selling of a call option while simultaneously holding an equivalent position in the underlying commodity. This is an attempt to take advantage of a neutral or declining stock. If the option expires unexercised, the writer keeps the premium. If the holder exercises the option, the stock must be delivered, but, because the writer already owns the stock, risk is limited. This is the opposite of an uncovered call, when the writer sells a call for a stock that he/she does not already own, a dangerous strategy with unlimited risk
Covered Option — a term referring to the ability of an individual to cover their put option or short call by actually buying the commodity or futures contract
CPT (Carriage Paid to (named place of destination)) — seller pays for main carriage Risk transfers to buyer upon delivery to first carrier rail
Crack — "…is trading across the CDU, i.e. buying crude or a refined product and selling another refined product"
Crack spread — the simultaneous purchase or sale of crude against the sale or purchase of refined petroleum products. These spread differentials which represent refining margins are normally quoted in dollars per barrel by converting the product prices into dollars per barrel and subtracting the crude price
Cracking — the refining process of breaking down the larger, heavier, and more complex hydrocarbon molecules into simpler and lighter molecules
Credit Default Swap — is a swap, where the protection buyer of makes a series of payments to the protection seller; the protection seller provides a payment if a financial instrument (such a bond or loan) or a portfolio of financial instruments experiences a predefined credit event
Credit Derivative — is a contract that provides protection if a credit instrument or a portfolio of credit instruments (typically a bond or loan) experiences a credit event
Credit Portfolio Risk — is the potential loss a bank can suffer from default, delayed or missed repayment or interest payments, or credit quality/ rating downgrade
Credit Risk — is the risk of loss due to non-payment of a loan, bond, or other credit
Credit Risk Capital — is capital allocated against possible credit losses
Credit Risk Management — is a structured approach to monitoring, measuring, and managing exposures to reduce the risk of potential loss due to default
Credit Spread — is the yield differential between different securities, caused by differences in their credit quality
Credit Value-at-Risk — is a quantitative estimate of the credit risk of the portfolio and is typically the difference between expected and unexpected losses on a credit portfolio over a one year time horizon expressed at a certain level statistical confidence
Crop (Marketing) Year — while each crop year is based on the individual agricultural commodity it is linked to, crop years are defined by the time between harvests. In the Northern hemisphere, new marketing years tend to begin in October or November, and end somewhere in the summer months of July or August
Crop Reports — an estimate of expected yield, actual planted acreage, and anticipated production of various agricultural commodities, with production statistics from previous years thrown in for comparison purposes. The report is prepared by the U.S. Department of Agriculture
Cross-hedging — 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 markets follow similar price trends (e.g., using soybean meal futures to hedge fish meal)
Crowded Trade — is a series of simultaneous and similar trades by a larger number of market participants that follow, implement, or execute essentially the same or highly similar strategy
Crude oil assay — – is the chemical evaluation of crude oil feedstocks by petroleum testing laboratories. Each crude oil type has unique molecular, chemical characteristics. No crude oil type is identical and there are crucial differences in crude oil quality. The results of crude oil assay testing provide extensive detailed hydrocarbon analysis data for refiners, oil traders and producers. Assay data help refineries determine if a crude oil feedstock is compatible for a particular petroleum refinery or if the crude oil could cause yield, quality, production, environmental and other problems.
Crude Oil Less Lease Condensate — a mixture of hydrocarbons that exists in liquid phase in natural underground reservoirs and remains liquid at atmospheric pressure after passing through surface separating facilities. Such hydrocarbons as lease condensate and natural gasoline recovered as liquids from natural gas wells in lease or field separation facilities and later mixed into the crude stream are excluded. Depending upon the characteristics of the crude stream, crude oil may also include:
Crush Spread — also known as a reverse crush. In a move that appears to cancel itself out, an investor or trader purchases soybean futures and then simultaneously sells soybean oil and meal futures
CTRM — Commodity Trading and Risk Management
Currency — is a generally accepted form of money - coins and bills - used in a country or a group of countries issued by their governments, central banks, or monetary authorities
Currency future — (also FX future or foreign exchange future) – is an exchange traded futures contract that conveys the right to exchange one currency for another at a specified date in the future at a predetermined exchange rate known at the purchase date
Currency option — (also FX option or foreign exchange option) – is a derivative where the holder has the right but not the obligation to exchange one currency into another currency at a known exchange rate at or before a specified date
Currency swap — that involves the exchange of principal and interest in one currency for the same in another currency; this type of swap is different from a forex swap
Current Yield — a ratio that measures the worth of the current market price of the debt instrument to that of the initial coupon
Customer margin — within the futures industry, financial guarantees required of both buyers and sellers of futures contracts and sellers of options contracts to ensure fulfilling of contract obligations
D
Daily price limit — in trading markets, the maximum price, increase/decrease, permitted from the previous day's settlement price. Set by the relevant exchange on which the contract is traded
DAP (Delivered at Place (named place of destination)) — seller pays for carriage to the named place, except for costs related to import clearance, and assumes all risks prior to the point that the goods are ready for unloading by the buyer
DAT (Delivered at Terminal) — seller pays for carriage to the terminal, except for costs related to import clearance, and assumes all risks up to the point that the goods are unloaded at the terminal
Dated Brent — Brent cargoes are known as dated Brent cargoes once they acquire a specific set of loading dates, usually at a point about two weeks from loading. Before this point, Brent cargoes are typically traded generically as so-called 15-day Brent. The dated Brent market, which Platts assesses on a 7-15 day forward basis (7-17 days on a Friday), generates prices which have become a key benchmark for contract pricing of crude oil worldwide.
Day order — an order to buy or sell at a particular price level which is only valid for one business day
Day traders — speculators who take positions in futures or options contracts and liquidate them prior to the close of the same trading day
Day-ahead and hour-ahead markets — forward markets where electricity quantities and market clearing prices are calculated individually for each hour of the day on the basis of participant bids for energy sales and purchases
Day-ahead schedule — a schedule prepared by a scheduling coordinator or the independent system operator before the beginning of a trading day. This schedule indicates the levels of generation and demand scheduled for each settlement period that trading day
DDP (Delivered Duty Paid (destination place)) — seller is responsible for delivering the goods to the named place in the country of importation, including all costs and risks in bringing the goods to import destination. This includes duties, taxes and customs formalities
Deadweight tons — the lifting capacity of a ship expressed in long tons (2,240 lbs.), including cargo, commodities, and crew
Declaration date — the last date on which the holder of an option may advise the grantor of his intention to exercise the option
Default — failure to complete a futures contract, either by not fulfilling a margin call, or not delivering or receiving the goods as promised
Deliverability — represents the number of future years during which a pipeline company can meet its annual requirements for its presently certificated delivery capacity from presently committed sources of supply. The availability of gas from these sources of supply shall be governed by the physical capabilities of these sources to deliver gas by the terms of existing gas-purchase contracts, and by limitations imposed by State or Federal regulatory agencies
Deliverable grade — grades of metal or plastics, which have been officially approved by the LME as deliverable in settlement of an LME contract
Delivery — the official term for the transfer of a commodity from the seller to the buyer of the futures contract. Many buyers and sellers prefer to settle delivery via cash only
Delivery month — a specific month in which delivery may take place under the terms of a futures contract. Also referred to as contract month
Delivery Points — an exchange establishes the physical boundaries where a certain commodity may be delivered. An excellent example of this is steel futures and commodities, which recently had three additional ports in the U.S. added to its official list of delivery points by the London Metals Exchange
Delta — the rate of change to the premium of an option as the underlying price changes
Delta hedging — the process whereby the grantor of an option decides to buy or sell more or less of an underlying futures contract in order to protect against being declared upon by the options holder. If delta hedging, the grantor of a call option will buy more of the futures contract if it rises in value towards the strike price (as the probability of being declared upon rises towards 100%). The grantor of a put option will typically sell more of the underlying futures contract if it slides in value (as the probability of being declared upon rises towards 100%).
