C & F: “Cost and Freight” paid to a point of destination and included in the price
quoted. Same as C.A.F.
Call: (1) A period at the opening and the close of some futures markets in which
the price for each futures contract is established by auction; (2) Buyer’s Call generally
applies to cotton, also called “call sale.” A purchase of a specified quantity of
a specific grade of a commodity at a fixed number of points above or below a
specified delivery month futures price with the buyer allowed a period of time to fix
the price either by purchasing a future for the account of the seller or telling the
seller when he wishes to fix the price; (3) Seller’s Call, also called “call purchase,” is
the same as the buyer’s call except that the seller has the right to determine the
time to fix the price; (4) option contract giving the buyer the right but not the
obligation to purchase the commodity or to enter into a long futures position; and
(5) the requirement that a financial instrument be returned to the issuer prior to
maturity, with principal and accrued interest paid off upon return.
Call Cotton: Cotton bought or sold on call. See Call.
Called: Another term for “exercised” when the option is a call. The writer of a call
must deliver the indicated underlying commodity when the option is exercised or
called.
Call Option: A contract that entitles the buyer/taker to buy a fixed quantity of
commodity at a stipulated basis or striking price at any time up to the expiration of
the option. The buyer pays a premium to the seller/grantor for this contract. A call
option is bought with the expectation of a rise in prices. See Put Option.
Call Rule: An exchange regulation under which an official bid price for a cash commodity
is competitively established at the close of each day’s trading. It holds until
the next opening of the exchange.
Capping: Effecting commodity or security transactions shortly prior to an option’s
expiration date depressing or preventing a rise in the price of the commodity or
security so that previously written call options will expire worthless and the premium
the writer received will be protected.
Carrying Broker: A member of a commodity exchange, usually a futures commission
merchant, through whom another broker or customer elects to clear all or part
of its trades.
Carrying Charges: Cost of storing a physical commodity or holding a financial
instrument over a period of time. Includes insurance, storage, and interest on the
invested funds as well as other incidental costs. It is a carrying charge market when
there are higher futures prices for each successive contract maturity. If the carrying
charge is adequate to reimburse the holder, it is called a “full charge.” Also see
Negative Carry, Positive Carry and Contango.
Cash Commodity: The physical or actual commodity as distinguished from the
futures contract. Sometimes called Spot Commodity or Actuals.
Cash Forward Sale: See Forward Contracting.
Cash Market: The market for the cash commodity (as contrasted to a futures
contract), taking the form of: (1) an organized, self-regulated central market (e.g.,
a commodity exchange); (2) a decentralized over-the-counter market; or (3) a
local organization, such as a grain elevator or meat processor, which provides a
market for a small region.
Cash Price: The price in the marketplace for actual cash or spot commodities to
be delivered via customary market channels.
Cash Settlement: A method of settling certain futures or option contracts
whereby the seller (or short) pays the buyer (or long) the cash value of the commodity
traded according to a procedure specified in the contract.
CCC: See Commodity Credit Corporation.
CD: See Certificate of Deposit.
CEA: See Commodity Exchange Authority.
Certificate of Deposit (CD): A time deposit with a specific maturity evidenced
by a certificate. Large-denomination CDS are typically negotiable.
CFTC: See Commodity Futures Trading Commission.
CFO: Cancel Former Order.
Certificated or Certified Stocks: Stocks of a commodity that have been inspected
and found to be of a quality deliverable against futures contracts, stored
at the delivery points designated as regular or acceptable for delivery by a commodity
exchange. In grain, called “stocks in deliverable position.” See Deliverable
Stocks.
Changer: A clearing member of both the Mid-America Commodity Exchange (MCE)
and another futures exchange who, for a fee, will assume the opposite side of a
transaction on the MCE by taking a spread position between the MCE and another
futures exchange which trades an identical, but larger, contract. Through this service,
the changer provides liquidity for the MCE and an economical mechanism for
arbitrage between the two markets.
Charting: The use of graphs and charts in the technical analysis of futures markets
to plot trends of price movements, average movements of price, volume of
trading and open interest. See Technical Analysis.
Chartist: Technical trader who reacts to signals derived from graphs of price
movements.
Cheapest-to-Deliver: Usually refers to the selection of bonds deliverable against
an expiring bond futures contract.
Chooser Option: An option which is transacted in the present but which at some
prespecified future date is chosen to be either a put or a call option.
Churning: Excessive trading of an account by a broker with control of the account
for the purpose of generating commissions while disregarding the interests of the
customer.
