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quantity exposed pit bids offers including intended execution price hit acceptable unexecuted balance crossed contraside trader lox procedures large traders large trader holds controls position future option expiration series commodity contract market equaling exceeding exchange cftc specified reporting level notice day final day notices intent deliver futures contracts may issued trading day day trading ceases maturing current delivery month leaps long dated exchange traded options leverage contract contract standardized terms conditions long term years longer purchase long leverage contract sale short leverage contract leverage customer leverage commodity provides participation leverage transaction merchant principal leverage transaction initial maintenance margin payments leverage customer periodic payment leverage customer accrual leverage transaction merchant leverage customer variable carrying charge fee initial value contract plus margin deposits leverage customer connection short leverage contract delivery commodity amount form readily purchased sold normal commercial retail channels delivery leverage commodity satisfaction balance due contract determination contract purchase repurchase sale resale prices leverage transaction merchant leverage dealer see leverage transaction merchant leverage transaction merchant individual association partnership corporation trust engaged business offering enter entering confirming execution leverage contracts soliciting accepting orders leverage contracts accepts leverage customer funds extends credit lieu funds licensed warehouse warehouse approved exchange commodity may delivered futures contract see regular warehouse life contact period trading particular futures contract expiration trading cases phrase denotes period passed trading occurred example life contract high far life delivery life future limit maximum price advance decline previous settlement price permitted trading session fixed rules exchange see daily price limits limit move price advanced declined permissible limit trading session fixed rules contract market limit definite price stated customer broker restricting execution order to sell stated price limit order order customer specifies price limit condition time order contrasted market order implies order filled soon possible liquidation closing long position term denote closing short position referred covering see cover liquid market market selling buying accomplished minimal price change local member exchange trades account fills orders customers activities provide market liquidity see floor trader locked hedged position lifted offsetting sides hedge spread see hedging refers caught limit price move london gold market refers dealers set fix gold price london mocatta amp goldsmid rothschild amp sons johnson matthey sharps pixley samuel montagu amp london option generic term describe options physical commodities futures contracts traded abroad typified options london commodity markets options whatsoever legitimate foreign markets gained notoriety prior ban united states sales practices fraud allegations associated american dealers sold long bought futures contract establish market position market position obligates holder take delivery owns inventory commodities see short long hedge purchase futures fixed price forward sale cash commodity long basis person firm bought spot commodity hedged sale futures said long basis lookback option option payoff depends minimum maximum price underlying asset portion life option lot unit trading see lot job lot round lot ltm leverage transaction merchant maintenance margin see margin managed account see controlled account discretionary account margin amount money collateral deposited customer broker broker clearing member clearing member clearinghouse purpose insuring broker clearinghouse loss open futures contracts margin partial payment purchase initial margin total amount margin contract required broker futures position opened maintenance margin sum maintained deposit times equity account drops level adverse price movement broker issue margin call restore equity see variation margin margin call request brokerage firm customer bring margin deposits initial levels request clearinghouse clearing member deposit original margin daily intra day variation payment adverse price movement based positions carried clearing member market correction technical analysis small reversal prices following significant trending period marketer see distributor market touched mit order order market order particular price reached sell mit placed market mit placed market referred board order market marker professional securities dealer obligation excess sell orders sell excess orders maintaining offering price sufficiently higher buying price firms compensated risk involved allowing inventory securities act buffer temporary order imbalances commodities industry term loosely refer floor trader local speculating account provides market commercial users market see specialist system market close order sell the trading session price closing range prices see close order market opening order sell the trading session price opening range prices market order order sell futures contract price obtainable time entered pit see market mark market daily cash flow system futures exchanges maintain minimum level margin equity given futures option contract position calculating gain loss contract position resulting changes price futures option contracts trading day maturity period futures contract settled delivery actual commodity maximum price fluctuation see limit member rate commission charged execution order person member exchange minimum price contract hybrid commercial forward contract agricultural products includes provision guaranteeing person making delivery minimum price product agricultural commodities contracts common introduction exchange traded options futures contracts permit