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Call Option
An option that gives the buyer (holder) the right,
but not the obligation, to buy a futures contract (enter
into a long futures position) for a specified price within a
specified period of time in exchange for a one-time premium
payment. It obligates the seller (writer) of an option
to sell the underlying futures contract (enter into a short
futures position) at the designated price, should the
option be exercised at that price.
Candlestick Charting
A technical analysis charting technique indicating
the range of a day’s prices and illustrating the overall
movement of the market. The chart that results tends to
resemble a row of candlesticks.
Cap
A supply contract between a buyer and a seller,
whereby the buyer is assured that he will not have to pay
more than a given maximum price. This type of contract
is analogous to a call option.
Capacity
In general, the maximum volume of liquid or gas
that can be pumped through a pipeline, or the maximum
load that a generating unit or station can carry under
specified conditions for a given period of time, or the
total storage space or volume of a warehouse or storage
container or tank farm.
Carry Market
A market situation in which prices are higher in
the succeeding delivery months than in the nearest delivery
month. Also known as contango, it is the opposite of
backwardation.
Carrying Charge
The total cost of storing a physical commodity
over a period of time. Includes storage charges, insurance,
interest, and opportunity costs.
Cash Commodity
The actual physical commodity. Sometimes
called a spot commodity or actuals.
Cash Market
The market for a cash commodity where the
actual physical product is traded.
Cash-Settled
Futures contracts that are settled in cash without
the option to deliver the underlying commodity.
Central Bank
A national bank that operates to establish monetary
and fiscal policy and to control the money supply
and interest rates.
CFTC
See Commodity Futures Trading Commission.
Charting
The use of graphs and charts in the analysis of
market behavior, so as to plot trends of price movements,
average movements of price, volume, and open
interest, in the hope that such graphs and charts will help
one to anticipate and profit from price trends. Contrasts
with fundamental analysis. (See Candlestick Charting)
Cost, Insurance, Freight (CIF)
Term refers to a sale in which the buyer agrees to
pay a unit price that includes the free on board (FOB)
value at the port of origin plus all costs of insurance and
transportation. This type of transaction differs from a
"delivered" agreement in that it is generally ex-duty, and
the buyer accepts the quantity and quality at the loading
port rather than paying for quality and quantity as determined
at the unloading port. Risk and title are transferred
from the seller to the buyer at the loading port, although
the seller is obliged to provide insurance in a transferable
policy at the time of loading.
Clean Cargo
Refined products such as kerosene, gasoline,
home heating oil, and jet fuel carried by tankers, barges,
and tank cars. All refined products except bunker fuels,
residual fuel oil, asphalt, and coke.
Clearing
The registration and settlement of a trade that
includes provisions for margin requirement and performance
guarantee.
Clearing Member
Clearing members of an
Exchange accept responsibility for all trades cleared
through them, and share secondary responsibility for the
liquidity of the Exchange’s clearing operation. They earn
commissions for clearing their customers’ trades, and
enjoy special margin privileges. Original margin requirements
for clearing members are lower than for non-clearing
members and customers, and clearing members may
use letters of credit posted with the clearinghouse as
original margin for customer accounts as well as for their
own trades. Clearing members must meet a minimum
capital requirement.
Clearing House
An Exchange-associated body charged with the
function of insuring the financial integrity of each trade.
Orders are "cleared" by means of the clearinghouse acting
as the buyer to all sellers and the seller to all buyers.
Close
A period defined by the Exchange and occurring
at the end of each trading session wherein any transactions
are considered to be made "at the close."
Closing Range
A range of prices at which transactions took place
at the closing of the market; buying and selling orders
during the closing period might have been filled at any
point within such a range.
Collar
A supply contract between a buyer and seller of a
commodity, whereby the buyer is assured that he will not
have to pay more than some maximum price, and
whereby the seller is assured of receiving some minimum
price. This is analogous to an options fence, also known
as a range forward.
Commission
The fee charged by a futures broker for the execution
of an order.
Commission House
An organization that trades commodities and/or
futures and options contracts for customer accounts in
return for a fee.
Commission Merchant
One who makes a trade, either for another member
of an exchange or for a non-member client, but who
makes the trade in his own name and becomes liable as
principal to the other.
Commitment or Open Interest
The number of open or outstanding contracts for
which an individual or entity is obligated to the Exchange
because that individual or entity has not yet made an offsetting
sale or purchase, an actual contract delivery, or, in
the case of options, exercised the option.
Commodity
As defined by the Commodity Futures Trading
Commission, specifically enumerated agricultural commodities,
all other goods and articles, except onions, and
all services, rights, and interests in which contracts for
future delivery are presently, or in the future may be,
dealt.
Commodity Futures Trading
Commission (CFTC)
A federal regulatory agency authorized under the
Commodity Futures Trading Commission Act of 1974 to
regulate futures trading in all commodities. The commission
has five commissioners, one of whom is designated
as chairman, all appointed by the President, subject to
Senate confirmation. The CFTC is independent of the
Cabinet departments.
Commodity Trading Advisor (CTA)
Directs trading in the managed accounts of a
commodity pool. Professional money managers who
manage client assets on a discretionary basis, using
global futures markets as an investment medium.
Contango
A market situation in which prices are higher in
the succeeding delivery months than in the nearest delivery
month. Also known as a carry market, it is the opposite
of backwardation.
Contingency Order
An order which becomes effective only upon the
fulfillment of some condition in the marketplace.
Contract
1) A term of reference describing a unit of trading
for a commodity future or option.
2) An agreement to
buy or sell a specified commodity, detailing the amount
and grade of the product and the date on which the contract
will mature and become deliverable.
Contract Grade
That grade of product established in the rules of a
commodity futures exchange as being suitable for delivery
against a futures contract.
Contract Month
See delivery month.
Conversion
A delta-neutral arbitrage transaction involving a
long futures contract, a long put option, and a short call
option. The put and call options have the same strike
price and same expiration date.
Cover
To offset a short futures or options position.
Covered Writing
The sale of an option against an existing position
in the underlying futures contract. For example, a short
call and long futures position.
Cracking
The process of breaking down the molecular
structure of a substance into smaller units. Petroleum is
cracked as part of the refining process to extract products
such as heating oil and gasoline.
Crack Spreads
The simultaneous purchase or sale of crude oil
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 (divide
the cents-per-gallon price by 42) and subtracting the
crude oil price.
Cross Trade
Offsetting match by a broker of the buy order of
one customer against the sell order of another, or a
match of a trade made by a broker with his customer, a
practice that is permissible only when executed in accordance
with the Commodity Exchange Act, Commodity
Futures Trading Commission regulations, and rules of the
contract market.
Crude Oil
A mixture of hydrocarbons that exists as a liquid
in natural underground reservoirs and remains liquid at
atmospheric pressure after passing through surface separating
facilities. Crude is the raw material which is
refined into gasoline, heating oil, jet fuel, propane, petrochemicals,
and other products.
Current Delivery Month
The futures contract which ceases trading and
becomes deliverable during the present month or the
month closest to delivery. Also called the spot month.
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