Delta neutral — this is an “options/options” or “options/underlying instrument” position constructed so that it is relatively insensitive to the price movement of the underlying instruments. This is arranged by selecting a calculated ratio of offsetting short and long positions
Demand, Law of — one of the fundamental governing principles of all market trade, the law that describes how many people desire a particular product, and how that demand either increases or decreases price
Demurrage — the charge paid to the vessel owner or operator for detention of a vessel at the port(s) beyond the time allowed, usually 72 hours, for loading and unloading
Derivative — financial instrument that reflect value of an underlying commodity in the future
Designated Self-Regulatory Organization (DSRO) — a Futures Commission Merchant is occasionally the member of more than one Self-Regulatory Organization, prompting the group of affiliated SRO’s to decide which among them shall be ultimately responsible for the usual tasks of smoothly running the FCM. The NFA frequently is selected for all FCMs that are not part of an exchange
Desulphurisation — the removal of sulphur, as from molten metals, petroleum oil, or flue gases
DGCX — Dubai Gold and Commodities Exchange
Differentials — price differences between classes, grades, and delivery locations of various stocks of the same commodity
Discharged fuel — irradiated fuel removed from a nuclear reactor during refuelling
Disclosure Document — this document is occasionally required from CPOs to their customers, and should provide a description of their performance, fees, and general business strategy, especially in regard to how they approach trading and other market policies
Discount — a discount can be literally applied in the case of a commodity that fails to meet a certain grade standard, or it can be used as term to describe different futures that are trading at a lower rate than a previous future
Discretionary Account — also known as a Managed Account. An account that is controlled by a broker or Commodity Trading Adviser, but is not technically owned by them. The authority to take action on these accounts is usually granted via a written power of attorney process by the initial owner of the account
Dispatching — the operating control of an integrated electric system involving operations such as (1) the assignment of load to specific generating stations and other sources of supply to effect the most economical supply as the total or the significant area loads rise or fall (2) the control of operations and maintenance of high-voltage lines, substations, and equipment; (3) the operation of principal tie lines and switching; (4) the scheduling of energy transactions with connecting electric utilities
Distillate Fuel Oil — a general classification for one of the petroleum fractions produced in conventional distillation operations. It includes diesel fuels and fuel oils. Products known as No. 1, No. 2, and No. 4 diesel fuel are used in on-highway diesel engines, such as those in trucks and automobiles, as well as off-highway engines, such as those in railroad locomotives and agricultural machinery. Products known as No. 1, No. 2, and No. 4 fuel oils are used primarily for space heating and electric power generation
Distillation unit (atmospheric) — the primary distillation unit that processes crude oil (including mixtures of other hydrocarbons) at approximately atmospheric conditions. It includes a pipe still for vaporizing the crude oil and a fractionation tower for separating the vaporized hydrocarbon components in the crude oil into fractions with different boiling ranges. This is done by continuously vaporizing and condensing the components to separate higher oiling point material. The selected boiling ranges are set by the processing scheme, the properties of the crude oil, and the product specifications
Dividend — a cash bonus or other distribution made by a company to its shareholders and applicable to every share that they hold in relation to that company. Spread bets in relation to individual equities do not qualify for dividends
Dore — a gold-silver alloy, an intermediate product from certain gold mines
Double bottom/ double top — in technical analysis, a double bottom occurs when the price falls to the same level twice and fails to penetrate. This signals good support. A double top is the opposite, ie, when a price rises to the same level twice and fails to break above it, and therefore produces a level of good resistance
Drift mine — a mine that opens horizontally into the coal bed or coal outcrop
Dubai Crude — s also known as Fateh is produced in the Emirate of Dubai, part of the United Arab Emirates. Dubai's only refinery, at Jebel Ali, takes condensates as feedstocks, and therefore all of Dubai's crude production is exported. For many years it was the only freely traded oil in the Middle East, but gradually a spot market has developed in Omani crude as well.
E
Earnings at Risk — measures the potential earnings variability for multiple time horizons based on a set of earnings recognition rules that determine in which reporting period those earnings fall
Econometrics — econometrics utilizes mathematical and statistical models with real economic data to validate or disprove economic theories and help formulate or solve basic economic problems
Efficient Markets — a market in which information is immediately available to all users
EFP — Exchange of futures for physical: refers to the exchange of a futures position for a physical (swap) position.
Electronic Order — a broker is not required for the placement of an electronic order; however, a system affiliated with the official trading or exchange houses is required in order to make the order go through
Embedded Option — usually provides either the bondholder or the issuer the right to take some action, and include callable bonds and convertible bond
Emissions Trading — emissions Trading allows for transfer of AAUs across international borders or emission allowances between companies covered by a Cap and Trade scheme. However, it is a general term often used for the three Kyoto mechanisms: JI, CDM and emissions trading
Ending stocks — primary stocks of crude oil and petroleum products held in storage as of 12 midnight on the last day of the month. Primary stocks include crude oil or petroleum products held in storage at (or in) leases, refineries, natural gas processing plants, pipelines, tank farms, and bulk terminals that can store at least 50,000 barrels of petroleum products or that can receive petroleum products by tanker, barge, or pipeline. Crude oil that is in-transit by water from Alaska or that is stored on Federal leases or in the Strategic Petroleum Reserve is included. Primary Stocks exclude stocks of foreign origin that are held in bonded warehouse storage
Energy Trading and Risk Management — is a category of software applications, architectures and tools that support the business processes associated with the trading of energy commodities
Enterprise Risk Management — is a collection of processes, methods, and other approaches businesses and other organisations use to manage, monitor, and measure risks
Equilibrium Price — neither bearish nor bullish, the equilibrium price is instead the ideal balance between the market price and quantity of a commodity, where the supply and demand are exactly even
Equity — a way to describe a futures trading account if all available positions were offset by the actual contemporary market price
Ethane — a normally gaseous straight-chain hydrocarbon. It is a colorless paraffinic gas that boils at a temperature of -127.48 degrees Fahrenheit. It is extracted from natural gas and refinery gas streams
Ether — a generic term applied to a group of organic chemical compounds composed of carbon, hydrogen, and oxygen, characterized by an oxygen atom attached to two carbon atoms (e.g., methyl tertiary butyl ether)
Ethylene — an olefinic hydrocarbon recovered from refinery processes or petrochemical processes. Ethylene is used as a petrochemical feedstock for numerous chemical applications and the production of consumer goods
Ethylene dichloride — a colourless, oily liquid used as a solvent and fumigant for organic synthesis, and for ore flotation
Eurodollars — a term describing the status of United States dollars that are currently deposited in a bank outside of the jurisdiction of the United States. This institution can either be a foreign bank, or an affiliated institution of a U.S. bank that is technically in another country
European Terms — essentially, the foreign currency unit per dollar. This is needed in order to set or quote exchange rate
European-style option — an option that can only be exercised on the expiry date
Evening evaluations — the prices determined for margining purposes as at the close of business on each business day by the quotations committee and confirmed by the Clearing House. These are sometimes referred to as Closing Prices
Exchange — is a highly organized market where (especially) tradable securities, commodities, foreign exchange, futures, and options contracts are sold and bought. Exchanges bring together brokers and dealers who buy and sell these objects
Exchange For Physical (EFP) — Exchange For Physical. Actual exchange between an OTC contract and a futures contract which takes place off exchange between parties
Exchange Open Interest (EOI) — is a calculation produced by LCH.Clearnet to represent open exchange positions of LME clearing members for a particular prompt date. EOI does not take into account the positions of clients of members or non-clearing members. EOI is calculated from open positions recorded on LCH.ClearnetOs matching system. The LME reports EOI in lots for each plastics contract and by individual prompt date. EOI represents the exposure of LCH.Clearnet to clearing members
Exchange traded options — options on future contracts offered by a recognised futures exchange, such as LME, COMEX or NYMEX
Exercise — 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 the underlying futures contract
Exercise of option — the initiation of the right to buy (call) or sell (put) an asset by the option holder at the agreed strike price
Exercise price (strike) — the value of the underlying futures contract determined at the time of purchasing an option. Hence the price achieved if the option is exercised
Exit — the point at which a trader closes out of a trade
Exotic instrument — is a financial asset or instrument with features making it more complex than simpler, plain vanilla, products
Exotic options — options with non-standard pay-out structures usually traded over-the-counter (OTC) and designed specifically for a user
Expected loss — describes the size of losses that can be expected to occur
Expiration date — options on futures generally expire on a specific date during the month preceding the futures contract delivery month. For example, an option on a March futures contract expires in February but is referred to as a March option because its exercise would result in a March futures contract position
Expiry (options) — the date by which an option holder must decide whether to exercise or abandon an option.