buyers hedge price risks associated contracts minimum price fluctuation smallest increment price movement possible trading given contract momentum technical analysis relative change price specific time interval equated speed velocity considered terms relative strength money market short term debt instruments naked call see naked option naked option sale call put option holding offsetting position underlying commodity naked put see naked option national futures association nfa self regulatory organization composed futures commission merchants commodity pool operators commodity trading advisors introducing brokers leverage transaction merchants commodity exchanges commercial firms banks responsible cftc oversight certain aspects regulation fcms cpos ibs ltms associated persons focusing primarily qualifications proficiency financial condition retail sales practices business conduct futures professionals nearbys nearest delivery months commodity futures market nearby delivery month month futures contract closest maturity negative carry cost financing financial instrument short term rate interest cost current return financial instrument see carrying charges positive carry position difference open long contracts open short contracts held trader commodity nfa national futures association nob spread note bond futures spread trade involving buying selling treasury note futures contract selling buying treasury bond futures contract non member traders speculators hedgers trade exchange member hold exchange memberships nominal price nominal quotation computed price quotation futures period actual trading took place usually average bid asked prices notice day day notices intent deliver futures contracts may issued notice delivery notice presented seller futures contract clearinghouse clearinghouse assigns notice subsequent delivery instrument buyer notice intention deliver notional amount amount interest rate swap forward rate agreement derivative instrument amounts currency swap interest rates applied expressed rate stated coupon basis order calculate periodic payment obligations called notional principal amount contract amount reference amount currency amount offer indication willingness sell given price opposite bid offset liquidating purchase futures contracts sale equal number contracts delivery month liquidating short sale futures purchase equal number contracts delivery month see cover omnibus account account carried futures commission merchant futures commission merchant transactions persons combined carried name originating broker designated separately track track country station type deferred delivery price set location buyer agrees pay freight costs destination commodities loaded railroad cars track opening price range price price range recorded period designated exchange official opening opening the period the trading session officially designated exchange transactions considered opening open interest total number futures contracts long short delivery month market entered liquidated offsetting transaction fulfilled delivery called open contracts open commitments open order orders order remains force canceled futures contracts expire see good canceled good week orders open outcry method public auction required bids offers trading pits rings commodity exchanges option commodity option unilateral contract gives buyer right sell specified quantity commodity specific price specified period time regardless market price commodity see put call term erroneously applied futures contract may refer specific delivery month july option option buyer person buys calls puts combination calls puts option grantor person originates option contract promising perform certain obligation return price option known option writer original margin term applied initial deposit margin money clearing member firm required to clearinghouse rules based positions carried determined separately customer proprietary positions similar concept initial margin security deposit required customers exchange regulations see initial margin money term describe option intrinsic value example call gold trading money dollars trade trade cleared clearinghouse trade data submitted clearing members involved trade differs respect price quantity cases clearing members brokers involved reconcile discrepancy possible resubmit trade clearing agreement reached clearing members brokers involved dispute settled appropriate exchange committee overbought technical opinion market price risen steeply fast relation underlying fundamental factors rank file traders bullish long turned bearish overnight trade trade liquidated trading day established oversold technical opinion market price declined steeply fast relation underlying fundamental factors rank file traders bearish short turned bullish amp purchase sale statement statement sent commission house customer part futures position offset showing number contracts involved prices contracts bought sold gross profit loss commission charges profit loss transactions balance paper profit loss profit loss realized open contracts liquidated certain time certain price par refers standard delivery point quality commodity deliverable futures contract contract price serves benchmark base discounts premiums varying quality delivery locations bond markets index usually representing face value bond path dependent option option valuation payoff depends realized price path underlying asset asian option lookback option pay collect shorthand method referring payment loss pay receipt gain collect clearing member clearing organization occurs futures position marked market see variation margin payment kind refers alternative cash payments producers various commodities department agriculture acreage control program authorized congress payments consisted generic certificates exchanged commodities held government warehouses redeemed equivalent monetary value pegged price price commodity fixed agreement pegging effecting commodity transactions