- C -

- C & F -
"Cost and Freight" paid to a point of destination and included in the price quoted.

- C.I.F. -
Cost, Insurance and Freight paid to a point of destination and included in the price quoted.

- Calendar spread -
The sale of an option with a nearby expiration against the purchase of an option with the same strike price, but a more distant expiration. The loss is limited to the net premium paid, while the maximum profit possible depends on the time value of the distant option when the nearby expires. The strategy takes advantage of time value differentials during periods of relatively flat prices.

- Call -
The period at market opening or closing during which futures contract prices are established by auction.

- 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 to purchase the commodity or to enter into a long position.
(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.

- Call Contract -
A contract giving the buyer the right to purchase something within a certain period of time at a specified price. The seller receives money (the premium) for the sale of this right. The contract also obligates the seller to deliver, if the buyer exercises his right to purchase.

- Call Option -
A contract that entitles the buyer/taker to buy a fixed quantity of a 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.

- 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.

- Capping -
Effecting commodity or security transactions shortly prior to an option's expiration date by 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 received therefrom 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.

- Carrying Costs-
The cost of storing a physical commodity, consisting of interest on the invested funds, insurance, storage fees, and other incidental costs. Carrying costs are usually reflected in the difference between futures prices for different delivery months. When futures prices for deferred contract maturities are higher than for nearby maturities, it is a carrying charge market. A full carrying charge market reimburses the owner of the physical commodity for its storage until the delivery date.

- Carryover -
The portion of existing supplies remaining from a prior production period.

- Cash Commodity -
The physical or actual commodity as distinguished from the futures contract. Sometimes called Spot Commodity or Actuals.

- Cash commodity/cash market -
The actual or physical commodity. The market in which the physical commodity is traded, as opposed to the futures market, where contracts for future delivery of the physical commodity are traded. See also Actuals.

- Cash flow -
The cash receipts and payments of a business. This differs from net income after taxes in that non-cash expenses are not included in a cash flow statement. If more cash comes in than goes out, there is a positive cash flow, while more outgoing cash causes a negative cash flow.

- Cash forward contract -
See forward contract.

- Cash Forward Sale -
See Forward Contracting.

- Cash market -
A market in which goods are purchased either immediately for cash, as in a cash and carry contract, or where they are contracted for presently, with delivery occurring at the time of payment. All terms of the contract are negotiated between the buyer and seller.

- 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 cost of a good or service when purchased for cash. In commodity trading, the cash price is the cost of buying the physical commodity on the current day in the spot market, rather than buying contracts in the futures market

- Cash Price -
IThe 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.

- Cash settlement -
Instead of having the actuals delivered, cash is transferred upon settlement.

- 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.

- Certificate of Deposit (CD): -
A large time deposit with a bank, having a specific maturity date and yield stated on the certificate. CDs usually are issued with $100,000 to $1,000,000 face values.

- 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 the commodity exchange. In grain called stocks in deliverable position. See Deliverable Stocks.

- Certificated stock -
Stocks of a physical commodity that have been inspected by the exchange and found to be acceptable for delivery on a futures contract. They are stored at designated delivery points.

- CFO -
Cancel Former Order.

- CFTC -
See Commodity Futures Trading Commission.

- Changer -
A clearing member of both the Mid-America Commodity Exchange 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 -
When technicians analyze the futures markets, they employ graphs and charts to plot the price movements, volume, open interest, or other statistical indicators of price movement. See also Technical analysis and Bar chart.

- Chartist -
Technical trader who reacts to signals read from graphs of price movements.

- Cheapest-to-Deliver -
Usually refers to the selection of bonds deliverable against the expiring bond futures contract.

- Chicago Board of Trade (CBOT): -
Founded in 1848 with 82 original members, it had an active cash and forward contracting business at first. Although the records were destroyed in the fire of 1871, it is agreed that futures contracts were being traded there during the 1860s. Today, the CBOT is the largest exchange in the world. It is known for its grain, gold, and Treasury Bond futures, as well as options on T-Bond futures. The Chicago Board of Trade is located at 141 W. Jackson Blvd., Chicago, IL 60604.