Extrinsic value — the amount of money the option buyer is willing to pay for an option in the anticipation that, over time, a change in the underlying futures price will cause the option to increase in value. In general, an option premium is the sum of time value and intrinsic value. Any amount by which an option premium exceeds the option’s intrinsic value can be considered time value. Also referred to as time value
EXW (Ex Works (named place)) — the seller makes the goods available at his premises. The buyer is responsible for all charges. This trade term places the greatest responsibility on the buyer and minimum obligations on the seller. The Ex Works term is often used when making an initial quotation for the sale of goods without any costs included. EXW means that a seller has the goods ready for collection at his premises (Works, factory, warehouse, plant) on the date agreed upon. The buyer pays all transportation costs and also bears the risks for bringing the goods to their final destination. The seller delivers the good at seller's premiese or named place (works, factory and warehouse,etc), but not loaded on collecting vehicles and not cleared for export. The seller has no obligation to load the goods, even though in practice he may be in a better position to do so. If the seller does load the good, he does so at buyer's risk and cost. If parties wish seller to be responsible for the loading of the goods on departure and to bear the risk and all costs of such loading, this must be made clear by adding explicit wording to this effect in the Contract of sale.
F
Fabricated fuel — fuel assemblies composed of an array of fuel rods loaded with pellets of enriched uranium dioxide
Fabricator — a company that processes refined (cathodes, ingots, billet etc) or semi-fabricated (extrusions, sheet metal etc) metal to produce products for sale to end consumers
Face value — the nominal value given to legal tender coin or currency
Fair value — the theoretical price at which a futures contract or a commodity would be expected to trade
FAS (Free Alongside Ship (named loading port)) — the seller must place the goods alongside the ship at the named port. The seller must clear the goods for export. Suitable only for maritime transport but NOT for multimodal sea transport in containers (see Incoterms 2010, ICC publication 715). This term is typically used for heavy-lift or bulk cargo
FCA (Free Carrier (named places)) — the seller hands over the goods, cleared for export, into the custody of the first carrier (named by the buyer) at the named placed. The buyer pays for carriage to the named point of destination, but risk passes when the goods are handed over to the first carrier
Federal Funds — ta way to describe the funds that are deposited by member banks at the Federal Reserve. Frequently, the funds are being loaned from one member bank to another
Federal Funds Rate — the interest rate for using federal funds
Federal Reserve System — created in 1913 by the Federal Reserve Act, the Federal Reserve System helps ensure that banks will always be able to protect their investors by keeping reserve funds on hand. When a bank is ‘insured’ by the Federal Reserve, all depositors who have funds less than $100,000 are guaranteed that their funds will be available for withdrawal
Fill order — an order that must be filled immediately (or cancelled)
Fill-or kill — a customer order that is a price limit order that must be filled immediately or cancelled
Financial Instrument — a somewhat murky sounding term, there are actually only two types of financial instruments which deal with ways to structure debt and equity. A debt instrument is an another term for a loan with interest
Fine weight — the weight of gold contained in a bar, coin or bullion as determined by multiplying the gross weight by the fineness
Fineness — the proportion of precious metal in an alloy expressed as parts in 1,000; thus 995 or two nines five is 995/1000 or 99.5% pure
First Notice Day — when a futures contract requires fulfilment of the delivery of the commodity, the first day that this is possible is referred to as the first notice day. The delivery period is usually about a month in total, depending on the particulars of the contract. The seller gives this notice to a clearinghouse, which correspondingly informs the buyer on their behalf
Fix — the London gold fixing takes place twice daily (10.30 am and 3.00 pm) over the telephone and sets a price at which all known orders to buy and sell gold on a spot basis at the time of the fix can be settled. The fix is widely used as the benchmark for spot transactions throughout the market, also in silver, platinum, palladium and rhodium
Flag — in technical analysis, one of the basic chart patterns. In a bull market a flag occurs when prices consolidate for a period then continue to rise. In a bear market the converse occurs, ie, prices resume falling after a period of consolidation
Flat Price Trading — "…is trading the outright commodity, as opposed to trading spreads or cracks…".
Flat rate forwards — forward contracts offering a constant contango throughout the life of the contract
Float/ flotation — the first public offering of a company's shares or securities on a regulated exchange
Floor — in Trading- a recognised low point in market prices. This may be a point the market does not expect the price to fall below, the lowest price achieved before the market rises or a level set by a customer as a minimum selling price
Floor Broker — the individual who physically cries out bids and offers on behalf of other
Floor Trader — a member of the exchange who trades entirely for his own account in the pit
FOB — Free on Board. A FOB price usually includes cost of transport, insurance and loading onto a vessel at the port of departure
Forward (cash) contract — a cash contract in which a seller agrees to deliver a specific cash commodity to a buyer sometime in the future. Forward contracts, in contrast to futures contracts, are privately negotiated and are not standardized
Forward Curve — is a graph of forward prices over different forward time periods
Forward premium — the difference between spot and forward quotations which will be determined by money and precious metal interest rates and storage charges
Forward Price — is the forward price is established by a contract in which you set the price now, but delivery and payment occur at a future date
Forward Rate Agreement — is an OTC derivative contracts that allow banks to take positions in forward interest rates. The contract gives the right to lend/borrow funds at a fixed rate for a specified period starting in the future
Forward Transaction — purchase or sale for delivery and payment at an agreed date in the future
Fractionation — the process by which saturated hydrocarbons are removed from natural gas and separated into distinct products, or "fractions," such as propane, butane, and ethane.
Fuel ethanol — ethanol intended for fuel use. Fuel ethanol in the United States must be anhydrous (less than 1 percent water). Fuel ethanol is denatured (made unfit for human consumption), usually prior to transport from the ethanol production facility, by adding 2 to 5 volume percent petroleum, typically pentanes plus or conventional motor gasoline. Fuel ethanol is used principally for blending in low concentrations with motor gasoline as an oxygenate or octane enhancer. In high concentrations, it is used to fuel alternative-fuel vehicles specially designed for its use. See Alternative-Fuel Vehicle, Denaturant, E85, Ethanol, Fuel Ethanol Minus Denaturant, and Oxygenates
Full Carrying Charge Market — essentially, this term refers to a market that takes into account the differences in price between storage, interest and insurance depending on the particular delivery month of the commodity
Fully Disclosed — while an FCM carries the account, the account is clearly named after the individual owner
Fundamental analysis — the study of basic underlying factors which will affect the supply and demand of the commodity being traded
Futures Commission Merchant (FCM) — also known as a Wire House or Commission House. Somewhere between a broker and an individual, an FCM can buy and sell futures and options for clients, whether those clients are individuals or large companies
Futures Contract — a legally binding agreement, made on the trading floor of a futures exchange, to buy or sell a commodity or financial instrument sometime in the future. Futures contracts are standardized according to the quality, quantity, and delivery time and location for each commodity. The only variable is price, which is discovered on an exchange trading floor
Futures curve — the series of prices that someone would be willing to transact today, for future delivery periods. It is the current snapshot of the sum of all market participants expectation of prices in the future for a commodity. The futures curve is also referred to as a forward curve
Futures Exchange — the forum for buying and selling of futures and options. An exchange provides the regulations for the transactions carried on within its walls, but it does actually gain any financial benefit from these transactions
G
Gallon — a volumetric measure equal to 4 quarts (231 cubic inches) used to measure fuel oil. One barrel equals 42 gallons
Gamma — the sensitivity of an option's delta to changes in the price of the underlying instrument
Gap through — when a market opens or trades through the specified level of a market order without actually trading at the price of the market order
Gas to liquids — a process that combines the carbon and hydrogen elements in natural gas molecules to make synthetic liquid petroleum products, such as diesel fuel
Gasification — a method for converting coal, petroleum, biomass, wastes, or other carbon-containing materials into a gas that can be burned to generate power or processed into chemicals and fuels
Gasoil — an intermediate distillate product used for diesel fuel, heating fuel and sometimes as feedstock. In US parlance: No. 2 Heating Oil
Gasoline — volatile motor fuel used in cars. See also octane number
Gasoline blending components — Naphthas which will be used for blending or compounding into finished aviation or motor gasoline (e.g.,straight-run gasoline, alkylate, reformate, benzene, toluene, andxylene). Excludes oxygenates (alcohols, ethers), butane, and pentanes plus
GlobalCOAL — was founded by leading members of the world coal industry to promote the development of the coal markets through screen trading of standardised coal products. Its mission has been achieved through three major innovations. Firstly, globalCOAL defined a range of standardised coal quality specifications, which was then imbedded in its Standard Coal Trading Agreement (SCoTA®) - now widely established as the contract of choice for the sale and purchase of seaborne thermal coal
GLOBEX — the global electronic trading system
GOFO — Gold Forward Offered Rate. The gold equivalent to LIBOR. The rates at which dealers will lend gold on swap against US dollars
