ORENDA Commodities

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These are the terms that are most commonly used in our trading room.

Listed in alphabetical order, these terms are not all-inclusive but do represent those that are most commonly used. If you cannot find the term you are looking for or have comments about the terms, please let us know.

At-the-Market: Obtainable market price when you place an order, a sell order will trade at the bid. A buy order will trade at the offer or ask.

Bear Market: If any market price drops more than 20% from it’s recent highs. Falling prices represent a downtrend.

Bull Market: Prices are rising or are expected to rise.

Broker: Who executes orders on behalf of clients or help self-directed traders and charges them a commission.

Contango: If the current price of a crude oil contract is $50 per barrel, but the price for delivery in six months is $60, that market would be in contango. The opposite of Normal Backwardation.

Daily Price Limit: The maximum price advance or decline in a day. If it happens, there can be no trading at any price until the next trading day.

Day Trader: Buying and selling within the same trading day.

Expiration Date: The date on which a futures option expires and the last day an option may be exercised.

Electronic Trading: A manner of trading where orders are routed electronically from traders to a platform on which buyers and sellers are matched to complete transactions – as opposed to floor trading, where buyers and sellers complete transactions via verbal (shouting) and hand signal buy and sell orders.

Exchange: A central marketplace where transactions are executed between buyers and sellers, typically.

Interest Rates: The costs of borrowing money.

ICE Exchange: The first all electronic futures exchange.

Initial Margin: The minimum amount of a good faith deposit required to initiate a futures position.

Intra Commodity Spread: The purchase of one month and shorting of a different month within the same futures market.

Inter Commodity Spread: The purchase of a contract in one futures market and shorting of another contract in a different futures market.

Everage: Controlling a large dollar amount of an asset on a small amount of security deposit.

Limit-Move: When the price a futures contract goes up or down the most allowed in one day by a futures exchange.

Last Trading Day: The day a futures contract expires and no more trading can take place.

Libor: The London Inter-Bank Rate.

Live Cattle: A futures contract listed on the Chicago Mercantile Exchange that represents 40,000 lbs of beef.

Lean Hogs: A futures contract listed on the Chicago Mercantile Exchange that represents 40,000 lbs of pork.

LME: London Metals Exchange.

Margin Call: This occurs when a request/demand is made from a futures brokerage firm, such as Cannon Trading Co, to one of its clients to bring margin deposits up to initial levels for a particular futures contract/position.

Market Order: A market order is an order to buy or sell a futures contract at whatever price is obtainable; (dependent upon the current bids/asks) at the time it is entered in the order book, ring, pit, or electronic trading platform.

Quotation: The last price or bid or ask for any commodity or futures price.

Rally: The act of the market rising. Price rally most common use.

Range: When price stays between two levels of support and resistance; total price traveled in a certain time period.

Reaction: Correction or retracement of trending direction.

Resistance: A Level price has difficulty or expected difficulty exceeding.

Round Turn: Both entering and exiting a position. A buy and a sell; two sides.

Scalper: A trader who trades rapidly or on smaller time frames.

Short: Taking an interest in a negative price result. Opposite of long.

Short Selling: Taking a short position with the intention to cover at lower prices.

Speculator: Individual looking to profit from educated guessing not random chance.

Stop Order: Order on long or short side to protect risk; also could be used to enter above or below market.

Support: A Level price has difficulty or expected difficulty dropping below.

Tick: Smallest movement in price fluctuation.

Trader: Individual who places trades or is responsible for the computer placing trades.

Exhaustion Gap: The gap in the difference of an asset’s price – typically an indication of high trading volume in a specific direction – followed by a reversal of the asset’s price as a result of a sudden change in market sentiment.

Futures Contract: A legal agreement to buy or sell a specific commodity. The terms of the contract include a specific description of the quantity and quality of the commodity, as well as the date on which the buy/sell transaction is to be completed and often a list of the locations at which the transfer of the commodity can take place.

First Notice Day: The first-day holders of a purchased/long position in a commodity futures contract may be notified – typically by the exchange on which the commodity is traded – that the physical commodity has been designated to be delivered.

Fundamental Analysis: A type of evaluation that uses any available information – news, reports, data – as a collective indication of a commodity’s current and potential change in value.

Gap: A difference in two prices that occurs between two-time intervals with no other trading taking place between those two prices.

Globex: An electronic commodities trading platform formed by the Chicago Mercantile Exchange (CME). Introduced in 1992, it accounts for >80% of the CME’s total trading volume, in itself the largest futures and options exchange in the world.

Hedge: In futures, a position in the market designed to counterbalance, protect or mitigate losses of another position.

Historical Volatility: The speed or rate of change in an asset’s price movement over a period of time.

Head and Shoulders: In technical analysis, a price pattern defined by two price peaks/lows on either side of a higher/lower price peak/low – a chart formation believed to be a trend reversal pattern.

Market-on-Opening: A market-on-opening order is an order to buy or sell at the beginning of the trading session at a price within the opening range of prices.

Mini Contract: This refers to a futures contract that has a smaller contract size than an otherwise identical futures contract of “full size”. An example would be a Mini-Crude Oil contract of 500 barrels instead of the full 1,000 barrel contract size.

Notice Day: This refers to any day on which notices of “intent to deliver” on futures contracts may/shall be issued.

Net Asset Value (NAV): This value refers to each unit of participation in regards to a commodity pool.

Open Interest: Open contracts refer to the total number of futures contracts that are still active and have not yet been closed through offsetting transactions or fulfilled by physical delivery. They represent the outstanding positions in a specific delivery month or market.

Open Trade Equity: This refers to any unrealized gains or losses on open futures positions, (those futures positions that have not been offset).

Option Writer: Option writer refers to a person/trader who sells an option and takes on the obligation to fulfill the terms of the option contract in exchange for the premium received.

Overbought: Overbought refers to a situation in technical analysis where the price of a futures market has risen rapidly and excessively, leading traders to believe it may soon reverse. This prompts a shift from bullish to bearish sentiment, with traders potentially entering short positions.

Position Trader: This refers to a commodity trader who either buys or sells futures contracts and holds them usually for an extended or longer period of time than a single trading session, as distinguished from a day trader, who will normally initiate and offset a futures position within a single trading session.

Price Discovery: This refers to the market process of determining the price level for a commodity or futures contract through/by the interaction of buyers and sellers and based on supply and demand conditions in a particular market.

Pyramiding: This refers to the strategy of utilizing profits/gains on existing positions as margin to increase the size of the open futures position. Normally this will be executed in successively smaller increments or sizes.

Trading Floor: Floor where Traders gather to execute trading through hand signals.

Trend: Detection of the recent price movement respective to the time frame.

Trend Line: A diagonal slanted line following the direction of the trend.

Unable: Orders that have worked that have worked throughout the day but are Unable to fill because the market never traded through the orders price.

Uncovered Option: The Sale of a put or a call without holding an equal or opposite position in the underlying futures contract.