prevent decline price commodity previously written put options expire worthless protecting premiums previously received pit specially constructed arena trading floor exchanges trading futures contract conducted exchanges term designates trading area commodity see pit brokers see floor broker point measure price change equal cent futures traded decimal units grains cent bonds percent par see tick point figure method charting uses prices form patterns movement regard time defines price trend continued movement direction reversal predetermined criterion met point balance statement prepared futures commission merchants show profit loss open contracts computing official closing settlement price usually calendar month pork bellies major cuts hog carcass cured bacon portfolio insurance trading strategy attempts alter nature price changes portfolio substantially reduce likelihood returns predetermined level established period time achieved moving assets stocks cash fixed income securities advent stock index futures contracts hedging stock portfolio selling stock index futures declining market purchasing futures rising market objective create exposure similar stock portfolio protective purchased put option position interest market long short form open contracts position refers commodity located readily moved point delivered futures contract commodities situated position soybeans mississippi position delivery chicago position export shipment gulf position limit maximum position long short commodity future option futures options commodity combined may held controlled person prescribed exchange cftc position trader commodity trader buys sells contracts holds extended period time distinguished day trader normally initiate offset futures position single trading session positive carry cost financing financial instrument short term rate interest cost current return financial instrument see carrying charges negative carry posted price announced advertised price indicating firm pay commodity price firm sell prearranged trading trading brokers accordance expressed implied agreement understanding violation commodity exchange act cftc regulations premium amount price increased purchase better quality commodity refers futures delivery month selling higher price july premium may cash prices futures price foreign exchanges forward rate italian lira premium spot lira selling spot price see contango discount money securities property buyer pays writer granting option contract price basing situation producers processors merchants consumers commodity establish commercial transaction prices based futures prices related commodity offer sell corn cents december futures price phenomenon commonly observed grain metal markets price discovery process determining price level commodity based supply demand factors price manipulation planned operation transaction practice calculated cause maintain artificial price price movement limit see limit primary market producers major purchaser commodities commercial marketing channels important center spot commodities concentrated shipment terminal markets processors market major supplier commodity needs market market dealing members act principals transactions conclude clients privileges see option program trading purchase sale large number stocks contained comprising portfolio originally called program trading index funds institutional investors began embark large scale buying selling campaigns programs invest manner replicated target stock index term commonly includes computer aided stock market buying selling programs portfolio insurance index arbitrage prompt date date buyer option sell underlying commodity futures contract option exercised public trade parlance non professional speculators distinguished hedgers professional speculators traders public elevators grain elevators bulk storage grain provided public fee grain grade owned different persons usually mixed commingled opposed storing identity preserved elevators approved exchanges regular delivery futures contracts purchase sale statement see amp puts option contracts give holder right obligation sell specified quantity particular commodity interest given price strike price prior future date called put option higher lower value lower higher current market value underlying article relative strike price put option option sell specified amount commodity agreed price time time expiration option put option purchased protect fall price buyer pays premium seller grantor option buyer right sell commodity enter short position futures market option exercised see call option pyramiding profits existing positions margin increase size position normally successively smaller increments quick order see fill kill order quotation actual price bid ask price cash commodities futures contracts investment terms view related banking law basics articles view faq banking legal topics banking attorney ask lawyer looking social read articlesinvestment terms kinvestment 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Investment Terms A Z Free Advice Law Advice Insurance Advice Community Law Advice Free Case Evaluation Ask a Lawyer Q amp A Legal Topics All Legal Topics Accident Law Bankruptcy Law Business Law Criminal Law Employment Labor Law Estate Planning Family Law Financial Law General Practice Government Law Immigration Law Insurance Law Intellectual Property Litigation Malpractice Law Personal Injury Real Estate Law Tax Law Small Claims Admiralty Maritime Aviation Law Financial Law Topics All Financial Law Topics Banking LawSecurities LawCommodities LawBroker Disputes Free Advice Law Advice Financial Law Banking Law Current Page Investment Terms L Q Written by FreeAdvice Staff Click here for Investment Terms A K Large Order Execution LOX Procedures Rules in place at the Chicago Mercantile Exchange that authorize a member firm which receives a large order from an initiating party to solicit counterparty interest off the exchange floor prior to open