- Chicago Mercantile Exchange (CME)-
The second largest futures exchange in the United States. Originally formed in 1874 as the Chicago Produce Exchange, the "Chicago Merc" was primarily a perishable agricultural products market (butter, eggs, poultry, etc.). The name was changed in 1919, and since then the CME has been an innovator in the industry. The CME trades financial futures, options, and stock index futures contracts. The CME is the largest exchange for futures contracts in live commodities, foreign currencies, and Eurodollars. Foreign currencies contracts traded include: German Mark, Canadian Dollar, French Franc, Swiss Franc, Mexican Peso, British Pound, Australian Dollar, and Japanese Yen. Futures contracts on the S&P 500, Nikkei 250, Major Market Index, and S&P 100 Stock Indexes and options on many of the their futures contracts are also traded at the CME. The CME is located at 30 S. Wacker Dr., Chicago, IL 60606.

- Chooser Option -
An option which is transacted at 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 broker with control of the account for the purpose of generating commissions while disregarding the interests of the customer.

- Circuit Breaker-
A system of trading halts and price limits on equities and derivative markets designed to provide a cooling-off period during large, intraday market declines. 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 he adopted following the market break of October 1987.

- 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 at strike price 62 and a May call at strike price 58).

- Clearing -
The procedure through which the clearing house or association becomes buyer to each seller of a futures contract, and 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 ".

- Closing Price (or Range) -
The price (or price range) recorded in trading that takes place in the final moments of a day's trade that are officially designated as the "close ".

- Closing-Out -
Liquidating an existing long or short futures or option position with an equal and opposite transaction. Also known as Offset.

- 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 harbors of lakes 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, large corporations with impeccable credit ratings generally dominate the commercial paper market.

- Commission -
The charge made by a commission house for buying and selling commodities.

- 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 forerunner of the Commodity Futures Trading Commission

- Commodity Exchange Commission -
A commission consisting of the Secretary of Agriculture, Secretary of Commerce, and the Attorney General, charged with responsibility 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 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.

- 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.

- 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 references 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 on which 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) To corner is to secure such relative control of a commodity or security that its price can be manipulated.
(2) In the extreme situation, obtaining contracts requiring 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.

- D -

- Day order -
An order which, if not executed during the trading session the day it is entered, automatically expires at the end of the session. All orders are assumed to be day orders unless specified otherwise.

- Day-trader -
Futures or options traders (often active on the trading floor) who usually initiate and offset position during a single trading session.

- Dealer option -
A put or call on a physical good written by a firm dealing in the underlying cash commodity. A dealer option does not originate on, nor is it subject to the rules of an exchange.

- Debt instruments -
(1) Generally, legal IOUs created when one person borrows money from (becomes indebted to) another person;
(2) Any commercial paper, bank CDs, bills, bonds, etc.;
(3) A document evidencing a loan or debt. Debt instruments such as T-Bills and T-Bonds are traded on the CME and CBOT, respectively

- Deck -
All orders in a floor broker's possession that have not yet been executed.

- Deep in-the-money -
An option is "deep in-the money" when it is so far in-the-money that it is unlikely to go out-of-the-money prior to expiration. It is an arbitrary term and can be used to describe different options by different people.

- Deep out-of-the-money -
Used to describe an option that is unlikely to go into-the-money prior to expiration. An arbitrary term.

- Default -
Failure to meet a margin call or to make or take delivery. The failure to perform on a futures contract as required by exchange rules.

- Deferred delivery -
Futures trading in distant delivery months.

- Deferred pricing -
A method of pricing where a producer sells his commodity now and buys a futures contract to benefit from an expected price increase. Although some people call this hedging, the producer is actually speculating that he can make more money by selling the cash commodity and buying a futures contract than by storing the commodity and selling it later. (If the commodity has been sold, what could he be hedging against?)

- Delivery month -
The month during which a futures contract expires, and delivery is made on that contract.

- Delivery notice -
Notification of delivery by the clearinghouse to the buyer. Such notice is initiated by the seller in the form of a "Notice of Intention to Deliver."

- Delivery point -
The location approved by an exchange for tendering and accepting goods deliverable according to the terms of a futures contract.

- Delivery -
The transportation of a physical commodity (actuals or cash) to a specified destination in fulfillment of a futures contract.

- Delta -
The correlation factor between a futures price fluctuation and the change in premium for the option on that futures contract. Delta changes from moment to moment as the option premium changes.

- Demand -
The desire to purchase economic goods or services (and the financial ability to do so) at the market price constitutes demand. When many purchasers demand a good at the market price, their combined purchasing power constitutes "demand." As this combined demand increases or decreases, other things remaining constant, the price of the good tends to rise or fall.

- Derivative -
A financial instrument whose characteristics and value are based on the characteristics and value of another financial instrument or product.

- Diagonal spread -
Uses options with different expiration dates and different strike prices; for example, a trader might purchase a 26 December German Mark put and sell a 28 September German Mark put when the futures price is $.2600/DM.

