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