Circuit Breakers: A system of trading halts and price limits on equities and derivative
markets designed to provide a cooling-off period during large, intraday
market movements. The first known use of the term circuit breaker in this context
was in the Report of the Presidential Task Force on Market Mechanisms (January
1988), which recommended that circuit breakers be adopted following the market
break of October 1987.
C.I.F.: Cost, insurance and freight paid to a point of destination and included in the
price quoted.
Class (of options): Options of the same type (i.e., either puts or calls, but not
both) covering the same underlying futures contract or physical commodity (e.g., a
March call with a strike price of 62 and a May call with a strike price of 58).
Clearing: The procedure through which the clearing house or association becomes
the buyer to each seller of a futures contract, and the seller to each buyer, and
assumes responsibility for protecting buyers and sellers from financial loss by assuring
performance on each contract.
Clearing House: An adjunct to, or division of, a commodity exchange through
which transactions executed on the floor of the exchange are settled. Also charged
with assuring the proper conduct of the exchange’s delivery procedures and the
adequate financing of the trading.
Clearing Member: A member of the Clearing House or Association. All trades of a
non-clearing member must be registered and eventually settled through a clearing
member.
Clearing Price: See Settlement Price.
Close, The: The period at the end of the trading session, officially designated by
the exchange, during which all transactions are considered made “at the close.”
Also see Call.
Closing-Out: Liquidating an existing long or short futures or option position with
an equal and opposite transaction. Also known as Offset.
Closing Price (or Range): The price (or price range) recorded during trading
that takes place in the final moments of a day’s activity that is officially designated
as the “close.”
Combination: Puts and calls held either long or short with different strike prices
and expirations.
Commercial: An entity involved in the production, processing, or merchandising
of a commodity.
Commercial Grain Stocks: Domestic grain in store in public and private elevators
at important markets and grain afloat in vessels or barges in lake and seaboard
ports.
Commercial Paper: Short-term promissory notes issued in bearer form by large
corporations, with maturities ranging from 5 to 270 days. Since the notes are
unsecured, the commercial papers market generally is dominated by large corporations
with impeccable credit ratings.
Commission: (1) The charge made by a commission house for buying and selling
commodities; (2) the CFTC.
Commitments: See Open Interest.
Commodity Credit Corporation: A government-owned corporation established
in 1933 to assist American agriculture. Major operations include price support
programs, foreign sales, and export credit programs for agricultural commodities.
Commodity Exchange Authority: A regulatory agency of the U.S. Department
of Agriculture established to administer the Commodity Exchange Act prior to
1975; the predecessor of the Commodity Futures Trading Commission.
Commodity Exchange Commission: A commission consisting of the Secretary
of Agriculture, Secretary of Commerce, and the Attorney General, responsible for
administering the Commodity Exchange Act prior to 1975.
Commodity Futures Trading Commission (CFTC): The Federal regulatory
agency established by the CFTC Act of 1974 to administer the Commodity Exchange
Act.
Commodity-Linked Bond: A bond in which payment to the investor is dependent
on the price level of such commodities as crude oil, gold, or silver at maturity.
Commodity Option: See Option, Puts and Calls.
Commodity Pool: An investment trust, syndicate or similar form of enterprise
operated for the purpose of trading commodity futures or option contracts.
Commodity Pool Operator (CPO): Individuals or firms in businesses similar to
investment trusts or syndicates that solicit or accept funds, securities or property
for the purpose of trading commodity futures contracts or commodity options.
Commodity Price Index: Index or average, which may be weighted, of selected
commodity prices, intended to be representative of the markets in general or a
specific subset of commodities (for example, grains or livestock).
Commodity Trading Advisor (CTA): Individuals or firms that, for pay, issue
analyses or reports concerning commodities, including the advisability of trading in
commodity futures or options.
Congestion: (1) A market situation in which shorts attempting to cover their
positions are unable to find an adequate supply of contracts provided by longs
willing to liquidate or by new sellers willing to enter the market, except at sharply
higher prices; (2) in technical analysis, a period of time characterized by repetitious
and limited price fluctuations.
Consignment: A shipment made by a producer or dealer to an agent elsewhere
with the understanding that the commodities in question will be cared for or sold
at the highest obtainable price. Title to the merchandise shipped on consignment
rests with the shipper until the goods are disposed of according to agreement.
