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Self-Regulatory Organization
Although United States commodity exchanges
ultimately function under the auspices of the Commodity
Futures Trading Commission, daily operations are regulated
from within the organization. Trade, market, and
financial surveillance are performed to ensure the utmost
integrity of futures trading.
Sellers' Market
A condition of the market in which there is a
scarcity of goods available and hence sellers can obtain
better conditions of sale or higher prices. Opposite of
buyer’s market.
Selling
Hedge (Or Short Hedge)
Selling futures contracts to protect against possible
decreased prices of commodities. Also see hedging.
Serial
Expiration
Options on the same underlying futures contract
which expire in more than one month. NYMEX Division
platinum options have serial expiration.
Series
All options of the same class which share a common
strike price.
Settlement
or Settling Price
The price established by the Exchange settlement
committee at the close of each trading session as the
official price to be used by the clearinghouse in determining
net gains or losses, margin requirements, and the
next day’s price limits. The term “settlement price” is
often used as an approximate equivalent to the term
“closing price.” The close in futures trading refers to a
brief period at the end of the day, during which transactions
frequently take place quickly and at a range of
prices immediately before the bell. Therefore, there frequently
is no single closing price, but a range of prices. In
months with significant activity, the settlement price is
derived by calculating the weighted average of the prices
at which trades were conducted during that period.
Short
1) The market position of a futures contract seller
whose sale obligates him to deliver the commodity
unless he liquidates his contract by an offsetting purchase.
2) A trader whose net position in the futures market
shows an excess of open sales over open purchases.
3) The holder of a short position.
4) In the options market,
the position of the seller of a call or a put option. The
short in the options market is obliged to take a futures
position if he is assigned for exercise. Opposite of long.
Short
Selling
Selling a contract with the idea of delivering or of
buying to offset it at a later date.
Short-The-Basis
A person or firm that has a commitment to sell in
the cash or spot markets and hedges through the purchase
of futures is said to be short-the-basis.
Sour
Or Sweet Crude
Industry terms which denote the relative degree of
a given crude oil’s sulfur content. Sour crude refers to
those crudes with a comparatively high sulfur content,
0.5% by weight and above; sweet refers to those crudes
with sulfur content of less than 0.5%.
Specifications
1) Contract terms specified by the Exchange.
2)
Term referring to the properties of a given crude oil or
refined petroleum product, which are "specified" since
they often vary widely even within the same grade of
product. In the normal process of negotiation, the seller
will guarantee the buyer that the product or crude to be
sold will meet certain specified limits. Generally, the
major properties of oil that are guaranteed are API gravity,
sulfur, pour point, viscosity, and BS&W.
Specific
Gravity
The ratio of the density of a substance at 60 degrees
Fahrenheit to the density of water at the same temperature.
Speculator
A trader who hopes to profit from the specific
directional price move of a futures or options contract, or
commodity.
Spot
Term which describes one-time open market cash
transaction, where a commodity is purchased "on the
spot" at current market rates. Spot transactions are in
contrast to term sales, which specify a steady supply of
product over a period of time.
Spot
Market
A market of immediate delivery of product and
immediate payment.
Spot Month
The futures contract closest to maturity. The
nearby delivery month.
Spread
(Futures)
The simultaneous purchase and sale of futures
contracts for different months, different commodities, or
different grades of the same commodity.
Spread
(Options)
The purchase and sale of options which vary in
terms of type (call or put), strike prices, expiration dates,
or both. May also refer to an options contract purchase
(sale) and the simultaneous sale (purchase) of a futures
contract for the same underlying commodity.
Stock-Type
Settlement
A settlement procedure in which the purchase of a
contract requires immediate and full payment by the buyer
to the seller. In stock-type settlement, the actual cash
profit or loss from a trade is not realized until the position is
liquidated. Exchange options have this type of settlement
procedure, which differs from that in the futures market
where gains and losses are realized on a daily basis.
Stop
Order
An order that becomes a market order when the
market reaches the elected price of the stop order. See
market order.
Stop
Limit Order
An order that goes into force as soon as there is a
trade at the specified stop price. The order, however, can
only be filled at the limit price or better. The stop price
and the limit price can be the same or different. The stop
price is the price level specified in the order.
Stop-Loss
A resting order designed to close out a losing
position when the price reaches a level specified in the
order. It becomes an at-the-market order when the "stop"
price is reached. Individuals also use stops to enter the
market when the prices reach a specified level.
Straddle
(Futures)
Also known as a spread, the purchase of one
futures month against the sale of another futures month
of the same commodity. A straddle trade is based on a
price relationship between the two months.
Straddle
(Options)
The purchase or sale of both a put and a call having
the same strike price and expiration date. The buyer
of a straddle benefits from increased volatility, and the
seller benefits from decreased volatility.
Strangle
An options position consisting of the purchase or
sale of put and call options having the same expiration
but different strike prices.
Strike Price
The price at which the underlying futures contract
is bought or sold in the event an options contract is exercised.
Also called an exercise price.
Strip
The simultaneous purchase (or sale) of an equal
number of futures positions in consecutive months. The
average of the prices for the futures contracts bought (or
sold) is the price level of the hedge. A six-month strip, for
example, consists of an equal number of futures contracts
for each of six consecutive contract months. Also
known as a calendar strip.
Sulfur
An element that is present in some oil, gas, and
coal as an impurity in the form of its various compounds.
Support
In technical analysis, a price area where new buying
is likely to come in and stem any decline.
Swap
A custom-tailored, individually negotiated transaction
designed to manage financial risk, usually over a
period of one to 12 years. Swaps can be conducted
directly by two counterparties, or through a third party
such as a bank or brokerage house. The writer of the
swap, such as a bank or brokerage house, may elect to
assume the risk itself, or manage its own market exposure
on an exchange. Swap transactions include interest
rate swaps, currency swaps, and price swaps for commodities,
including energy and metals. In a typical commodity
or price swap, parties exchange payments based
on changes in the price of a commodity or a market
index, while fixing the price they effectively pay for the
physical commodity. The transaction enables each party
to manage exposure to commodity prices or index values.
Settlements are usually made in cash.
Sweet Crude
Crude oil typically containing less than 1% sulfur,
by weight.
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