Futures Glossary

A  B  C  D  E  F  G  H  I  J  K  L  M  N  O  P  Q  R  S  T  U  V  W  X  Y  Z



The simultaneous purchase and sale of identical or equivalent financial instruments or commodity futures in order to benefit from a discrepancy in their price relationship.


Also called "offer". Indicates a willingness to sell a futures contract at a given price.


Back Months

Settlement and related processes.

Bear Market

A prolonged period of generally falling prices.


An investor who believes that prices are going to fall.


The price that the market participants are willing to pay.

Bull Market

A prolonged period of generally rising prices.


An investor who believes that prices are going to rise.

Buy On Close

To buy at the end of a trading session at a price within the closing range.

Buy On Opening

To buy at the beginning of a trading session at a price within the opening range.


Cabinet Trade or Cab

A trade that allows options traders to liquidate deep out-of-the-money options by trading the option at a price equal to one-half tick.


An option to buy a commodity, security or futures contract at a specified price any time between now and the expiration date of the option contract.

Cash Commodity

The actual physical commodity as distinguished from a futures commodity.


CFTC - The Commodity Futures Trading Commission as created by the Commodity Futures Trading Commission Act of 1974. This government agency currently regulates the US commodity futures industry.

Close, The

The period at the end of the trading session.

Closing Range (or Range)

The high and low prices, or bids and offers, recorded during the period designated as the official close.

Commission (or Round Turn)

The fee charged by a broker to a customer when a futures or options on futures position is liquidated either by offset or delivery.


Unit of trading for a financial or commodity future. Also, actual bilateral agreement between the parties (buyer and seller) of a futures or options on futures transaction as defined by an exchange.

Contract Month

The month in which futures contracts may be satisfied by making or accepting delivery. (See delivery month.)


Day Order

An order that is placed for execution during only one trading session. If the order cannot be executed that day, it is automatically cancelled.

Day Trading

Refers to establishing and liquidating the same position or positions within one days trading, thus ending the day with open position in the market.

Day Trader

Speculators who take positions in commodities which are then liquidated prior to the close of the same trading day.


Another term for "back months."


The tender and receipt of an actual commodity or financial instrument, or cash in settlement of a futures contract.


Exercise Or Strike Price

The price at which the holder (buyer) may purchase or sell the underlying futures contract upon the exercise of an option.

Expiration Date

The last day that an option may be exercised into the underlying futures contract. Also, the last day of trading for a futures contract.


Floor Broker

An exchange member who is paid a fee for executing orders for Clearing Members or their customers. A Floor Broker executing orders must be licensed by the CFTC.

Floor Trader

An exchange member who generally trades only for his/her own account or for an account controlled by him/her. Also referred to as a "local."


A Futures Contract is an agreement between a buyer and a seller to receive and deliver on a future date a specified amount of a product at an agreed price.

Federal Reserve System

The central banking system of the US comprising 12 Federal Reserve Banks controlling 12 districts under the Federal Reserve Board. Membership of the Fed is compulsory for banks chartered by the Comptroller of Currency and optional for state chartered banks.

Fill or Kill

An order which must be entered for trading, normally in a pit three times, if not filled is immediately canceled.

Futures Commission Merchant

A firm or person engaged in soliciting or accepting and handling orders for the purchase or sale of futures contracts, subject to the rules of a futures exchange and, who, in connection with solicitation or acceptance of orders, accepts any money or securities to margin any resulting trades or contracts. The FCM must be licensed by the CFTC.


Going Long

The purchase of a stock, commodity, or currency for investment or speculation.

Going Short

The selling of a currency or instrument not owned by the seller.

Good Until Canceled

An instruction to a broker that unlike normal practice the order does not expire at the end of the trading day, although normally terminates at the end of the trading month.


Head and Shoulders

A pattern in price trends which chartist consider indicates a price trend reversal. The price has risen for some time, at the peak of the left shoulder, profit taking has caused the price to drop or level. The price then rises steeply again to the head before more profit taking causes the the price to drop to around the same level as the shoulder. A further modest rise or level will indicate a that a further major fall is imminent. The breach of the neckline is the indication to sell.


Hedgers are individuals and firms that make purchases and sales in the futures market solely for the purpose of establishing a known price level--weeks or months in advance--for something they later intend to buy or sell in the cash market.


One who purchases an option.


Indicative Quote

A market-maker's price which is not firm.


Continued rise in the general price level in conjunction with a related drop in purchasing power. Sometimes referred to as an excessive movement in such price levels.

Initial Margin

The funds required when a futures position (or a short options on futures position) is opened.


Limit Order

An order given to a broker by a customer that specifies a price; the order can be executed only if the market reaches or betters that price.

Limit Price

The maximum amount the contract price can change, up or down, during one trading session, as stipulated by Exchange rules.


Any transaction that offsets or closes out a long or short futures position.


One who has bought a futures or options on futures contract to establish a market position through an offsetting sale; the opposite of Short.

Long Hedge

The purchase of a futures contract in anticipation of an actual purchase in the cash market. Used by processors or exporters as protection against and advance in the cash price.


The ability of a market to accept large transactions.



Market-If-Touched. A price order that automatically becomes a market order if the price is reached.

Maintenance Margin

A sum, usually smaller than--but part of--the initial margin, which must be maintained on deposit in the customers account at all times. If a customers equity in any futures position drops to, or under, the maintenance margin level, a "margin call" is issued for the amount of money required to restore the customers equity in the account to the initial margin level.


