ACU (Asian Currency Units): Dollar deposits held in Singapore or other Asian centers.

Abandon: The act of an option holder in electing not to exercise or offset an option.

About Steady - Supplies slightly out of balance with demand, but not sufficient to warrant a price change. 

Acceptance of bill of exchange: Recognition of a legal obligation to pay the amount on a term bill of exchange at a specified future date (maturity date).

Accommodation Trading: Non-competitive trading entered into by a trader, usually to assist another with illegal trades.

Active: Buyer needs are aggressive, product moves out quickly. 

Actuals: The physical or cash commodity, as distinguished from a commodity futures contract.

Ad valorem: According to value. 

ADB: Asia Development Bank, an international lending institution head quartered in Manila, Philippines. 

Adequate - Supplies sufficient to fill all orders and a normal carryover. 

Advance Against Documents (AAD): A loan made on the security of the actual documents covering a shipment.

Advance payment: Trading method in which the buyer pays for the goods before they are dispatched. This is used where the buyer is of unknown credit worthiness and is unable to obtain a letter of credit. This is also used as a matter of convenience for small orders.

Adviory Capacity:  Used to indicate that a shipper's agent or agent or representative is not empowered to make definitive changes or adjustments without approval of the group or individual represented.

Advising bank: Bank, usually in the seller's country, whose primary function is to
authenticate the letter of credit and advise it to the seller. The advising bank MAY also take on other roles in the transaction.  These include:

• confirming the letter of credit (confirming bank)

• accepting  a term bill of exchange (accepting bank)

• paying  the seller upon presentation of documents (paying or negotiating bank)

Aggregation: The principle under which all futures positions owned or controlled by one trader (or group of traders acting in concert) are combined to determine reporting status and compliance with speculative limits.

Air way bill (AWB): Transport document used in air freight. Serves as a receipt for the goods and evidence of carriage contract.  This is not a document of title and so is not needed by the consignee in order to claim the goods from the carrier. 

All risks insurance: Insurance covering risks set out in the Institute of London Underwriters Cargo Clauses A. Covers fire, theft, loss at sea, damage during loading, transhipment and discharge but NOT strikes, riots, civil commotion or war piracy.

Allowances: The discounts (premiums) allowed for grades or locations of a commodity lower (higher) than the par (or basis) grade or location specified in the futures contract.

Alongside: The side of a ship.  Goods to be delivered "alongside" are to be placed on the dock or taken next to the ship within reach of the transport ship's tackle so that can be loaded aboard the ship.

Amendment: Variation in the terms or conditions of any document.  In the case of Letters of credit, an amendment to a letter of credit is issued by the Issuing bank under the direction of the applicant, and is advised to the Advising bank, following the same route as the original LC.

Ample - Supplies sufficient to fill all orders with an excessive carryover. 

APEC: Asia Pacific Economic Cooperation, an organization of countries in Asia and elsewhere dedicated to increasing international trade.

Applicant: Buyer/importer in a letter of credit transaction, who applies to the Issuing Bank for a letter of credit in favor of the seller (beneficiary).  Other terms for this are, the accountee or accreditor. 

Approved Delivery Facility: Any bank, stockyard, mill, storehouse, plant, elevator or other depository that is authorized by an exchange for the delivery of commodities tendered on futures contracts.

Arbitrage: The process of buying foreign exchange, stocks, bonds, and other commoditiies in one market and immediately selling them in another market at hopefully higher prices.

Arbitrage: Simultaneous purchase of cash commodities or futures in one market against the sale of cash commodities or futures in the same or a different market to profit from a discrepancy in prices. Also includes some aspects of hedging. See Spread, Switch.

ASEAN: The Association of South East Asian Nations, a regional organization of Southeast Asian countries. 

Asian Dollars: US funds deposited in banks in Asia and the Pacific Basin.

Asian Option: An option whose payoff depends on the average price of the underlying asset during some portion of the life of the option.

Assignable Contract: One which allows the holder to convey his rights to a third party. Exchange-traded contracts are not assignable.