execution of the order in the pit and that provide for special surveillance procedures The parties determine a maximum quantity and an intended execution price Subsequently the initiating party's order quantity is exposed to the pit any bids or offers up to and including those at the intended execution price are hit acceptable The unexecuted balance is then crossed with the contraside trader found using the LOX procedures Large Traders A large trader is one who holds or controls a position in any one future or in any one option expiration series of a commodity on any one contract market equaling or exceeding the exchange or CFTC specified reporting level Last Notice Day The final day on which notices of intent to deliver on futures contracts may be issued Last Trading Day Day on which trading ceases for the maturing current delivery month Leaps Long dated exchange traded options Leverage Contract A contract standardized as to terms and conditions for the long term ten years or longer purchase long leverage contract or sale short leverage contract by a leverage customer of leverage commodity which provides for participation by the leverage transaction merchant as a principal in each leverage transaction initial and maintenance margin payments by the leverage customer periodic payment by the leverage customer or accrual by the leverage transaction merchant to the leverage customer of a variable carrying charge or fee on the initial value of the contract plus any margin deposits made by the leverage customer in connection with a short leverage contract delivery of a commodity in an amount and form which can be readily purchased and sold in normal commercial or retail channels delivery of the leverage commodity after satisfaction of the balance due on the contract and determination of the contract purchase and repurchase or sale and resale prices by the leverage transaction merchant Leverage Dealer See Leverage Transaction Merchant Leverage Transaction Merchant Any individual association partnership corporation or trust that is engaged in the business of offering to enter into entering into or confirming the execution of leverage contracts or soliciting or accepting orders for leverage contracts and who accepts leverage customer funds or extends credit in lieu of those funds Licensed Warehouse A warehouse approved by exchange from which a commodity may be delivered on a futures contract See Regular Warehouse Life of Contact Period between the beginning of trading in a particular futures contract and the expiration of trading In some cases this phrase denotes the period already passed in which trading has already occurred For example The life of contract high so far is Same as Life of Delivery or Life of the Future Limit Up or Down The maximum price advance or decline from the previous day's settlement price permitted during one trading session as fixed by the rules of an exchange See Daily Price Limits Limit Move A price that has advanced or declined the permissible limit during one trading session as fixed by the rules of a contract market Limit Only The definite price stated by a customer to a broker restricting the execution of an order to buy for not more than or to sell for not less than the stated price Limit Order An order in which the customer specifies a price limit or other condition such as time of an order as contrasted with a market order which implies that the order should be filled as soon as possible Liquidation The closing out of a long position The term is sometimes used to denote closing out a short position but this is more often referred to as covering See Cover Liquid Market A market in which selling and buying can be accomplished with minimal price change Local A member of a U S exchange who trades for his own account and or fills orders for customers and whose activities provide market liquidity See Floor Trader Locked In A hedged position that cannot be lifted without offsetting both sides of the hedge spread See Hedging Also refers to being caught in a limit price move London Gold Market Refers to the five dealers who set fix the gold price in London Mocatta amp Goldsmid N Rothschild amp Sons Johnson Matthey Sharps Pixley and Samuel Montagu amp Co London Option A generic term sometimes used to describe options on physical commodities or on futures contracts traded abroad typified by options on London commodity markets These options which often had nothing whatsoever to do with legitimate foreign markets gained notoriety prior to their ban in the United States in because of the sales practices and fraud allegations associated with the American dealers who sold them Long One who has bought a futures contract to establish a market position a market position which obligates the holder to take delivery one who owns an inventory of commodities See Short Long Hedge Purchase of futures against the fixed price forward sale of a cash commodity Long the Basis A person or firm that has bought the spot commodity and hedged with a sale of futures is said to be long the basis Lookback Option An option whose payoff depends on the minimum or maximum price of the underlying asset during some portion of the life of the option Lot A unit of trading See Even Lot Job Lot and Round Lot LTM Leverage Transaction Merchant Maintenance Margin See Margin Managed Account See Controlled Account and Discretionary Account Margin The amount of money or collateral deposited by a customer with his broker by a broker with a clearing member or by a clearing member with the clearinghouse for the purpose of insuring the broker or clearinghouse against loss on open futures contracts The margin is not partial payment on a purchase Initial margin is the total amount of margin per contract required by the broker when a futures position is opened Maintenance margin is a sum which must be maintained on deposit at all times If the equity in a customer's account drops to or under the level because of adverse price movement