Glossary

Carrying Charges

See Also:

Call: There are three meaning of the "Call" term. It could be:
1) An option contract giving the buyer the right but not the obligation to purchase a commodity or other asset or to enter into a long futures position;
2) a period at the opening and the close of some futures markets in which the price for each futures contract is established by auction;
3) the requirement that a financial instrument be returned to the issuer prior to maturity, with principal and accrued interest paid off upon return.

Called: Called is another term for exercised when an option is a call. In the case of an option on a physical, the writer of a call must deliver the indicated underlying commodity when the option is exercised or called. In the case of an option on a futures contract, a futures position will be created that will require margin, unless the writer of the call has an offsetting position.

Commodity: A commodity, as defined in the Commodity Exchange Act, includes the agricultural commodities enumerated in Section 1a(4) of the Commodity Exchange Act, 7 USC 1a(4), and all other goods and articles, except onions as provided in Public Law 85-839 (7 USC 13-1), a 1958 law that banned futures trading in onions, and all services, rights, and interests in which contracts for future delivery are presently or in the future dealt in.

Contango: Contango is a market situation in which prices in succeeding delivery months are progressively higher than in the nearest delivery month; the opposite of backwardation.

Contract: Contract is a term of reference describing a unit of trading for a commodity future or option. At the same time contract is an agreement to buy or sell a specified commodity, detailing the amount and grade of the product and the date on which the contract will mature and become deliverable.

Futures: Futures (also called Futures Contract) is a legally binding agreement to buy or sell a commodity or financial instrument at a later date. Futures contracts are normally standardized according to the quality, quantity, delivery time and location for each commodity, with price as the only variable.

Futures Price: Futures Price could be referred to the price of a commodity for future delivery that is traded on a futures exchange or Futures Price could refer to the price of any futures contract.

High: High is the highest price of the day for a particular futures or options on futures contract.

Instrument: Instrument is a tradable asset such as a commodity, security, or derivative, or an index or value that underlies a derivative or could underlie a derivative.

Maturity: Maturity is a period within which a futures contract can be settled by delivery of the actual commodity.

Negative Carry: Negative Carry is the cost of financing a financial instrument (the short-term rate of interest), when the cost is above the current return of the financial instrument.

Positive Carry: Positive Carry is the cost of financing a financial instrument (the short-term rate of interest), where the cost is less than the current return of the financial instrument.

Ring: Ring is a circular area on the trading floor of an exchange where traders and brokers stand while executing futures trades. Some exchanges use pits rather than rings.

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