Glossary

Clearing Price

See Also:

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.

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.

Closing Price: Closing Price is the same as Settlement Price. Closing price is the last price paid for a future contracts on any trading day. The closing price (or closing price range) recorded during trading that takes place in the final period of a trading session's activity that is officially designated as the "close."

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.

Equity: Equity is used on a trading account statement and it refers to the residual dollar value of a futures or option trading account, assuming it was liquidated at current prices.

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 Contract: Futures Contract is an agreement to purchase or sell a commodity for delivery in the future: (1) at a price that is determined at initiation of the contract; (2) that obligates each party to the contract to fulfill the contract at the specified price; (3) that is used to assume or shift price risk; and (4) that may be satisfied by delivery or offset.

Invoice Price: Invoice Price is the price fixed by the clearing house at which deliveries on futures are invoiced—generally the price at which the futures contract is settled when deliveries are made. Also called Delivery Price.

Margin: Margin is 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 a down payment or partial payment on a purchase, as in securities, but rather a performance bond. There are two main types of Margin: initial margin and maintenance margin. Initial margin is the amount of margin required by the broker when a futures position is opened. Maintenance margin is an amount that must be maintained on deposit at all times. In situation when the equity in a customer's account drops to or below the level of maintenance margin because of adverse price movement, the broker must issue a margin call to restore the customer's equity to the initial level. Exchanges specify levels of initial margin and maintenance margin for each futures contract, but futures commission merchants may require their customers to post margin at higher levels than those specified by the exchange. Futures margin is determined by the SPAN margining system, which takes into account all positions in a customer's portfolio.

Margin Call: Margin Call is a call from a clearinghouse to a clearing member, or from a broker or firm to a customer, to bring margin deposits up to a required minimum level.

Open: Open is the period at the beginning of the trading session officially designated by the exchange during which all transactions are considered made "at the open."

Open Trade Equity: Open Trade Equity is the unrealized gain or loss on open futures positions.

Settlement: Settlement is the act of fulfilling the delivery requirements of the futures contract.

Settlement Price: Settlement Price (also referred to as Closing Price) is the last price paid for a futures contract on any trading day. Settlement prices are used to determine open trade equity, margin calls and invoice prices for deliveries. Settlement price at which the clearing organization clears all trades and settles all accounts between clearing members of each contract month. The term also refers to a price established by the exchange to even up positions which may not be able to be liquidated in regular trading.

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