Gold loan — a financing mechanism whereby gold is borrowed from a bullion bank (which has usually borrowed it from a central bank or banks), and sold into the market to raise cash, usually to finance a gold mining operation. The metal is then repaid over an agreed period of time. The interest on the loan is usually paid either in dollars or in gold subject to the agreement between the counter-parties
Good delivery bars — also referred to as large bars, the ingots that conform to London Good Delivery standard
Good delivery standard — the specification to which a gold bar must conform in order to be acceptable on a certain market or exchange. Good delivery for the London Bullion Market is the internationally accredited good delivery standard
Governance — (Risk and Compliance) – is an umbrella term, covers an organization's approach across governance, risk management and compliance; it implies the process of integration across these three areas to to avoid conflicts, overlaps and gaps
Grade — the mass of desired metal(s) in a given mass of ore
Grain — one of the earliest units of weight for gold. 1 grain = 0.0648 grams or 0.002083 troy ounces. 15.43 grains = 1 gram; 480.6 grains = 1 troy ounce; 24 grains = 1 pennyweight
Grain Terminal — a method of storage and transport for physical grain supplies. Frequently, this terminal takes the shape of an enormous elevator which can interconnect with either ships or railroads
Greenhouse effect — the result of water vapor, carbon dioxide, and other atmospheric gases trapping radiant (infrared) energy, thereby keeping the earth's surface warmer than it would otherwise be. Greenhouse gases within the lower levels of the atmosphere trap this radiation, which would otherwise escape into space, and subsequent re-radiation of some of this energy back to the Earth maintains higher surface temperatures than would occur if the gases were absent
Greenhouse gases — hose gases, such as water vapor, carbon dioxide, nitrous oxide, methane, hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride, that are transparent to solar (short-wave) radiation but opaque to long-wave (infrared) radiation, thus preventing long-wave radiant energy from leaving Earth's atmosphere. The net effect is a trapping of absorbed radiation and a tendency to warm the planet's surface
Gross Domestic Product (GDP) — usually measured in the period of one year, this is the combined value of all the services and goods that originate from a single economy
Gross National Product — this is a formula that takes the GDP, adds it to all the money earned by the residents of that country from investments they made in other countries, then subtracts any income that was generated in the domestic economy by non-residents
Gross Processing Margin — specific to soybeans, this measures the cost shortfalls or gains between how much the raw product actually cost versus the income generated from processed meal and oil
GTC (Good 'Til Cancelled) — applicable to market orders, it signifies that the order will be open and carried forward indefinitely until it is either filled or cancelled by the client
Guaranteed Introducing Broker — Essentially a letter of recommendation from an FCM to his or her clientele, assuring them that introducing broker’s actions will be handled by the FCM, should any financial or other responsibilities arise during the introducing broker’s dealings with those clients
H
Haircut — in computing the value of assets for purposes of capital, segregation, or margin requirements, a percentage reduction from the stated value (e.g., book value or market value) to account for possible declines in value that may occur before assets can be liquidated
Hallmark — a mark or number of marks made on gold or silver jewellery and other fabricated products to confirm that the quality is of the carat fineness marked on the item
Head — and – in technical analysis, a three-peak pattern resembling the head and shoulders outline of a person, which is used to chart stock and commodity price trends. The pattern indicates the reversal of a trend. As prices move down to the right shoulder, a head and shoulders top is formed, meaning that prices should be falling. A reverse head and shoulders pattern has the head formation at the bottom of the chart and means that prices should be rising
Hedge — the reduction of risk by covering anticipated commitments at a fixed price in the future through a futures or options contract. Buyers and sellers can hedge
Hedger — in and out of the market only when there is a (strategic) business; reduce/eliminate the risk faced from potential future price movements; business objective driven; reduce/eliminate exposure to volatility of the business; want certainty at the cost of sacrificing away potential upside; no surprise approach
High — much like a temperature reading, the price ‘high’ is recorded daily for each futures or options agreement
High grade — in metals -the best or richest ore in a deposit
Historical volatility — is the realized volatility of a financial instrument over a given time period
Hog/Corn Ratio — this is another version of the feed ratio, except it is concentrated principally on hogs and corn
Holder — the buyer of an option, more commonly referred to as the taker
Horizontal spread — the purchase of either a call or put option and the simultaneous sale of the same type of option with typically the same strike price but with a different expiration month. This is also referred to as a calendar spread
House account — an account designated for the brokers' own transactions
I
ICMM — the International Council on Mining and Metals (ICMM) was established in 2001 to act as a catalyst for performance improvement in the mining and metals industry. Today, the organization brings together 18 mining and metals companies as well as 30 national and regional mining associations and global commodity associations to address the core sustainable development challenges faced by the industry
Implied volatility — is the estimated volatility of a security's price
In-The-Money (ITM) — an option which has intrinsic value. A put option is in-the-money when its strike price is above the value of the underlying futures contract. A call option is in-the-money when its strike price is below the value of the underlying futures contract
Independent Introducing Broker — unlike a guaranteed introducing broker, an introducing broker has to actually be responsible for minimum money requirements
Indicative bid — a bid given by a trader and or quoted by a broker that is an indication of where the trader is willing to trade. Another trader or a broker can not execute a trade based on this bid with out prior consultation with the bidder. An indicative bid needs to be “firmed up” (e.g. where the broker calls the trader to confirm that he is willing to trade at that price (if the trader is willing to trade at that price he will give a Firm bid
Ingot — a form of metal bar, often a preferred form for delivery. Derived from casting into a simple shape for hot working or remelting
Initial deposit/ Margin — funds put up as security for the guarantee of the contract fulfilment at the beginning of a futures or options contract
Initial margin — the returnable collateral required to establish an options position
Integrated metals producer — a metals producer who also owns the smelting and semi-fabricating facilities
Intercommodity spread — the purchase of a given delivery month of one futures market and the simultaneous sale of the same delivery month of a different, but related, futures market
Intercontinental Exchange (ICE) — operates leading regulated exchanges, trading platforms and clearing houses serving the global markets for agricultural, credit, currency, emissions, energy and equity index markets. ICE Futures Europe trades half of the world's crude and refined oil futures
Interdelivery Spread — also known as intramarket spread. Much like an intercommodity spread, except that the transaction takes place on the same exchange market
Interest yield — in the context of the LME, interest yield refers to the profit earned by borrowing metal in a contango market, sometimes giving the user a greater return than is available from the current interest rate on money
Intermarket Spread — almost identical to the interdelivery spread, but in this case the transaction takes place in two entirely separate markets
Intrinsic value — refers to options. The difference between the current spot price and the option strike (or exercise) price, i.e., the in-the-money element
Introducing broker — a person or organization that solicits or accepts orders to buy or sell futures contracts or commodity options but does not accept money or other assets from customers to support such orders
Inverted market — a futures market in which the relationship between two delivery months of the same commodity is abnormal
Investment — investing cash through positions in energy markets, with the intention of earning returns on these positions
Invisible Supply — occasionally, commodities are ‘hidden’ in the storage of manufacturers and retailers, and can’t be easily counted or inventoried. These commodities are supposed to be part of the market, but may simply be impossible to accurately count
ISDA Master Agreement — a standardized contract which is typically used between a derivatives dealer and their counterparty when discussions begin surrounding a derivatives trade. There are two basic forms of Master Agreement: single jurisdiction/currency and multiple jurisdiction/currency. One of these documents is generally combined with a Schedule to set out the basic trading terms between the parties; each subsequent trade is then recorded in a Confirmation which references the Master Agreement and Schedule. The terms of the Schedule are often negotiated, and many firms have preferred versions of the Schedule
J
Joint venture — a contractual agreement between two or more parties for the purpose of executing a business undertaking. All parties agree to share in the profits and losses of the enterprise
K
Karat — unit of fineness, scaled from one to 24. 24 karat gold (or pure gold) has at least 999 parts pure gold per thousand; 18-karat has 750 parts pure gold and 250 parts alloy, etc
Kerb — on LME- a trading session when open-outcry transactions occur freely outside of scheduled ring times and when all or some of the LME metals are traded simultaneously
Key reversal — in technical analysis, a crucial change in price direction, signalling an end to either a bull or bear market
Key Risk Indicator — measures the riskiness of a specific activity
Kilo Bar — a popular small gold bar. A one-Kg bar .995 fine = 31.990 troy ounces, and a one-KG bar 9999 fine = 32.148 troy ounces
Knock-in — in options, an exotic option in which the option becomes valid only when a pre-agreed price level (usually different to the strike price) is touched during the lifetime of the option
Knock-out — an exotic option which is automatically terminated or "knocked out" if the price of the underlying asset reaches a predetermined level (usually different to the strike price) during the lifetime of the option