Funds that must be deposited as a margin by a customer with his or her broker, by a broker with a clearing member, or by a clearing member, with the Clearing House. The margin helps to ensure the financial integrity of brokers, clearing members and the Exchange as a whole.

Margin Call

A demand for additional funds to be deposited in a margin account to meet margin requirements because of adverse future price movements.


The daily adjustment of an account to reflect accrued profits and losses often required to calculate variations of margins.

Market Maker

A market maker is a person or firm authorized to create and maintain a market in an instrument.

Market Order

An order for immediate execution given to a broker to buy or sell at the best obtainable price.

Minimum Price Fluctuation

Smallest increment of price movement possible in trading a given contract, often referred to as a tick.

Mid-Price or Middle Rate

The price half-way between the two prices, or the average of both buying and selling prices offered by the market makers.

Minimum Price Fluctuation

The smallest increment of market price movement possible in a given futures contract.

Moving Average

A way of smoothing a set of data, widely used in price time series.



The nearest active trading month of a futures or options on futures contract. Also referred to as "lead month."



Also called "ask". Indicates a willingness to sell a futures contract at a given price.


Selling if one has bought, or buying if one has sold, a futures or options on futures contract.

Open Interest

Total number of futures or options on futures contracts that have not yet been offset or fulfilled by delivery. An indicator of the depth or liquidity of a market (the ability to buy or sell at or near a given price) and of the use of a market for risk- and/or asset-management.

Open Order

An order to a broker that is good until it is canceled or executed.

Opening Price (Or Range)

The range of prices at which the first bids and offers were made or first transactions were completed.

Opening, The

The period at the beginning of the trading session during which all transactions are considered made or first transactions were completed.


A contract giving the holder the right, but not the obligation, hence, "option," to buy or sell a futures contract in a given commodity at a specified price at any time between now and the expiration of the option contract.


A situation that results when there is some confusion or error on a trade. A difference in pricing, with both traders thinking they were buying, for example, is a reason why an out-trade may occur.



An interest in the market, either long or short, in the form of open contracts.


1.) The excess of one futures contract price over that of another, or over the cash market price. 2.) The amount agreed upon between the purchaser and seller for the purchase or sale of a futures option --purchasers pay the premium and sellers (writers) receive the premium.


An option to sell a commodity, security, or futures contract at a specified price at any time between now and the expiration of the option contract.



An indicative price. The price quoted for information purposes but not to deal.



An upward movement of prices following a decline; the opposite of a reaction.


The high and low prices or high and low bids and offers, recorded during a specified time.


A decline in prices following an advance. The opposite of rally.

Registered Representative

A person employed by, and soliciting business for, a commission house or a Futures Commission Merchant.

Risk Management

The identification and acceptance or offsetting of the risks threatening the profitability or existence of an organisation. With respect to futures involves among others consideration of market, sovereign, country, transfer, delivery, credit, and counterparty risk.

Risk Position

An asset or liability, which is exposed to fluctuations in value through changes in exchange rates or interest rates.


A swapping of contracts, specifically the next contact month against the current contract month.


Procedure by which a long or short position is offset by an opposite transaction or by accepting or making delivery of the actual financial instrument or physical commodity.



To trade for small gains. Scalping normally involves establishing and liquidating a position quickly, usually within the same day, hour or even just a few minutes.

Settlement Price

A figure determined by the closing range that is used to calculate gains and losses in futures market accounts. Settlement prices are used to determine gains, losses, margin calls, and invoice prices for deliveries.

Settlement Risk

Risk associated with the non settlement of the transaction by the counter party.


One who has sold a futures contract to establish a market position and who has not yet closed out this position through an offsetting purchase; the opposite of long.

Short Hedge

The sale of a futures contract in anticipation of a later cash market sale. Used to eliminate or lessen the possible decline in value of ownership of an approximately equal amount of the cash financial instrument or physical commodity.


One who attempts to anticipate price changes and, through buying and selling futures contracts, aims to make profits; does not use the futures market in connection with the production, processing, marketing or handling of a product. The speculator has no interest in making or taking delivery.


The simultaneous purchase and sale of futures contracts for the same commodity or instrument for delivery in different months, or in different but related markets. A spreader is not concerned with the direction in which the market moves, but only with the difference between the prices of each contract.

Soft Market

More potential sellers than buyers, which creates an environment where rapid price falls are likely.

Stop Order (Or Stop)

An order to buy or sell at the market when and if a specified price is reached.


Thin Market

A market in which trading volume is low and in which consequently bid and ask quotes are wide and the liquidity of the instrument traded is low.


Refers to a change in price, either up or down.


A minimum change in price, up or down.


Simultaneous buying of a currency for delivery the following day and selling for the spot day, or vice versa. Also referred to as overnight.


The buying or selling of futures or options resulting from the execution of an order.



Another term for an open position.


An exchange rate is normally considered to be undervalued when it is below its purchasing power parity.

Up Tick

A transaction executed at a price greater than the previous transaction.



The number of transactions in a futures or options on futures contract made during a specified period of time.


Wash Trade

A matched deal which produces neither a gain nor a loss.


Term for where a trader takes a position, then has to move against it triggering stop loss limits and liquidation of positions, then having to move in the original direction. Normally occurs in volatile markets.


An individual who sells an option.