the broker must issue a margin call to restore the customer's equity See Variation Margin Margin Call A request from a brokerage firm to a customer to bring margin deposits up to initial levels a request by the clearinghouse to a clearing member to make a deposit of original margin or a daily or intra day variation payment because of adverse price movement based on positions carried by the clearing member Market Correction In technical analysis a small reversal in prices following a significant trending period Marketer See Distributor Market if Touched MIT Order An order that becomes a market order when a particular price is reached A sell MIT is placed above the market a buy MIT is placed below the market Also referred to as a board order Market Marker A professional securities dealer who has an obligation to buy when there is an excess of sell orders and to sell when there is an excess of buy orders By maintaining an offering price sufficiently higher than their buying price these firms are compensated for the risk involved in allowing their inventory of securities to act as a buffer against temporary order imbalances In the commodities industry this term is sometimes loosely used to refer to a floor trader or local who in speculating for his own account provides a market for commercial users of the market See Specialist System Market on Close An order to buy or sell at the end of the trading session at a price within the closing range of prices See Stop Close Only Order Market on Opening An order to buy or sell at the beginning of the trading session at a price within the opening range of prices Market Order An order to buy or sell a futures contract at whatever price is obtainable at the time it is entered in the ring or pit See At The Market Mark to Market Daily cash flow system used by U S futures exchanges to maintain a minimum level of margin equity for a given futures or option contract position by calculating the gain or loss in each contract position resulting from changes in the price of the futures or option contracts at the end of each trading day Maturity Period within which a futures contract can be settled by delivery of the actual commodity Maximum Price Fluctuation See Limit Up or Down Member Rate Commission charged for the execution of an order for a person who is a member of the exchange Minimum Price Contract A hybrid commercial forward contract for agricultural products which includes a provision guaranteeing the person making delivery a minimum price for the product For agricultural commodities these contracts became much more common with the introduction of exchange traded options on futures contracts which permit buyers to hedge the price risks associated with such contracts Minimum Price Fluctuation Smallest increment of price movement possible in trading a given contract Momentum In technical analysis the relative change in price over a specific time interval Often equated with speed or velocity and considered in terms of relative strength Money Market Short term debt instruments Naked Call See Naked Option Naked Option The sale of a call or put option without holding an offsetting position in the underlying commodity Naked Put See Naked Option National Futures Association NFA A self regulatory organization composed of futures commission merchants commodity pool operators commodity trading advisors introducing brokers leverage transaction merchants commodity exchanges commercial firms and banks that is responsible under CFTC oversight for certain aspects of the regulation of FCMs CPOs IBs LTMs and their associated persons focusing primarily on the qualifications and proficiency financial condition retail sales practices and business conduct of these futures professionals Nearbys The nearest delivery months of a commodity futures market Nearby Delivery Month The month of the futures contract closest to maturity Negative Carry The cost of financing a financial instrument the short term rate of interest when the cost is above the current return of the financial instrument See Carrying Charges and Positive Carry Net Position The difference between the open long contracts and the open short contracts held by a trader in any one commodity NFA National Futures Association NOB Spread Note Against Bond A futures spread trade involving the buying selling of a Treasury note futures contract and the selling buying of a Treasury bond futures contract Non Member Traders Speculators and hedgers who trade on the exchange through a member but do not hold exchange memberships Nominal Price or Nominal Quotation Computed price quotation on futures for a period in which no actual trading took place usually an average of bid and asked prices Notice Day Any day on which notices of intent to deliver on futures contracts may be issued Notice of Delivery A notice that must be presented by the seller of a futures contract to the clearinghouse The clearinghouse then assigns the notice and subsequent delivery instrument to a buyer Also Notice of Intention to Deliver Notional Amount The amount in an interest rate swap forward rate agreement or other derivative instrument or each of the amounts in a currency swap to which interest rates are applied whether or not expressed as a rate or stated on a coupon basis in order to calculate periodic payment obligations Also called the notional principal amount the contract amount the reference amount and the currency amount Offer An indication of willingness to sell at a given price opposite of bid Offset Liquidating a purchase of futures contracts through the sale of an equal number of contracts of the same delivery month or liquidating a short sale of futures through the purchase of an equal number of contracts of the same delivery month See Cover Omnibus Account An account carried by one futures commission merchant with another futures commission merchant in which the transactions of two or more persons are combined and carried in the name of the