Assignment:  A transfer of legal rights under an agreement.  In the case of letters of credit, a banking arrangement between the beneficiary of a letter of credit and a third party - usually the supplier of the goods - who requires an assurance of payment.  Usually takes the form of a letter or deed of assignment.  The beneficiary of the credit is the assignor; part of the proceeds of the credit  are irrevocably assigned to the assignee. 

Associated Person: A person associated with any futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, or leverage transaction merchant as a partner, officer, employee, consultant, or agent. Also, any person occupying a similar status or performing similar functions, in any capacity that involves: (a) the solicitation or acceptance of customers' orders, discretionary accounts, or participation in a commodity pool (other than in a clerical capacity); or (b) the supervision of any person or persons so engaged.

At-the-Market: An order to buy or sell a futures contract at whatever price is obtainable when the order reaches the trading floor. Also called a Market Order.

At-the-money: An option whose strike price equals, or is approximately equal, to the current market price of an underlying futures contract.

At-the-Money: When an option's exercise price is the same as the current trading price of the underlying commodity, the option is at-the-money.

Audit Trail: The record of trading information identifying, for example, the brokers participating in each transaction, the firms clearing the trade, the terms and time of the trade, and, ultimately, and when applicable, the customers involved.

Avalisation: Payment undertaking given by a bank in respect of a bill of exchange drawn on a buyer. A way of giving security to the drawer of a term bill.  The bill is stamped with wording such as 'Pour aval' and signed by a representative of the bank.

Back Months: Those futures delivery months with expiration or delivery dates furthest into the future; futures delivery months other than the spot or nearby delivery month.

Back pricing: Fixing the price of a commodity for which the commitment to purchase has been made in advance. The buyer can fix the price relative to any monthly or periodic delivery using the futures markets.

Back-to-back letters of credit: Arrangement used by intermediaries to give payment security to their suppliers.  The beneficiary of one L/C (prime or 'master' letter of credit) offers this as security for the issuance of a further L/C (second or 'slave' letter of credit) in favor of the supplier of the goods.  The bank issuing the second L/C (usually Advising bank to the prime L/C) is called the second Issuing bank.   This is regarded by many banks as risky - if the prime L/C runs into problems, it will no longer serve as security for the second L/C.

Backwardation: Market situation in which futures prices are progressively lower in the distant delivery months. For instance, if the gold quotation for February is $160.00 per ounce and that for June is $155.00 per ounce, the backwardation for four months against January is $5.00 per ounce. (Backwardation is the opposite of contango). See Inverted Market.

Balance of Trade: The difference between a country's total imports and exports; if exports exceed imports, a favorable balance of trade exists; if not, a trade deficit is said to exist.

Bank guarantee: Undertaking given by a bank on behalf of a customer to pay the guaranteed party a sum of money if the customer cannot or will not pay.  This should not be confused with the payment undertaking given under a letter of credit. 

Banker's Acceptance: A draft or bill of exchange accepted by a bank where the accepting institution guarantees payment. Used extensively in foreign trade transactions.

Banker's draft: A payment instrument used to make international payments.

Barely Adequate - Supplies insufficient to fill all orders with some orders going unfilled. 

Barely Steady - Supplies readily fill demand.  Prices barely maintained or possibly will move lower. 

Bargain Purchase Option: A lease provision allowing the lessee, at its option, to purchase the equipment for a price predetermined at lease inception, that is substantially lower than the expected fair market value at the date the option can be exercised.

Barter: Trade in which merchandise is exchanged directly for other merchandise without the use of money.  Barter is the oldest form of trade and is currently widely in use in trade with countries using currency that is not readily convertible on world exchange markets.

Basis: The difference between the price of a commodity and the price of a related futures contract.

Basis: The difference between the spot or cash price of a commodity and the price of the nearest futures contract for the same or a related commodity. Basis is usually computed in relation to the futures contract next to expire and may reflect different time periods, product forms, qualities, or locations.

Basis Grade: The grade of a commodity used as the standard or par grade of a futures contract.

Basis Point: The measurement of a change in the yield of a debt security. One basis point equals 1/100 of one percent.