- Direct hedge -
When the hedger has (or needs) the commodity (grade, etc.) specified for delivery in the futures contract, he is "direct hedging." When he does not have the specified commodity, he is cross hedging.

- Discount rate -
The interest rate charged by the Federal Reserve to its member banks (banks which belong to the Federal Reserve System) for funds they borrow. This rate has a direct bearing on the interest rates banks charge their customers. When the discount rate is increased, the banks must raise the rates they charge to cover their increased cost of borrowing. Likewise, when the discount rate is lowered, banks are able to charge lower interest rates on their loans.

- Discount -
(1) Quality differences between those standards set for some futures contracts and the quality of the delivered goods. If inferior goods are tendered for delivery, they are graded below the standard, and a lesser amount is paid for them. They are sold at a discount.
(2) Price differences between futures of different delivery months.
(3) For short-term financial instruments, "discount" may be used to describe the way interest is paid. Short-term instruments are purchased at a price below the face value (discount). At maturity, the full face value is paid to the purchaser. The interest is imputed, rather than being paid as coupon interest during the term of the instrument; for example, if a T-Bill is purchased for $974,150, the price is quoted at 89.66, or a discount of 10.34% (100.00 - 89.66 = 10.34). At maturity, the holder receives $1,000,000.

- Discretionary accounts -
An arrangement in which an account holder gives power of attorney to another person, usually his broker, to make decisions to buy or to sell without notifying the owner of the account. Discretionary accounts often are called "managed" or "controlled" accounts.

- Downtrend -
A channel of downward price movement.

- E -

- Economic good -
That which is scarce and useful to mankind.

- Economy of scale -
A lower cost per unit produced, achieved through large-scale production. The lower cost can result from better tools of production, greater discounts on purchased supplies, production of by-products, and/or equipment or labor used at production levels closer to capacity. A large cattle feeding operation may be able to benefit from economies such as lower unit feed costs, increased mechanization, and lower unit veterinary costs.

- Efficiency -
Because of futures contracts' standardization of terms, large numbers of traders from all walks of life may trade futures, thus allowing prices to be determined readily (it is more likely that someone will want a contract at any given price). The more readily prices are discovered, the more efficient are the markets.

- Elasticity -
A term used to describe the effects price, supply, and demand have on one another for a particular commodity. A commodity is said to have elastic demand when a price change affects the demand for that commodity; it has supply elasticity when a change in price causes a change in the production of the commodity. A commodity has inelastic supply or demand when they are unaffected by a change in price.

- Equity -
The value of a futures trading account with all open positions valued at the going market price.

- Eurodollar Time Deposits -
U.S. dollars on deposit outside the United States, either with a foreign bank or a subsidiary of a U.S. bank. The interest paid for these dollar deposits generally is higher than that for funds deposited in U.S. banks because the foreign banks are riskier_they will not be supported or nationalized by the U.S. government upon default. Furthermore, they may pay higher rates of interest because they are not regulated by the U.S. government.

- Even up -
To close out, liquidate, or cover an open position.

- Exchange rates -
The price of foreign currencies. If it costs $.42 to buy one Swiss Franc, the exchange rate is .4200. As one currency is inflated faster or slower than the other, the exchange rate will change, reflecting the change in relative value. The currency being inflated faster is said to be becoming weaker because more of it must be exchanged for the same amount of the other currency. As a currency becomes weaker, exports are encouraged because others can buy more with their relatively stronger currencies.

- Exchange -
An association of persons who participate in the business of buying or selling futures contracts or futures options. A forum or place where traders (members) gather to buy or sell economic goods. There are 9 domestic futures exchanges currently operating as non-profit member organizations. See also Board of trade or Contract market.

- Exercise -
When a call purchaser takes delivery of the underlying long futures position, or when a put purchaser takes delivery of the underlying short futures position. Only option buyers may "exercise" their options; option sellers have a passive position.

- Expiration date -
The final date when an option may be exercised. Many options expire on a specified date during the month prior to the delivery month for the underlying futures contract.

- Expiration -
An option is a wasting asset; i.e., it has a limited life, usually nine months. At the end of its life, it either becomes worthless (if it is at-the-money or out-of-the-money), or is automatically exercised for the amount by which it is in-the-money.

- Ex-pit transactions -
Occurring outside the futures exchange trading pits. This includes cash transactions, the delivery process, and the changing of brokerage firms while maintaining open positions. All other transactions involving futures contracts must occur in the trading pits through open outcry.