originating broker rather than designated separately On Track or Track Country Station A type of deferred delivery in which the price is set f o b seller's location and the buyer agrees to pay freight costs to his destination commodities loaded in railroad cars on track Opening Price or Range The price or price range recorded during the period designated by the exchange as the official opening Opening The The period at the beginning of the trading session officially designated by the exchange during which all transactions are considered made at the opening Open Interest The total number of futures contracts long or short in a delivery month or market that has been entered into and not yet liquidated by an offsetting transaction or fulfilled by delivery Also called Open Contracts or Open Commitments Open Order or Orders An order that remains in force until it is canceled or until the futures contracts expire See Good 'Til Canceled and Good This Week orders Open Outcry Method of public auction required to make bids and offers in the trading pits or rings of commodity exchanges Option A commodity option is a unilateral contract which gives the buyer the right to buy or sell a specified quantity of a commodity at a specific price within a specified period of time regardless of the market price of that commodity Also see Put and Call A term sometimes erroneously applied to a futures contract It may refer to a specific delivery month as the July Option Option Buyer The person who buys calls puts or any combination of calls and puts Option Grantor The person who originates an option contract by promising to perform a certain obligation in return for the price of the option Also known as Option Writer Original Margin Term applied to the initial deposit of margin money each clearing member firm is required to make according to clearinghouse rules based upon positions carried determined separately for customer and proprietary positions similar in concept to the initial margin or security deposit required of customers by exchange regulations See Initial Margin Out of the Money A term used to describe an option that has no intrinsic value For example a call at on gold trading at is out of the money dollars Out Trade A trade which cannot be cleared by a clearinghouse because the trade data submitted by the two clearing members involved in the trade differs in some respect e g price and or quantity In such cases the two clearing members or brokers involved must reconcile the discrepancy if possible and resubmit the trade for clearing If an agreement cannot be reached by the two clearing members or brokers involved the dispute would be settled by an appropriate exchange committee Overbought A technical opinion that the market price has risen too steeply and too fast in relation to underlying fundamental factors Rank and file traders who were bullish and long have turned bearish Overnight Trade A trade which is not liquidated on the same trading day in which it was established Oversold A technical opinion that the market price has declined too steeply and too fast in relation to underlying fundamental factors Rank and file traders who were bearish and short have turned bullish P amp S Purchase and Sale Statement A statement sent by a commission house to a customer when any part of a futures position is offset showing the number of contracts involved the prices at which the contracts were bought or sold the gross profit or loss the commission charges the net profit or loss on the transactions and the balance Paper Profit or Loss The profit or loss that would be realized if open contracts were liquidated as of a certain time or a certain price Par Refers to the standard delivery point s and or quality of a commodity that is deliverable on a futures contract at contract price Serves as a benchmark upon which the base discounts or premiums for varying quality and delivery locations In bond markets an index usually representing the face value of a bond Path Dependent Option An option whose valuation and payoff depends on the realized price path of the underlying asset such as an Asian option or a Lookback option Pay Collect A shorthand method of referring to the payment of a loss pay and receipt of a gain collect by a clearing member to or from a clearing organization that occurs after a futures position has been marked to market See Variation Margin Payment in Kind Refers to an alternative to cash payments to producers of various commodities under the U S Department of Agriculture acreage control program authorized by Congress in The payments consisted of generic certificates which could be exchanged for commodities held in government warehouses or redeemed for equivalent monetary value Pegged Price The price at which a commodity has been fixed by agreement Pegging Effecting commodity transactions to prevent a decline in the price of the commodity so that previously written put options will expire worthless thus protecting premiums previously received Pit A specially constructed arena on the trading floor of some exchanges where trading in a futures contract is conducted On other exchanges the term ring designates the trading area for a commodity See Ring Pit Brokers See Floor Broker Point A measure of price change equal to of one cent in most futures traded in decimal units In grains it is of one cent in T bonds it is one percent of par See Tick Point and Figure A method of charting which uses prices to form patterns of movement without regard to time It defines a price trend as a continued movement in one direction until a reversal of a predetermined criterion is met Point Balance A statement prepared by futures commission merchants to show profit or loss on all open contracts by computing them to an official closing or settlement price usually at calendar month end Pork Bellies One of the major cuts of the hog carcass that when cured becomes bacon Portfolio Insurance A trading strategy which attempts to alter the nature