Glossary of Commodity Market Terms [N-Z]

Nearby (Delivery) Month - The futures contract month closest to expiration. Also referred to as spot month.

Offer - An expression indicating one's desire to sell a commodity at a given price; opposite of bid.

Offset - Taking a second futures position opposite to the initial or opening position. See Liquidate.

Open Interest - The total number of futures contracts of a given commodity that have not yet been offset by an opposite futures transaction nor fulfilled by delivery of the commodity or option exercise. Each open transaction has a buyer and a seller, but for calculation of open interest, only one side of the contract is counted.

Position - A market commitment. A buyer of a futures contract is said to have a long position and, conversely, a seller of futures contracts is said to have a short position.

Price Discovery - The generation of information about "future" cash market prices through the futures markets.

Price Limit - The maximum advance or decline from the previous day's settlement price permitted for a contract in one trading session by the rules of the exchange.

Settlement Close Out Price - The last price paid for a commodity on any trading day. The exchange clearing house determines a firm's net gains or losses, margin requirements, and the next day's price limits, based on each futures and options contract settlement price. If there is a closing range of prices, the settlement close out price is determined by averaging those prices.

Short - One who has sold futures contracts or plans to purchase a cash commodity. Selling futures contracts or initiating a cash forward contract sale without offsetting a particular market position.

Short Hedge - Selling futures contracts to protect against possible declining prices of commodities that will be sold in the future. At the time the cash commodities are sold, purchasing an equal number and type of futures contracts as those that were initially sold closes the open futures position.

Speculator - A market participant who tries to profit from buying and selling futures and options contracts by anticipating future price movements. Speculators assume market price risk and add liquidity and capital to the futures markets.

Spot - Usually refers to a cash market price for a physical commodity that is available for immediate delivery.

Spread - The price difference between two related markets or commodities or between contracts of different maturities of same commodity.

Volatility - A measure of the change in price over a given time period. It is often expressed as a percentage and computed as the annualized standard deviation of percentage change in daily price.

Volume - The number of purchases or sales of a commodity futures contract made during a specified period of time, often the total transactions for one trading day.

Warehouse Receipt - Document guaranteeing the existence and availability of a given quantity and quality of a commodity in storage; commonly used as the instrument of transfer of ownership in both cash and futures transactions.

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