Definitions courtesy of the National Futures Association.


Basis – The difference between the current cash price of a commodity and the futures price of the same commodity

Bear Market (Bear/Bearish) – A market in which prices are declining. A market participant who believes prices will move lower is called a “bear.” A news item is considered bearish if it is expected to result in lower prices

Bull Market (Bull/Bullish) – A market in which prices are rising. A market participant who believes prices will move higher is called a “bull.” A news item is considered bullish if it is expected to result in higher prices.

Cash Commodity – The actual physical commodity as distinguished from the futures contract based on the physical commodity.

Cash Market – A place where people buy and sell the actual commodities (i.e., grain elevator, bank, etc.).

Cash Settlement – A method of selling certain futures or options contracts whereby the market participants settle in cash (payment of money rather than delivery of the commodity).

Commodity Futures Trading Commission (CFTC) – The federal regulatory agency established in 1974 that administers the Commodity Exchange Act. The CFTC monitors the futures and options on futures markets in the United States.

Contract Month – The month in which delivery is to be made in accordance with the terms of the futures contract.

Delivery – The transfer of the cash commodity from the seller of a futures contract to the buyer of a futures contract. Each futures exchange has specific procedures for delivery of a cash commodity. Some futures contracts, such as stock index contracts, are cash settled.

First Notice Day – The first day on which notice of intent to deliver a commodity in fulfilling of an expiring futures contract can be given to the clearinghouse by a seller and assigned by the clearinghouse to a buyer.

Last Trading Day – The last day on which trading may occur in a given futures or option.

Limit – See position limit, price limit, variable limit.

Long – One who has bought futures contracts or options on futures contracts or owns a cash commodity.

Low – The lowest price of the day of a particular futures or options on futures market.

Managed Account – Also referred to as a discretionary account. An arrangement by which the owner of the account gives written power of attorney to someone else, usually the broker or a Commodity Trading Advisor, to buy and sell without prior approval of the account owner.

Margin – An amount of money deposited by both buyers and sellers of futures contracts and by sellers of options contracts to ensure performance of the terms of the contract (the making or taking delivery of the commodity or the cancellation of the position by a subsequent offsetting trade). Margin in commodities is not down payment, as in securities, but rather a performance bond.

Nearby Delivery Month – The futures contract month closest to expiration.

Open Interest – The total number of futures or options contracts of a given commodity that have not yet been offset by an opposite futures or option transaction nor fulfilled by delivery of the commodity or options exercise. Each open transaction has a buyer and a seller, but for calculations of open interest, only one side of the contract is counted.

Position – A commitment, either long or short, in the market.

Position Limit – The maximum number of speculative futures contracts one can hold as determined by the CFTC and/or the exchange where the contract is traded.

Price Limit – The maximum advance or decline, from the previous day’s settlement price, permitted for a futures contract in one trading session.

Range – The difference between the high and low price of a commodity during a given trading session, week, month, year, etc.

Short – One who has sold futures contracts or plans to purchase a cash commodity.

Variable Limit – A price system that allows for larger than normal allowable price movements under certain conditions. In periods of extreme volatility, some exchanges permit trading at price levels that exceed regular daily price limits.

Volatility – A measurement of the change in price over a given time period.

Volume – The number of purchases and sales of futures contracts made during a specified period of time, often the total transactions for one trading day.