Kyoto Protocol — adopted at the Third Conference of the Parties to the United Nations Convention on Climate Change held in Kyoto, Japan in December 1997, the Kyoto Protocol commits industrialized country signatories to collectively reduce their greenhouse gas emissions by at least 5.2% below 1990 levels on average over 2008–12 while developing countries can take no regret actions and participate voluntarily in emission reductions and removal activities through the CDM. The Kyoto Protocol entered into force in February 2005
L
L.C.H.Clearnet — the London Clearing House, is an independent financial clearing house, serving major international exchanges and trading platforms, as well as a range of OTC markets. Its main business is in Europe where it clears for a number of commodity, derivative and equity exchanges, as well as being the largest over-the-counter interest rate swap clearer. It clears a broad range of asset classes including: securities, exchange traded derivatives, energy, freight, interbank interest rate swaps and euro and sterling denominated bonds and repos. As a clearing house, LCH.Clearnet sits in the middle of a trade, assuming the counterparty risk involved when two parties (or members) trade. When the trade is registered with a clearing house, it becomes the legal counterparty to the trade, ensuring the financial performance; if one of the parties fails, a clearing house steps in. To reduce the risk to LCH.Clearnet initial and variation margin (or collateral) is collected from members; should they fail, this margin is used to fulfil their obligations. The amount of margin is based on member's positions and market risk on a daily basis
Last Trading Day — after this time, no further trading may take place on a particular option or future
LBMA — the London Bullion Market Association acts as the coordinator for activities conducted on behalf of its members and other participants in the London Bullion Market, and it is the principal point of contact between the market and its regulators
Leaching — the extraction of a soluble metallic compound from ore by dissolving the metals in a solvent
Lending — one way f trading a metals carry. In this case the simultaneous selling of metal for a near dated prompt and the buying of that metal for a later dated prompt. In effect the party is lending the metal for the period
Leverage — the potential to magnify profits or losses by incurring exposure to large positions from a small investment outlay
Lifting a leg — the closing of one side of a balanced position, thus offering exposure to price movement
Limit order — an order that has restrictions placed on it. The customer specifies a price and the order can only be executed if the market moves to or betters that price
Limit up — the maximum price increase or decrease from the previous closing price. There are no set limits on LME contracts, but under LME rules, limits can be imposed under certain circumstances
Liquidate — also known as Offset. Essentially, the action of buying or selling a contract or position
Liquidity — is the ease with which something can be bought or sold (converted to cash) in the marketplace; A large number of buyers and sellers and a high volume of trading activity are important components of liquidity; Depth, or the ability of the market to absorb either a large buy or a large sell order without a significant price change in a security, is also crucial to the liquidity of the market
Liquidity risk — can be market (transactional) liquidity risk and funding (payment) liquidity risk
LME — London Metal Exchange – is the futures exchange with the world's largest market in options, and futures contracts on base and other metals. As the LME offers contracts with daily expiry dates of up to three months from trade date, along with longer-dated contracts, it also allows for cash trading. It offers hedging, worldwide reference pricing, and the option of physical delivery to settle contracts
LMESELECT — LME's electronic platform
Loan Program — type of financial agreement between farmers and the government, which allows farmers to essentially take out money based on their expected crop yields of the following year
Loan Rate — this refers to the money loaned to a farmer based on an individual unit of an agricultural commodity
Local — an exchange member who is trading for his account only
Long hedge — buyer futures contracts to protect against a possible price increase of cash commodities that will e purchased in the future. At the time the cash commodities are bought, the open futures position is closed by selling an equal number and type of futures contracts as those that were initially purchased. Also referred to as a buying hedge
Long Position — is to net own a commodity in a Market. A Long position is taken in the expectation that prices will rise. Think of something you own e.g. Your house. You are Long one house and would prefer its value to increase
Long straddle — the purchase of call and put options with the same exercise price and expiry date. The investor expects a significant increase in volatility; direction of prices is not of prime importance
Lookback option — a history dependent option where the settlement at maturity is reliant not only on whether the option is in-the-money at expiry, but also on the maximum or minimum price achieved by the underlying asset during at least some part of the option life
Lot — commonly used word for a standard futures contract
Low — the lowest recorded daily price for an individual commodity
M
Maintenance Margin — the minimum amount of money due from a customer to keep his claim on a particular option or future
Margin — in trading, a deposit, or collateral, required as security against open positions in futures, forwards or options markets. Also called "Initial Margin" or "Original Margin"
Margin call — money that is called for from the client during the life of the transaction to cover exposure resulting from an adverse price movement
Marginal cost pricing — a system of pricing designed to ignore all costs except those associated with producing the next increment of power generation. Sometimes referred to as incremental cost pricing
Mark-to-market — to revalue futures/option positions using current market prices to determine profit/loss. The profit/loss can then be paid, collected or simply tracked daily (see variation margin)
Market liquidity risk — refers to the ability to trade assets with negligible price concessions
Market maker — in LME terms, a broker who quotes prices for both buying and selling metal or plastics. LME brokers are allowed to make markets to their customers but are not obliged to do so
Market Open Interest (MOI) — is a calculation produced by the LME to represent open exchange positions of all members and clients for a particular prompt date. MOI is calculated from open positions reported to the LME by members. The LME reports MOI in lots for each contract and by individual prompt date. MOI is an indication of the liquidity and depth of the market
Market order — an order given to a dealer for immediate execution, to buy or sell at the best prevailing price. Also known as "At Best" or "At Market"
Market Profile — a professional method of comparing and contrasting price data, which is frequently utilized by traders
Market Reporter — the individual who records all pit prices. This person usually receives a paycheck from the exchange
Market risk — is defined as the risk of losses in on- and off-balance-sheet positions arising from movements in market prices, and typically encompass the risks pertaining to interest rate related instruments and equities in the trading book, and foreign exchange risk and commodities risk throughout the bank
Market squeeze — excess demand over supply on a particular prompt date or period that causes the price (s) for that date (period) to rise more sharply than surrounding prices
Market-if-touched — an order that becomes a market order if a specified price is achieved. A sell MIT order is placed above the current market price, a buy MIT order is placed below the current market price
MASP — monthly average settlement price. The average of the daily official settlement prices for the month
Matching — the process by which trades are input by two brokers who have made a trade with each other in order to confirm the trade
Matching period — a specified period of time, by which trades must be matched
Maturity — the date when a futures contract that has not been offset by an opposite position must be settled by delivery of physical metal
Merchant — a dealer in physical metal who sources stocks and markets for customers but neither produces nor consumes metal for his own use
Merger — when two companies combine in order to form one entity
Metallurgy — the production of metals from raw materials such as ore concentrates, residues and recycling materials
Milling — the first stage of mineral processing. Ore pieces from the mine are further mechanically reduced in size to maximise efficiency of the concentration process
Min/ Max — a zero cost collar-style hedging strategy whereby a client sells one option in exchange for another. In bullion markets, primarily used by producers who grant call options in exchange for put options – in this case, the structure guarantees that the client will receive a minimum pre-determined price in exchange for a possible opportunity loss if the actual price at maturity is above a maximum level, as determined by the strike price of the call option granted
Mining — the extraction of economically important minerals and ores from the earth
Mining — feasibility study – an assessment of the economic viability of a potential mining project
Money Supply — much as it sounds, this is a measure of the total available funds in the economy. It is measured not only by flowing currency, but by all recorded bank deposits and savings
Moulds — casting moulds made of copper, graphite, cast iron or steel for casting metal ingots
Moving average — in technical analysis this is a key trend line that is plotted on a bar chart, reflecting the progress or prices over a given period of time
Municipal Bonds — these are debts put forth by official government bodies, usually of a local or state, as opposed to federal or international, affiliation
N
Naked option — the sale of an option by a party who does not hold the underlying asset to back it
National — the favored DSRO of most FCM’s
Natural long — a market actor who is intrinsically long is a natural long. E.g. a power generator is a natural long as it would normally hold the ownership to physical power
Natural short — a market actor who is intrinsically short is a natural short. E.g. a power supplier (distributor) without its own generation would normally have obligation to supply its customers with power and hence be naturally short
Nearby Delivery Month — also known as a Spot Month. The delivery month of a futures contract that is chronologically soon
Net Asset Value — a way of measuring each person’s relative value of participation in a commodity pool scenario
Net change — the difference between the closing price of an instrument on the day's trading and the previous day's closing price. Net change can be positive or negative, and is quoted in terms of currency