of price changes in a portfolio to substantially reduce the likelihood of returns below some predetermined level for an established period of time This can be achieved by moving assets among stocks cash and fixed income securities or with the advent of stock index futures contracts by hedging a stock only portfolio by selling stock index futures in a declining market or purchasing futures in a rising market The objective is to create an exposure similar to that of a stock portfolio with a protective purchased put option Position An interest in the market either long or short in the form of one or more open contracts Also in position refers to a commodity located where it can readily be moved to another point or delivered on a futures contract Commodities not so situated are out of position Soybeans in Mississippi are out of position for delivery in Chicago but in position for export shipment from the Gulf Position Limit The maximum position either net long or net short in one commodity future or option or in all futures or options of one commodity combined which may be held or controlled by one person as prescribed by an exchange and or by the CFTC Position Trader A commodity trader who either buys or sells contracts and holds them for an extended period of time as distinguished from the day trader who will normally initiate and offset a futures position within a single trading session Positive Carry The cost of financing a financial instrument the short term rate of interest where the cost is less than the current return of the financial instrument See also Carrying Charges and Negative Carry Posted Price An announced or advertised price indicating what a firm will pay for a commodity or the price at which the firm will sell it Prearranged Trading Trading between brokers in accordance with an expressed or implied agreement or understanding which is a violation of the Commodity Exchange Act and CFTC regulations Premium the amount a price would be increased to purchase a better quality commodity refers to a futures delivery month selling at a higher price than another as July is at a premium over May cash prices that are above the futures price such as in foreign exchanges If the forward rate for Italian lira is at a premium to spot lira it is selling above the spot price See Contango Discount the money securities or property the buyer pays to the writer for granting an option contract Price Basing A situation where producers processors merchants or consumers of a commodity establish commercial transaction prices based on the futures prices for that or a related commodity e g an offer to sell corn at cents over the December futures price This phenomenon is commonly observed in grain and metal markets Price Discovery The process of determining the price level for a commodity based on supply and demand factors Price Manipulation Any planned operation transaction or practice calculated to cause or maintain an artificial price Price Movement Limit See Limit Up or Down Primary Market For producers their major purchaser of commodities in commercial marketing channels an important center at which spot commodities are concentrated for shipment to terminal markets and to processors the market that is the major supplier of their commodity needs Principals' Market A market where the ring dealing members act as principals for the transactions they conclude across the ring and with their clients Privileges See Option Program Trading The purchase or sale of a large number of stocks contained in or comprising a portfolio Originally called program trading when index funds and other institutional investors began to embark on large scale buying or selling campaigns or programs to invest in a manner which replicated a target stock index the term now also commonly includes computer aided stock market buying or selling programs portfolio insurance and index arbitrage Prompt Date The date on which the buyer of an option will buy or sell the underlying commodity or futures contract if the option is exercised Public In trade parlance non professional speculators as distinguished from hedgers and professional speculators or traders Public Elevators Grain elevators in which bulk storage of grain is provided for the public for a fee Grain of the same grade but owned by different persons is usually mixed or commingled as opposed to storing it identity preserved Some elevators are approved by exchanges as regular for delivery on futures contracts Purchase and Sale Statement See P amp S Puts Option contracts which give the holder the right but not the obligation to sell a specified quantity of a particular commodity or other interest at a given price the strike price prior to or on a future date Also called put option they will have a higher lower value the lower higher the current market value of the underlying article is relative to the strike price Put Option An option to sell a specified amount of a commodity at an agreed price and time at any time until the expiration of the option A put option is purchased to protect against a fall in price The buyer pays a premium to the seller grantor of this option The buyer has the right to sell the commodity or enter into a short position in the futures market if the option is exercised Also see Call Option Pyramiding The use of profits on existing positions as margin to increase the size of the position normally in successively smaller increments Quick Order See Fill or Kill Order Quotation The actual price or the bid or ask price of either cash commodities or futures contracts Click here for Investment Terms R Z View Related Banking Law Basics Articles View the Next FAQ Banking Homepage All Legal Topics Find a Banking Attorney Ask a Lawyer Didn't find what you were looking for Make it Social Must Read ArticlesInvestment Terms A KInvestment Terms L QWhat is financial law Investment Terms R ZWhat is a bank What are the purposes 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