Contango: Market situation in which prices in succeeding delivery months are
progressively higher than in the nearest delivery month; the opposite of “backwardation.”
Contract: (1) A term of reference describing a unit of trading for a commodity
future or option; (2) An agreement to buy or sell a specified commodity, detailing
the amount and grade of the product and the date onwhich the contract will mature
and become deliverable.
Contract Grades: Those grades of a commodity which have been officially approved
by an exchange as deliverable in settlement of a futures contract.
Contract Market: (1) A board of trade or exchange designated by the Commodity
Futures Trading Commission to trade futures or options under the Commodity
Exchange Act; (2) Sometimes the futures contract itself (e.g., corn is a contract
market).
Contract Month: See Delivery Month.
Contract Unit: The actual amount of a commodity represented in a contract.
Controlled Account: Any account for which trading is directed by someone
other than the owner. Also called a Managed Account or a Discretionary Account.
Convergence: The tendency for prices of physicals and futures to approach one
another, usually during the delivery month. Also called a “narrowing of the basis.”
Conversion: When trading options on futures contracts, a position created by
selling a call option, buying a put option, and buying the underlying futures contract,
where the options have the same strike price and the same expiration.
Corner: (1) Securing such relative control of a commodity or security that its price
can be manipulated; (2) In the extreme situation, obtaining contracts requiring the
delivery of more commodities or securities than are available for delivery.
Corn-Hog Ratio: See Feed Ratio.
Cost of Tender: Total of various charges incurred when a commodity is certified
and delivered on a futures contract.
Counter-Trend Trading: In technical analysis, the method by which a trader takes
a position contrary to the current market direction in anticipation of a change in
that direction.
Coupon (Coupon Rate): A fixed dollar amount of interest payable per annum,
stated as a percentage of principal value, usually payable in semiannual installments.
Cover: (1) Purchasing futures to offset a short position. Same as Short Covering.
See Offset, Liquidation; (2) To have in hand the physical commodity when a short
futures or leverage sale is made, or to acquire the commodity that might be deliverable
on a short sale.
Covered Option: A short call or put option position which is covered by the sale
or purchase of the underlying futures contract or physical commodity. For example,
in the case of options on futures contracts, a covered call is a short call position
combined with a long futures position. A covered put is a short put position combined
with a short futures position.
Cox-Ross-Rubinstein Option Pricing Model: An option pricing logarithm developed
by J. Cox, S. Ross and M. Rubinstein which can be adopted to include effects
not included in the Black-Scholes model (e.g., early exercise and price supports).
CPO: See Commodity Pool Operator.
Crack: In energy futures, the simultaneous purchase of crude oil futures and the
sale of petroleum product futures to establish a refining margin. See Gross Processing
Margin.
Crop Year: The time period from one harvest to the next, varying according to the
commodity (i.e., July 1 to June 30 for wheat; September 1 to August 31 for
soybeans).
Cross-Hedge: Hedging a cash market position in a futures contract for a different
but price-related commodity.
Cross-Margining: A procedure for margining related securities, options, and fu
tures contracts jointly when different clearing houses clear each side of the posi
tion.
Cross-Rate: In foreign exchange, the price of one currency in terms of another
currency in the market of a third country. For example, a London dollar cross-rate
could be the price of one U.S. dollar in terms of deutsche marks on the London
market.
Cross Trading: Offsetting or noncompetitive match of the buy order of one customer
against the sell order of another, a practice that is permissible only when
executed in accordance with the Commodity Exchange Act, CFTC regulations, and
rules of the contract market.
Crush Spread: In the soybean futures market, the simultaneous purchase of
soybean futures and the sale of soybean meal and soybean oil futures to establish
a processing margin. See Gross Processing Margin.
CTA: See Commodity Trading Advisor.
CTI Codes: Customer Type Indicator codes. These consist of four identifiers which
describe transactions by the type of customer for which a trade is effected.. The
four codes are: (1) trading for the member’s own account; (2) trading for a proprietary
account of the clearing member’s firm; (3) trading for another member who
is currently present on the trading floor or for an account controlled by such other
member; and (4) trading for any other type of customer. Transaction data classified
by the above codes are included in the trade register report produced by a
clearing organization.
Curb Trading: Trading by telephone or by other means that takes place after the
official market has closed. Originally it took place in the street on the curb outside
the market. Under CFTC rules, curb trading is illegal. Also known as kerb trading.
Current Delivery Month: The futures contract which matures and becomes
deliverable during the present month. Also called Spot Month.