Net Performance — a method of measuring the net increase or decrease of all asset value
Netting — is the settlement of mutual obligations by cancelling out mutual debts; settlement is at the net exposure and not at the gross exposure
Noise — normal everyday market movement, up and down without really going anywhere. The ebb and flow of everyday market movement
Noise — normal everyday market movement, up and down without really going anywhere. The ebb and flow of everyday market movement
NYMEX — The New York Mercantile Exchange - is the world's largest physical commodity futures exchange, located in New York City. Its two principal divisions are the New York Mercantile Exchange and Commodity Exchange, Inc (COMEX) which were once separate but are now part of the same company
O
Offer — the price at which a dealer is willing to sell. See also "Ask"
Offer Price — is the price at which you can buy
Official Prices — the last bid and offer prices quoted in the second ring of the morning session, commonly used by industry as a reference price for the day
Offset — taking a second futures or options position opposite to the initial or opening position. Selling (or purchasing) futures contracts of the same delivery month purchased (or sold) during an earlier transaction or making (or taking) delivery of the cash commodity represented by the futures contract
Oil trading — a trade of oil and oil products
Omnibus Account — an account managed by an FCM under the name of the FCM, even if the account is actually owned by other individuals
OPEC — 'Organization of the Petroleum Exporting Countries’ – is an intergovernmental organization of twelve developing countries made up of Algeria, Angola, Ecuador, Iran, Iraq,Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela. OPEC has maintained its headquarters in Vienna since 1965, and hosts regular meetings among the oil ministers of its Member Countries. Indonesia withdrew in 2008 after it became a net importer of oil, but stated it would likely return if it became a net exporter again. One of the principal goals is the determination of the best means for safeguarding the organization's interests, individually and collectively. It also pursues ways and means of ensuring the stabilization of prices in international oil markets with a view to eliminating harmful and unnecessary fluctuations; giving due regard at all times to the interests of the producing nations and to the necessity of securing a steady income to the producing countries; an efficient and regular supply of petroleum to consuming nations, and a fair return on their capital to those investing in the petroleum industry.
Open interest — open interest is the number of open contracts on a given future or options contract. Longs or shorts that have not been closed out are OI. Short-covering/profit-taking will tend to reduce OI
Open Market Operation — the term for the sale and purchase of government notes, bills, and bonds
Open outcry — a style of trading conducted on a futures exchange in a ring or a pit where dealers face each other, calling out the price, contract, month and number of contracts
Open pit — a mine based on extraction from a surface excavation, which remains open to the surface for the life of the mine
Open position — a market position which has not been closed out
Opening range — a range of prices at which buy and sell transactions took place during the opening of the market
Option — an option is the right but not the obligation to buy and sell a pre-determined quantity of an underlying asset at a pre-determined price by or on a defined date
Option buyer — the purchaser of either a call or put option. Option buyers receive the right, but not the obligation, to assume a futures position. Also referred to as the holder
Option premium — the price of an option the sum of money that the option buyer pays and the option seller receives for the rights granted by the option
Option price — is the buyer of the options contract pays for the right to buy or sell a security at a specified price in the future
Option seller — the person who sells an option in return for a premium and is obligated to perform when the holder exercises his right under the option contract. Also referred to as the writer
Option spread — the simultaneous purchase and sale of one or more options contracts, futures, and/or cash positions
Option writer — the person who sells an option in return for a premium and is obligated to perform when the holder exercises his right under the option contract. Also referred to as the option Seller
Original margin — the amount a futures market participant must deposit into his margin account at the time he places an order to buy or sell a futures contract. Also referred to as initial margin
Out-the-money (OTM) — an option which has no intrinsic value. A put option is out-of-the-money when its strike price is below the value of the underlying futures contract. A call option is out-of-the money when its strike price is above that of an the underlying futures contract
Over-the-counter (OTC) — or off-exchange trading is to trade financial instruments such as stocks, bonds, commodities or derivatives directly between two parties. It is contrasted with exchange trading, which occurs via facilities constructed for the purpose of trading (i.e., exchanges), such as futures exchanges or stock exchanges.
Overbought — a market in which the price, under excessive buying pressure, has risen too high and too fast without genuine fundamental support to maintain the new level
Oversold — a market which has fallen too far and too fast under excessive selling pressure and is expected to move back to a higher, more neutral level
P
Panning — the classic and simple method of mining alluvial gold
Paper gold — a term used to describe gold contracts such as loco London deals and futures contracts which do not necessarily involve the delivery of physical gold
Par — no significant growth or decrease in value from the face value of a particular security
Petroleum or crude oil — is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface.
Physical delivery — the transfer of ownership of an underlying commodity between a buyer and seller to settle a futures contract following expiry
Physical trade — trades that result in the delivery of the commodity i.e. not hedging, speculation or arbitrage
Pit — the area on the trading floor where futures and options on futures contracts are bought and sold. Pits are usually raised octagonal platforms with steps descending on the inside that permit buyers and sellers of contracts to see each other
Plain vanilla — is the standard type of a financial asset or instrument
Platinum Group Elements (PGE) / Platinum Group Metals (PGM) — the six metallic elements platinum, palladium, rhodium, ruthenium, iridium and osmium
Platts — is a provider of energy and metals information and a source of benchmark price assessments in the physical energy markets
Point-and-Figure Charts — relatively visually unengaging, a point and figure chart demonstrates very minimal price changes, regardless of whether it’s a day or a year
Position — the net tonnage a trader has bought or sold on any given prompt date. Also the overall position, being the net tonnage bought or sold for all prompt dates combined
Position limit — the maximum overall position a broker allows a customer. The limit may vary according to whether the customer is long or short and depending on the type of business in which they are involved
Precious metals — metals of great value being gold, silver, platinum and other platinum group metals
Premium — a one-off payment, made at the outset, to purchase an option. The premium is a write-off unless the option is traded on either at a profit or when some or all of the premium may be recovered
Price discovery — the generation of information about “future” cash market prices through the futures markets
Price Limit — set by the exchange, a limit in either growth or decline of the cost of a particular future
Price Limit Order — this is set by the customer, and determines the price at which a trade will occur
Primary Market — usually a commercial bank or a dealer who has been vetted and approved by the Federal Reserve
Prime Rate — banks set this rate of interest for their favored clientele
Principal to Principal — a contract where each party is acting as principal on its own account. LME Exchange contracts are between clearing members of the Exchange. These are novated overnight so that the LCH.Clearnet has a principal-to-principal contract with each clearing member
Producer Price Index (PPI) — ba way to measure how much it cost to manufacture items during the prior month
Producer's hedge — the purchase of futures or options or both as protection against a fall in raw material prices
Production standstill — regularly recurring production standstill in order that all furnaces and connected plant can be overhauled, maintained and repaired
Prompt date — the settlement date of a futures contract
Pulpit — the structure where market reporters record and deposit data on the trades happening around them
Purchase and Sale Statement (P&S) — tat the termination of a futures contract, an FCM sends out a statement to their customers detailing the total financial charges associated with this transaction
Purchasing (long) hedge — buyer buys contracts to protect against a possible price increase of cash commodities that will be purchased in the future. At the time the cash commodities are bought, the open futures position is closed by selling an equal number and type of futures contracts as those that were initially purchased. Also referred to as a buying hedge
Put option — an option that gives the holder the right (but not the obligation) to sell a specified quantity of the underlying instrument at a fixed price, on or before a specified date. The grantor of the option has the obligation to take delivery of the underlying instrument if the option is exercised
Put spread — an options position comprised of the purchase of a put option at one level and the sale of a put option at some lower level. The premium received by selling one option reduces the cost of buying the other, but participation is limited if the underlying goes down
Puts/Calls ratio — the ratio of puts to calls in an options market
Q
Quotation — refers to a time-sensitive price for a particular commodity or contract
R
Range — a way to compare the performance of a commodity over a set period of time by highlighting the low and high prices
Reciprocal of European Terms — essentially the reverse of European terms, whereby foreign currency is measured in terms of U.S. dollars
Refinery — A processing plant usually associated with a smelter that produces high purity metal
Refining — the separating and purifying the main metal (for example, gold or silver), from other metals
Regulations (CFTC) — the official rules that make possible the enforcement of the CEA
Reparations — when damages of a civil nature occur, the Commodities Futures Trading Commission uses ‘reparations’ to recover these funds.