Basis Quote: Offer or sale of a cash commodity in terms of the difference above or below a futures price (e.g., 10 cents over December corn).

Basis Risk: The risk associated with an unexpected widening or narrowing of basis between the time a hedge position is established and the time that it is lifted.

Bear: One who expects a decline in prices. The opposite of a "bull." A news item is considered bearish if it is expected to result in lower prices.

Bear Market: A market in which prices are declining.

Bear Spread: The simultaneous purchase and sale of two futures contracts in the same or related commodities with the intention of profiting from a decline in prices but at the same time limiting the potential loss if this expectation does not materialize. In agricultural products, this is accomplished by selling a nearby delivery and buying a deferred delivery.

Bear Vertical Spread: A strategy employed when an investor expects a decline in a commodity price but at the same time seeks to limit the potential loss if this expectation is not realized. This spread requires the simultaneous purchase and sale of options of the same class and expiration date but different strike prices. For example, if call options are spread, the purchased option must have a higher exercise price than option that is sold.

Beneficiary: a party who receives a legal benefit.  In a letter of credit situation, the party to whom payment will be made.  Normally, but not always,  the seller or exporter. 

Beta (Beta Coefficient): A measure of the variability of rate of return or value of a stock or portfolio compared to that of the overall market.

Bid: A verifiable price that a buyer is willing to pay to secure product. 

Bid: An offer to buy a specific quantity of a commodity at a stated price.

Big Emerging Markets: A group of fast growing economies identified by the Department of Commerce as having the most potential for US exporters.  They are: The Chinese Economic Area (China, Hong Kong and Taiwan), India, Indonesia, South Korea, Argentina, Brazil, Mexico, Poland, Turkey and South Africa.

Big-Ticket: A market segment of leasing, sales, etc for items costing over $2 million.  In leasing, this sector is generally dominated by leveraged leases, represented by lease financing over $2 million.

Bill of exchange: The most commonly-used financial instrument in international trade. An unconditional payment demand for a specific sum of money, payable either at sight or at a specified future date. This is drawn up by the seller and presented to the buyer.  This is sometimes called “the draft.” 

Bill of Lading: Transport document issued by the carrier or a document establishing the terms of a contract between a shipper and a transportation company under which the freight is to be moved between specific points for a specified charge.
An ocean shipment requires two documents: an Inland Bill of Lading to cover the domestic movement of the cargo, and an Ocean Bill of Lading to cover the international carriage; an Air Way Bill is essentially a through Bill of Lading for an air cargo shipment, domestic and/or international. Bill of lading - . Serves as: 

• a receipt for goods taken in charge 

• evidence of the carriage contract 

• a document of title - if appropriately drawn up, it can allow bearer to claim the goods.

Blackboard Trading: The practice of selling commodities from a blackboard on a wall of a commodity exchange.

Black-Scholes Model: An option pricing formula initially developed by F. Black and M. Scholes for securities options and later refined by Black for options on futures.

Blank endorsement: The method whereby a bill of lading is made into a freely negotiable document of title.  Any bearer of a blank endorsed bill of lading has title to the goods and may claim them from the carrier.  Insurance documents can also be blank endorsed, so that any party can make a claim if necessary. 

Board Broker System: A system of trading in which an individual member of an exchange (or a nominee of the member) is designated as a Board Broker for a particular commodity with the responsibility of executing orders left with him by other members on the floor, providing price quotations, and maintaining orderliness in the trading crowd. A Board Broker may not trade for his own account or the account of an affiliated organization. Also See Free Crowd Systems and Specialist System.

Board of Trade: Any exchange or association, whether incorporated or unincorporated, of persons who are engaged in the business of buying or selling any commodity or receiving the same for sale on consignment.

Board Order: See Market-if-Touched Order.

Boiler Room: An enterprise which often is operated out of inexpensive, low-rent quarters (hence the term "boiler room") that uses high pressure sales tactics (generally over the telephone) and possibly false or misleading information to solicit generally unsophisticated investors.

Bonded Warehouse - a warehouse authorized for storage of good on which payment of duty is deferred until the goods are removed from the warehouse.

