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Amortization
Liquidation of a debt through installment payments.
Abandon
To elect not to exercise or offset a long option position
Basis Grade
The grade of a commodity used as the standard or par grade of a futures contract.
Buy (or Sell) On Opening
To buy (or sell) at the beginning of a trading session within the open price range.
Arbitrage
A strategy involving the simultaneous purchase and sale of identical or equivalent commodity futures contracts or other instruments across two or more markets in order to benefit from a discrepancy in their price relationship. In a theoretical efficient market, there is a lack of opportunity for profitable arbitrage. See Spread.
Systemic Risk
The risk that a default by one market participant will have repercussions on other participants due to the interlocking nature of financial markets. For example, Customer A’s default in X market may affect Intermediary B’s ability to fulfill its obligations in Markets X, Y, and Z.
Security
Generally, a transferable instrument representing an ownership interest in a corporation (equity security or stock) or the debt of a corporation, municipality, or sovereign. Other forms of debt such as mortgages can be converted into securities.
Carrying Charges
Cost of storing a physical commodity or holding a financial instrument over a period of time. These charges include insurance, storage, and interest on the deposited funds, as well as other incidental costs.
Hedge Exemption
An exemption from speculative position limits for bona fide hedgers and certain other persons who meet the requirements of exchange and CFTC rules.
Par
Refers to the standard delivery point(s) and/or quality of a commodity that is deliverable on a futures contract at contract price.
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