Reportable Positions — trading firms and even individual investors or traders must begin to report their open contracts to an authorized exchange if they exceed a certain pre-determined number.
Repurchase Agreements (or Repo) — generally conducted for the purpose of government bonds, an agreement between the seller and the buyer that the seller will repurchase the sold item at a later time
Resistance level — a level at which a price trend is halted either temporarily or totally. See also "floor" and "ceiling"
Reverse Crush Spread — exactly as it sounds, this policy reverses the crush spread by selling soybean futures and purchasing the meal and oil futures
RHO — is a measure of an option's sensitivity to a change in interest rates; this will impact on both the future price of the option and the time value of the premium. Its impact increases with the maturity of the option
Ring — period of 5 minutes in which each metal is traded at the LME and a settlement quotation is fixed
Ring dealer — LME category one member firms that have the exclusive right to deal on the market floor
Risk — the exposure to adverse market movements, mischance or the possibility of losing money
Risk appetite — is the level of risk exposure an investor is willing to assume in exchange for the potential for a profit
Risk factor mapping — is a process that tells us how to convert selected risk factors into combinations of other risk factors
Risk management — a way to modify and control the risk profile of a firm's cash flows. This allows Management to adjust their exposure to specific risks, depending on their appetite for those risks.
Risk policy — outlines the risk management framework an organization in relationship to its objectives, and varies across and within industries and firm based on the ability to absorb losses and the rate of return it seeks from operations
Risk transfer — is the assumption of specific risk for a fee, or premium
Rogue trader — typically violates trading controls or manipulates reporting systems to hide his or her trading activity
Roll — a carry transaction, whereby an open position is "closed out" and replaced with a similar position for a prompt date further ahead
Roll over — the transfer of a position from one futures period to another involving the purchase (sale) of the nearby month and simultaneous sale (purchase) of a further-forward month.
Round — Turn –A kind of negating transaction which involves both the buying of and subsequent sale of futures which balances itself out
Rules NFA — as the usual DSRO, the NFA puts forth these series of guidelines to help administer its members
Runners — literally, individuals who must scurry from the phone banks with orders from clients to give to the pit brokers for fulfillment
S
Sampling — the selection of a small but representative part of an ore body or process material for analysis
Scalper — a trader who trades for small, short-term profits during the course of a trading session, rarely carrying a position overnight
Secondary metal — scrap metal that has been recycled
Segregated Account — also known as Customer Segregated Funds. Essentially, a way to categorize the money from customers as a separate entity from the money of the trading firm
Self-Regulatory Organization (SRO) — the body responsible for ensuring that rules are followed during financial transactions
Sell — to place an opening trade at the bid price of a spread in anticipation of the underlying market falling, commonly referred to as a "down trade", "taking a short position", or "going short". You can also sell at the bid price to close an existing long position
Sell signal — In technical analysis, a chart pattern which indicates a key reversal downwards in price
Selling (short) hedge — selling contracts to protect against possible declining prices of commodities that will be sold in the future. At the time the cash commodities are sold, the open futures position is closed by purchasing an equal number and type of futures contracts as those that were initially sold
Semi-fabricator — a company that processes refined material into shapes or forms for use by a fabricator
Settlement price — a price established at the close of a trading day used to calculate the settlement of futures contracts
Settlement risk — the risk that arises when payments are not exchanged simultaneously, generally arising due to time differences. One party to a transaction must effect payment or delivery in an earlier time zone without having confirmation of the receipt of a reciprocal asset in a later time zone
Short covering — the closure of short positions
Short hedge — selling futures contracts to protect against possible declining prices of commodities that will be sold in the future. At the time the cash commodities are sold, the open futures position is closed by purchasing an equal number and type of futures contracts as those that were initially sold
Short Position — is to net owe a commodity in a Market. You have an obligation to supply a commodity not currently owned to someone else. A Short position is taken in the expectation that prices will fall
Short Term Level Carries — in general, short level carries are a type of short dated carry where positions are rolled forward level (at the same price) with no contango or backwardation. It allows dealers or clients to "tidy" their books
Short-covering — to sell a long position, or buy back a short position
Silver — a lustrous, white, malleable and ductile precious metal, with remarkable electrical and thermal, light-reflecting, bacteria-killing, wear resistant, photosensitive and other qualities
Smelting — the process of melting ores or concentrates to separate out gold or silver from impurities
Spark spread — is the difference between the cost of electricity and the cost of converting natural gas to electricity
Speculation — involves the buying (long position), holding, selling, and short-selling (short position) of financial assets, commodities, foreign exchange, or derivatives, in the expectation that price fluctuations will generate a profit; a position that is not hedged or when simply buying or selling the asset with the hope of earning a profit
Speculative long — a trader who has bought a forward or future in the expectation of closing it out at a higher price
Speculative short — a trader who has sold a forward or future in the expectation of buying it back at a lower price
Speculator (characteristics) — frequent in & out of the market looking for potential gain opportunities; view driven; take a bet on the future direction of a market; want price volatility to increase; will enter into deals and set limits on when to exit.
Spot market — a market where goods are traded for immediate delivery
Spot month — the futures contract month closest to expiration. Also referred to as nearby delivery month
Spot price — is the spot price is the price for immediate payment and delivery
Spot settlement — delivery of metal and payment of money, which takes place two business days after the transaction date
Spread — the difference between two prices, either across time or between commodities or instruments.
Spread — an option trade in which two or more open positions are established in order to trade the differentials and offset risk. Option spreads may use different strike prices and/or expiry dates.
Spread-trading — buying one instrument/commodity and selling another, with a view to profiting from the change in the gap between the two markets.
Spreading — a form of hedging on two separate but similar commodities, except that it takes place over separate delivery months, and the profit is only realized once the transaction is complete
Standard Bar — 1) Gold bar weighing approximately 400 ounces or 12.5 kilograms and having a minimum fineness of 995 parts per 1,000 pure gold. 2) Silver bar weighing approximately 1,000 ounces with a minimum fineness of 999
Standard deviation — statistical measure of the degree to which an individual value in a probability distribution tends to vary from the mean of the distribution. Indicates probability of a variable or price falling within a certain width or band around the mean
Steer/Corn Ratio — much like the hog corn ratio and the feed ratio, this method measures how much it costs to feed cattle on a specific amount of corn
Stocklist — a distributor of semi-fabricated products who holds stock for sale to consumers
Stop loss — the risk management technique in which the trade is liquidated to halt any further decline in value
Stop or loss order — an order to close a position should the market rise above or below a stated level in order to minimise loss
Stop order — an order to buy or sell when the market reaches a specified point. A stop order to buy becomes a market order when the futures contract trades (or is bid) at or above the stop price. A stop order to sell becomes a market order when the futures contract trades (or is offered) at or below the stop price
Storage — typically onland tankage facilities for short- or long-term storage of crude or products; sometimes used in economic parlance interchangeably with the concept of oil stocks.