Book Transfer: A series of accounting or bookkeeping entries used to settle a series of cash market transactions.

Booking the Basis: A forward pricing sales arrangement in which the cash price is determined either by the buyer or seller within a specified time. At that time, the previously-agreed basis is applied to the then-current futures quotation.

Box Transaction: An option position in which the holder establishes a long call and a short put at one strike price and a short call and a long put at another strike price, all of which are in the same contract month in the same commodity.

Break: A rapid and sharp price decline.

Brisk - Buyer needs are aggressive, product often booked ahead of production. 

Broker: A company or person who arranges, for a fee, purchase or sales or transactions between lessees and lessors of an asset.

Broker: A person paid a fee or commission for executing buy or sell orders for a customer. In commodity futures trading, the term may refer to: (1) Floor Broker--a person who actually executes orders on the trading floor of an exchange; (2) Account Executive, Associated Person, registered Commodity Representative or Customer's Man--the person who deals with customers in the offices of futures commission merchants; or (3) the Futures Commission Merchant.

Broker Association: Two or more exchange members who (1) share responsibility for executing customer orders; (2) have access to each other's unfilled customer orders as a result of common employment or other types of relationships; or (3) share profits or losses associated with their brokerage or trading activity.

Bucket Shop: A brokerage enterprise which "books" (i.e., takes the opposite side of) a customer's order without actually having it executed on an exchange.

Bucketing: Directly or indirectly taking the opposite side of a customer's order into a broker's own account or into an account in which a broker has an interest, without open and competitive execution of the order on an exchange.

Bulge: A rapid advance in prices.

Bull Market: A market in which prices are rising.

Bull Spread: The simultaneous purchase and sale of two futures contracts in the same or related commodities with the intention of profiting from a rise in prices but at the same time limiting the potential loss if this expectation is wrong. In agricultural commodities, this is accomplished by buying the nearby delivery and selling the deferred.

Bull Vertical Spread: A strategy used when an investor expects that the price of a commodity will go up but at the same time seeks to limit the potential loss should this judgment be in error. This strategy involves the simultaneous purchase and sale of options of the same class and expiration date but different strike prices. For example, if call options are spread, the purchased option must have a lower exercise or strike price than the sold option.

Bull: One who expects a rise in prices. The opposite of "bear." A news item is considered bullish if it portends higher prices.

Bullion: Bars or ingots of precious metals, usually cast in standardized sizes.

Buoyant: A market in which prices have a tendency to rise easily with a considerable show of strength.

Burdensome - Supplies far exceed current orders. Often results in sharply lower prices. 

Butterfly Spread: A three-legged spread in futures or options. In the option spread, the options have the same expiration date but differ in strike prices. For example, a butterfly spread in soybean call options might consist of two short calls at a $6.00 strike price, one long call at a $6.50 strike price, and one long call at a $5.50 strike price.

Buy (or Sell) On Close: To buy (or sell) at the end of the trading session within the closing price range.

Buy (or Sell) On Opening: To buy (or sell) at the beginning of a trading session within the open price range.

Buyer: A market participant who takes a long futures position or buys an option. An option buyer is also called a taker, holder, or owner.

Buyer's Call: See Call.

Buyer's Market: A condition of the market in which there is an abundance of goods available and hence buyers can afford to be selective and may be able to buy at less than the price that previously prevailed. See Seller's Market.

Buying Hedge (or Long Hedge): Hedging transaction in which futures contracts are bought to protect against possible increases in the cost of commodities. SeeHedging.

C & F: "Cost and Freight" paid to a point of destination and included in the price quoted. Same as C.A.F.

CIF - Cost, Insurance, freight : a pricing term indicating that the cost of the goods, insurance, and freight are included in the quoted price.

C.I.F.: Cost, insurance and freight paid to a point of destination and included in the price quoted.

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 but not the obligation to purchase the commodity or to enter into a long futures position; and (5) the requirement that a financial instrument be returned to the issuer prior to maturity, with principal and accrued interest paid off upon return.

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.

Call Cotton: Cotton bought or sold on call. See Call.

