Glossary of Commodity Market Terms

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Arbitrage – To take advantage of price discrepancies and simultaneously sell & purchase the same type of commodities on different markets.

Arbitrations – A procedure for settling disputes between members or customers.

Bar Chart – This is a technical chart that graphically displays the settlement prices and highs for a trading session during a time period.

Basis – This is the main difference between the futures prices and the cash price for a similar commodity. The basis is usually determined by the month or the close of a futures contract, unless otherwise stated.

Bear: – A person who believes that the market prices will fall

Bear Market – An area of falling share market prices.

Bid – A request to pay money for a product at a price that is not offered.

Broker: A person or company that executes options and futures orders for the financial &commercial institutions as well as the general public.

Brokerage Fee – Commission Fee for Online Portal.

Brokerage House – Futures Commission Merchant.

Bull: – A person who believes that the marketplace will rise in prices.

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Bull Market – An increase in market prices over a time period.

Carrying Fee: – This is the total cost of storage insurance and space, as well as the finance charges, incurred for the possession of a physical commodity such as grains or metals. Also known as cost of carry, or carry.

Cash commodities: – A real physical commodity that someone sells or buys, such as gold, silver, palm oil, and soybeans. Also known as actuals.

Cash Market – This is a place where real commodities can be bought and sold. Also known as spot markets.

Charting – Use share market charts to analyse trading market behavior and predict future price movements. Trading charting is a technique that allows traders to plot factors such as settlement prices, low, high, and average price movements, volume, and open interest.

The bar charts and point & figures charts are two basic price charts.

Clearing Corp:- A separate company or corporation that settles all trades at an exchange, acts as a guarantor and compiles all clearing member company accounts every day to ensure that all profits and losses are credited. It also sets and adjusts clearing margins in order to change market conditions.

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Clearinghouse: – A split corporation or agency of a futures exchange that is responsible for clearing trading accounts, clearing trades and collecting margin monies. They also report trading data and charts.

Clearing houses are third parties to all futures and options contracts, acting as buyers to each clearing member seller and sellers to every clearing buyer.

Closing price: – Refer to Settlement Price Chart.

Closing Range: A range of prices at which transactions were made to buy and sell during the close of the market.

Commission Fee – An agent or broker fee for the execution of an entire transaction. Also known as brokerage fee.

Product: – Any product that can be used for commerce. Products that are bought and sold on an approved commodity exchange in a narrow sense.

These commodities include base metals, agricultural products and bullion.

Convergence: – This trading term refers to futures and cash prices that tend to be combined (i.e. the basis approaches zero) when the futures agreement or contract nears expiration.

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Cost Of Carry (or Carry). See Carrying Fee Charts.