Futures / Commodities Trading Terminology "D" to "I"

Glossary of Trading Terminology

Jump directly to a definition on this page by clicking on any of these words:
day orders | delivery | delivery month | delivery notice | differentials | financial futures | fundamental analysis | futures contract | futures commission merchant | futures funds | hedge | in-the-money | index futures | intrinsic value
day orders: Orders at a limited price which are understood to be good for the day unless expressly designated as an open order or "good-till-canceled" order.
delivery: The tender and receipt of the actual commodity, or, in the case of agricultural commodities, warehouse receipts covering such commodity, in settlement of a futures contract. Some contracts settle in cash (cash delivery), In which case open positions are marked to market on the last day of the contract based on the cash market close.
delivery month: Specified month within which delivery may be made under the terms of a futures contract.
delivery notice: A notice of a clearing member's intention to deliver a stated quantity of a commodity in settlement of a short futures position.
differentials: The premiums paid for the grades better than the basis grade and the discounts allowed for grades lower than the basis grades. These differentials are fixed by the contract terms on most exchanges.
financial futures: Futures contracts based on interest-rate instruments (T-bonds. T-bills, etc.), foreign currencies and indexes.
fundamental analysis: An approach to market forecasting that emphasizes the analysis of factors affecting supply and demand (opposite of technical analysis).
futures contract: A term used to designate any or all contracts covering the sale of commodities (including financial instruments and cash representing indexes) for future delivery made on an exchange and subject to its rules.
futures commission merchant (FCM): A broker who is permitted to accept orders to buy and sell futures contracts for customers.
futures funds: Usually limited partnerships for investors who prefer to participate in the futures market by buying shares in a fund managed by professional traders or commodity trading advisors.
hedge: A sale of futures contracts to offset the ownership or purchase of the underlying cash commodity in order to protect it against adverse price moves; or, conversely, a purchase of futures contracts to offset the sale of the underlying cash commodity, again for protection against adverse price moves.
in-the-money: In call options, when the strike price is below the price of the underlying futures. In put options, when the strike price is above the price of the underlying futures. In-the-money options are the most expensive options because the premium includes intrinsic value.
index futures: Futures contracts based on indexes such as the S&P 500 or Value Line Index. These are cash settlement contracts.
intrinsic value: For in-the-money call and put options, the difference between the strike price and the underlying futures price.

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