Call option - An option that gives the option buyer the right to buy the underlying futures contract at the strike price on or before the expiration date of the option. A contract that entitles the buyer/taker to buy a fixed quantity of 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.

Capital Lease: Type of lease classified and accounted for by a lessee as a purchase and by the lessor as a sale or financing, if it meets any one of the following criteria: (a) the lessor transfers ownership to the lessee at the end of the lease term; (b) the lease contains an option to purchase the asset at a bargain price; (c) the lease term is equal to 75 percent or more of the estimated economic life of the property (exceptions for used property leased toward the end of its useful life); or (d) the present value of minimum lease rental payments is equal to 90 percent or more of the fair market value of the leased asset less related investment tax credits retained by the lessor. (Also see finance lease.)

Capping: Effecting commodity or security transactions shortly prior to an option's expiration date 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 the writer received will be protected.

Carnet: A Customs document permitting the holder to carry or send merchandise temporarily into certain foreign countries for display, demonstration, or other purposes without paying import duties or posting bonds.

Carriage and insurance paid (CIP): Incoterm for all transport modes.
Exporter:

• delivers to a named destination 

• pays costs, insurance & freight 

• provides transport & insurance documents 

• pays export duties 

Importer:

• pays costs from named destination.

Carriage paid to (CPT): Incoterm for all transport modes.
Exporter:

• delivers to named destination 

•  pays cost and freight 

• provides export licence 

• provides transport document 

Importer:

•  pays cost and freight from named destionation 

• pays insurance 

• pays import duties

Carrier: The party responsible for transport of goods (shipping line, airline, road haulage company etc.) 

Carry - The cost of storage space, insurance and finance charges incurred by holding the commodity from one month to the next.

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.

Carryover - Commodity stocks not consumed during the marketing year and are "carried over" into the next marketing year.

Case of need: In a collection, party in the buyer's country who is designated by the seller to advise and/or give instructions in the event of problems or disputes. The collection order will specify whether the case of need is authorised to instruct the bank.

Cash Against Documents (CAD): Payment for goods in which a commission house or other intermediary transfers title documents to the buyer upon payment in cash.

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

Cash cover: In a letter of credit transaction, money deposited by the applicant with the Issuing bank.

Cash Forward Sale: See Forward Contracting.

Cash in Advance (CIA): Payment for goods in which the price is paid in full before the shipment is made.  This type of payment is usually only made for very small shipments or when goods are made in order.

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 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.

CCC: See Commodity Credit Corporation.

CD: See Certificate of Deposit.

CEA: See Commodity Exchange Authority.

Certiciate of manufacture: A statement which is usually notarized in which the producer of goods certifies that the goods have been produced and are now available to the buyer.

Certificate of Acceptance: Term used in leasing.  A document whereby the lessee acknowledges that the equipment to be leased has been delivered, is acceptable, and has been manufactured or constructed according to specifications.

Certificate of analysis/certificate of inspection: Documents that may be asked for by the importer and/or the authorities of the importing country, as evidence of quality or conformity to specifications.

Certificate of Deposit (CD): A time deposit with a specific maturity evidenced by a certificate. Large-denomination CDS are typically negotiable.

Certificate of origin: Documents that may be asked for by the authorities of the importing country, as evidence of the country of manufacture of the goods and hence
qualification for preferential tariffs etc. 

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 a commodity exchange. In grain, called "stocks in deliverable position." See Deliverable Stocks.

CFO: Cancel Former Order.

CFR - Cost and Freight : A pricing term that indicates that the cost of the goods and freight charges are included in the quoted price.

CFTC: See Commodity Futures Trading Commission.

Changer: A clearing member of both the Mid-America Commodity Exchange (MCE) 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.

Charter party bill of lading: Bill of lading issued by the charterer or hirer of a vessel. Unpopular with banks, because situations can arise when the owner of the vessel has a claim on the goods.

Charting: The use of graphs and charts in the technical analysis of futures markets to plot trends of price movements, average movements of price, volume of trading and open interest. See Technical Analysis.

Chartist: Technical trader who reacts to signals derived from graphs of price movements.

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

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

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