Straddle — purchase or sale of call and put options for the same underlying asset with the same expiry date and strike price
Strangle — in options, a speculative strategy of either buying or selling puts and calls, each with the same expiry date but with different strike prices
Strike price — the price at which an option holder has the right to buy or sell an underlying commodity/derivative
Supply, Law of — a reciprocal and equally fundamental pair to the Law of Demand, the law of Supply dictates how supply influences a particular item and its corresponding cost
Support — in technical analysis, the price level where new buyers are expected to emerge
Swap — Simultaneous purchase and sale of spot against forward
Switch — simultaneous purchase and sale of the same asset for different maturity dates
Synthetic — a strategy of buying a combination of futures and put options to achieve the equivalent position of buying a call option or buying a combination of futures and call options to achieve the equivalent position of buying a put option
T
TAEL — traditional Chinese unit of weight for gold. 1 tael = 1.20337 troy ounces = 37.4290 grams. The nominal fineness of a Hong Kong tael bar is 990 but in Taiwan 5 and 10 tael bars can be 999.9 fine
Tailings — fine grained remains of ore once most of the valuable material has been removed in the concentration process
Tapis crude — is a Malaysian crude oil used as a pricing benchmark in Singapore. While it is not traded on a market like Brent Crude or West Texas Intermediate, it is often used as an oil marker for Asia and Australia.
TAPO — an LME Traded Average Price Option, the value of which is based on the average of the daily official settlement prices for the relevant month
Technical analysis — the study of charts of historical price movements to establish a pattern in order to predict price movements and establish trigger points when either a sale or purchase should be made
The Carbon Capture & Storage Association (CCSA) — was launched in March 2006 to represent the interests of its members in promoting the business of capture and geological storage of carbon dioxide (known as Carbon Capture and Storage, or CCS) as a means of abating atmospheric emissions of carbon dioxide and, potentially, as a means of enhancing the production of fossil hydrocarbons. From its base in London the CCSA brings together specialist companies in manufacturing & processing, power generation, engineering & contracting, oil, gas & minerals as well as a wide range of support services to the energy sector such as law, banking, consultancy and project management. The Association is a model for sectoral cooperation in business development and its existence is welcomed by government
The International Swaps and Derivatives Association (ISDA) — a trade organization of participants in the market for over-the-counter derivatives.
Theta — in options, the rate of change in the value of the option with respect to time with all else remaining the same
Tick — the minimum movement of the market in question, also commonly referred to as a "point." The value of a tick can vary by type or size of bet or trade
Time Limit Order — in the same vein as stop limit orders and price limit orders, a time limit order is also designated by the customer. The order may only be sold during a limited time
Time value — the time component in a premium for an option art. Typically the time value of an option declines as it moves closer to expiry
Time-Stamped — a particular order will bear two distinct time stamps, relating to the time when it first arrived on the floor, and when the transaction was finally finished
TOCOM — the Tokyo Commodity Exchange, established in 1984
TOLA — traditional Indian unit of weight for gold. One tola = 0.375 troy ounces = 11.6638 grams. The most popular sized bar is 10 tola = 3.75 troy ounces
Tolling Agreement — an agreement between two companies in which one agrees to supply a certain amount of a raw material every so often. For example, an oil refinery and a drilling company may agree that the drilling company will sell the refinery a certain number of barrels of crude oil every month so that the refinery has something to refine. Tolling agreements are relevant to supply chains; because of the tolling agreement, the refinery in the above example may be more confident that it can sell refined oil to other companies along the supply chain. Tolling agreements can therefore be mutually advantageous
TOM — the market term used to refer to 'cash today' as the prompt date falling on the next business day
Total Return Swap — is an equity swap where the receiver gets a payment equal to the total return-capital gains plus dividends-of a stock over a fixed period of time, usually a calendar quarter
TOUCHED — the phrase 'at market if touched' refers to an order to execute a buy or sell trade should the market reach a stated price level
Transaction cost — is an expense incurred in buying or selling a security, including commissions, markups, markdowns, fees, and any direct taxes as well as the potential cost of executing the trade in the market due to widening spreads and liquidity considerations
Transfer — the movement of a customer's contract from one broker's account to another, usually done to reduce margin exposure or to net down warrant delivery obligations
Transparency — relates to the full, accurate, and timely disclosure of otherwise internal business, financial, or accounting information
Treatment Charge (TC) — a treatment charge made by galvanisers and refiners for their services
Troy Ounce — the traditional unit of weight used for precious metals which was attributed to a weight used in Troyes, France, in medieval times. One troy ounce is equal to 1.0971428 ounces avoirdupois
U
U.S. Treasury Bill — the shortest term of all government financial instruments, with an expiration of one year. Generally, these bills are sold at less than face value; when the government buys them back, they are purchased at their face value, thereby giving the buyer incentive to purchase them in the first place.
U.S. Treasury Bond — the longest term of all government financial instruments, with an average expiration date of more than 10 years.
U.S. Treasury Note — between a treasury bill and bond lies the note, which has an expiration period between one and ten years
Unallocated account — an account where specific bars are not set aside and the customer has a general entitlement to the metal. This is the most convenient, cheapest and most commonly used method of holding metal. The holder is an unsecured creditor
Uncovered Option — also known as a Naked Option. Essentially, an option that can’t be hedged or otherwise ‘saved’ by the last minute buying or selling of another future. The option can either be a put or a call
Underlying — the variable on which a futures, option or other derivative contract is based
Underlying asset — is the asset on which the price of a derivative depends
Underlying Futures Contract — in options, the rate of change in the value of the option with respect to time with all else remaining the same
V
Value at risk(VaR) — Value at Risk is probably the most common metric used for market risk management. VaR is a measure of the potential variability in the mark-to-market value of a portfolio. It is particularly useful as a short-term risk metric for trading firms, but it has very limited information for most energy and commodity firms
Vanilla option — the date agreed between parties for the settlement of a transaction
Variable Limit — also known as a variable price limit. This allows for exceptions to the minimum or maximum price restrictions set by the commodities exchange. Usually, these variable prices are limited to a period of one trading day, and are set in order to allow for the trade of one particular high quantity commodity
Variation margin — additional margin, or collateral payable by an investor, resulting from an adverse movement in the price of the underlying asset in a forward, futures or options contract
Vega — , a measure of sensitivity to volatility, is the first derivative of the option value with respect to the volatility of the asset or instrument underlying the option
Vertical spread — buying and selling puts or calls of the same expiration month but different strike prices
Volatility (historical volatility) — the degree to which a particular price has fluctuated in the past
Volatility (options) — a value attributed to an underlying futures contract which determines the premium that is set by the grantor. Includes an element of historical volatility, and the volatility which the grantor of an option believes will still be seen in that futures contract
Volume — on futures exchanges, the number of contracts traded in a session
W
Wafer — a thin gold bar popular in the Middle East, South East Asia and Japan
Warehouse receipt — a warehouse or depository receipt is issued when delivery is taken on a futures exchange. It specifies the quantity and fineness// grade of metal held
Warehouse stocks — each business day the London Metal Exchange publishes a stock report. This report provides an overview of the quantity of material for each contract currently held on warrant in LME approved warehouses. The report takes in to account all movement of stock, on and off warrant, by 1600 (London Time) on the previous business day
White gold — a gold alloy containing whitening agents such as silver, palladium or nickel as wel as other base metals. Often used as a setting for diamond jewellery
Window option — an option whose outcome depends on the performance of the underlying during the life of the option and whether that price lies between certain parameters on a certain observation day or days
Wire House — an institution which is linked by its communication methods, but may not necessarily have one central brick and mortar location, such as a series of bank branches
Writer — in options, the seller or granter of the option
WTI — West Texas Intermediate crude oil. WTI crude is deemed to be traded at Cushing, Oklahoma. Traders typically refer to the NYMEX Light Sweet Crude futures contract as the WTI contract, although the contract allows delivery of other grades
Y
Yield — the amount of money that will return from an investment. Can be measured in several different ways, and with different time periods, although it is usually measured annually
Yield curve — the relationship between interest rate yields and maturity lengths. The yield curve normally has a positive slope (ie, upwards) because yields on long-term interest rates usually exceed short-term yields. An investor expects a higher return for holding an asset for a longer time, hence yields normally increase with maturity length
Yield to Maturity — the anticipated return rate for a bond held until it matures. Involves calculations of coupon interest rate, current market price, par value, and time to maturity
Z
Zero-cost option — an option strategy under which one option is purchased by simultaneously selling another option of equal value. (see also Min/Max)
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