Glossary
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T
Taker: The buyer of an option contract.
T-Bond: See Treasury Bond.
Technical Analysis: An approach to forecasting commodity or futures prices which examines patterns of price change, rates of change, and changes in volume of trading and open interest, without regard to underlying fundamental market factors. Someone who follow technical rules (called a technician) believes that futures market prices will anticipate any changes in fundamentals.
Ted Spread: The difference between the price of the three-month U.S. Treasury bill futures contract and the price of the three-month Eurodollar time deposit futures contract with the same expiration month.
Tender: To give notice to the clearinghouse of the intention to initiate delivery of the physical commodity in satisfaction of the futures contract. Also see Retender.
Tenderable Grades: See Contract Grades.
Terminal Elevator: An elevator located at a point of greatest accumulation in the movement of agricultural products which stores the commodity or moves it to processors.
Terminal Market: Usually synonymous with commodity exchange or futures market, specifically in the United Kingdom.
Theta: The derivative of the option price equation with respect to the remaining time to expiration of the option. A measure of the sensitivity of the value of the option to the passage of time.
Tick: Refers to a minimum change in price up or down. See Point.
Time-of-Day Order: This is an order which is to be executed at a given minute in the session. For example, "Sell 10 March corn at 12:30 p.m."
Time Spread: The selling of a nearby option and buying of a more deferred option with the same strike price.
Time Value: That portion of an option's premium that exceeds the intrinsic value. The time value of an option reflects the probability that the option will move into-the-money. Therefore, the longer the time remaining until expiration of the option, the greater its time value. Also called Extrinsic Value.
To-Arrive Contract: A transaction providing for subsequent delivery within a stipulated time limit of a specific grade of a commodity.
Trade Option: A commodity option transaction in which the taker is reasonably believed by the writer to be engaged in business involving use of that commodity or a related commodity.
Trader: (1) A merchant involved in cash commodities; (2) a professional speculator who trades for his own account.
Transaction: The entry or liquidation of a trade.
Transfer Trades: Entries made upon the books of futures commission merchants for the purpose of: (1) transferring existing trades from one account to another within the same office where no change in ownership is involved; (2) transferring existing trades from the books of one commission merchant to the books of another commission merchant where no change in ownership is involved. Also called Ex-Pit Transactions.
Transferable Option (or Contract): A contract which permits a position in the option market to be offset by a transaction on the opposite side of the market in the same contract.
Transfer Notice: A term used on some exchanges to describe a notice of delivery. See Retender.
Treasury Bills: Short-term U.S. government obligations, generally issued with 13, 26 or 52-week maturities. T-Bills are a fixed income asset and issued at discount.
Treasury Bonds (or T-Bond): Long-term obligations of the U.S. government with maturities of more than 7 years, which pay interest semiannually until they mature or are called, at which time the principal and the final interest payment is paid to the investor.
Treasury Notes: Same as Treasury Bonds except that Treasury Notes are medium-term and not callable.
Trend: The general direction, either upward or downward, in which prices have been moving.
Trendline: In charting, a line drawn across the bottom or top of a price chart indicating the direction or trend of price movement. If up, the trendline is called bullish; if down, it is called bearish.
U
Underlying (Underlying Commodity): The commodity, instrument, or futures contract on which a futures option is based, and which must be accepted or delivered if the option is exercised. Also, the cash commodity or financial instrument underlying a futures contract.
V
Variable Limit (Variable Price Limit): A price limit schedule, determined by an exchange,
that permits variations above or below the normally allowable
price movement for any one trading day. Most exchanges set
limits on the maximum daily price movement of some of the
futures contracts trade at their exchange. They also retain
the right to expand these limits if the price moves up or
down the limit in one direction for two or there trading days
in a row. If the limits automatically change after repeated
limit moves, they are known as variable limits.
Variation Margin: Payment made on a daily or intraday basis by a clearing member to the clearing organization based on adverse price movement in positions carried by the clearing member, calculated separately for customer and proprietary positions.
Variation Margin Call: A margin call from the clearinghouse to a clearing member. These margin calls are issued when the clearing member’s margin has been reduced substantially by unfavorable price movements. The variation margin call must be met within one hour.
Vault Receipt: A document indicating ownership of a commodity stored in a bank or other depository and frequently used as a delivery instrument in precious metal futures contracts.
Visible Supply: Usually refers to supplies of a commodity in licensed warehouses. Often includes afloats and all other supplies "in sight" in producing areas.
Volatile: A market which is often subject to wide price fluctuations is said to be volatile. This volatility is often due to a lack of liquidity. Lack of liquidity is caused by too few market participants, too little volume, or both.
Volatility Quote Trading: Refers to the quoting of bids and offers on option contracts in terms of their implied volatilities rather than as prices.
Volume of Trade: The number of contracts traded during a specified period of time. It may be quoted as the number of contracts traded or in the total of physical units, such as bales or bushels, pounds or dozens.
W
Warehouse Receipt: A document certifying possession of a commodity in a licensed warehouse that is recognized for delivery purposes by a commodity futures exchange.
Warrant: An issuer-based product that gives the buyer the right, but not the obligation, to buy (in the case of a call) or to sell (in the case of a put) a stock or a commodity at a set price during a specified period.
Warrant or Warehouse Receipt for Metals: Certificate of physical deposit, which gives title to physical metal in an exchange approved warehouse.
Wash Sale: Transactions that give the appearance of purchases and sales but which are initiated without the intent to make a bona fide transaction and which generally do not result in any actual change in ownership. Such sales are prohibited by the Commodity Exchange Act.
Wash Trading: Entering into, or purporting to enter into, transactions to give the appearance that purchases and sales have been made, without resulting in a change in the trader's market position.
Weak Hands: When used in connection with delivery of commodities on futures contracts, the terms usually means that the party probably does not intend to retain ownership of the commodity; when used in connection with futures positions, the term usually means positions held by small speculators.
Wild Card Option: Refers to a provision of any physical delivery Treasury Bond or Note futures contract which permits shorts to wait until as late as 8:00 p.m. on any notice day to announce their intention to deliver at invoice prices that are fixed at 2:00 p.m., the close of futures trading, on that day.
Winter Wheat: Wheat that is planted in the fall, lies dormant during the winter, and is harvested beginning about May of the next year.
Writer: The issuer, grantor, or maker of an option contract.
XYZ
Yield: (1) The production of a piece of land; e.g., his land yielded 100 bushels per acre. (2) The return provided by an investment.
Yield Curve: A graphic representation of market yield for a fixed income security plotted against the maturity of the security.
