Commodities GlossaryA B C D E F G H I L M N O P R S T U W
Arabica Coffee: Arabica coffee beans are mild in flavor and contain less caffeine than other varieties. High quality blends consist of 100% arabica beans. Countries that produce arabica beans include Brazil, India, Colombia, Venezuela, Ecuador, Peru, Bolivia, Paraguay, Guyana, Suriname, French Guiana, … More
Arbitrage: Arbitrage is the practice of taking advantage of a price difference between two or more markets. It can yield a profit generated by the difference between the market prices. In commodity markets, if the difference in price between the futures … More
Backwardation: Backwardation is the scenario where the spot price of a commodity is higher than the futures price of the same commodity. This situation arises under abnormal conditions such as shortage of supply of a commodity in the short term.
Barrel: A barrel (bbl) is a unit of volume measure used for petroleum and refined products. 1 barrel = 42 U.S. gallons 1 barrel = 158.9873 liters
Base Metals: Base metals are metals that oxidize or corrode relatively easily, and react variably with diluted hydrochloric acid (HCl) to form hydrogen. Examples include aluminum, nickel, lead, tin and zinc. Copper is considered a base metal as it oxidizes relatively easily, … More
Basis: Basis is the difference between the local cash price of a commodity and the price of a specific futures contract of the same commodity at any given time. The price difference represents the costs to carry. A negative basis (cash … More
Basis Risk: Basis risk is the potential adverse change in the cash price – futures price relationship while a hedger maintains an open commodity futures position. If the basis remains unchanged during the time the position is open, it is considered a … More
Bear Spread: A bear spread strategy implies the speculator is short (sells) the nearby commodities futures contract and is long (buys) the distant futures contract. Under normal market conditions, the speculator will profit if the price difference between contracts widens. Under an … More
Bituminous Coal: Bituminous coal is the most abundant type of coal in the United States. It has a carbon content ranging from 45 to 86 percent carbon and a heat value of 10,500 to 15,500 BTUs-per-pound, much higher than lignite or sub-bituminous … More
Brent Crude: Brent crude is a crude oil sourced from the North Sea (between Great Britain and Scandinavia). Brent crude is a light sweet crude oil, though not as light or sweet as the West Texas Intermediate (WTI). It contains approximately 0.37% … More
British Thermal Unit (BTU): The British Thermal Unit (BTU or Btu) is a traditional unit of energy equal to about 1 055.05585 joules. It is approximately the amount of energy needed to heat 1 pound (0.454 kg) of water 1 °F (0.556 °C). The … More
Bull Spread: A bull spread strategy implies the speculator is long (buys) the nearby commodities futures contract and is short (sells) the distant futures contract. Under normal market conditions, the speculator will profit if the price difference between contracts narrows. Under an … More
Bushel: A bushel (bu, bsh.) is an imperial and U.S. customary unit of dry volume, equivalent in each of these systems to 8 gallons. It is used for volumes of dry commodities (not liquids), most often in agriculture. Bushels are now … More
Cash Crop: A cash crop is a crop that is grown for profit as opposed to crops grown for subsistence. Common cash crops include coffee, tea, sugar cane, cotton, wheat, soybeans, other grains and oil-producing grains, bananas, oranges, etc. Prices for major … More
Cash Settled Contracts: Upon expiration or exercise of commodity futures or option contracts, this settlement method allows the buyer to take the cash position associated with the commodity instead of the physical commodity itself. This settlement method is available for certain contracts. Commodity … More
Cattle Feeder Spread: A cattle feeder spread is a processing spread trade where feeder cattle (thin cows) futures are bought (long) and live cattle (fat cows) futures are sold (short) simultaneously. Cattle feeders use this hedging strategy to hedge the later purchase price … More
Central Appalachian Coal: Central Appalachian Coal is coal produced in the Central Appalachian region comprised of the counties located in southern West Virginia, eastern Kentucky, southwest Virginia, and eastern Tennessee. West Virginia and Kentucky are considered the two largest coal producers. Production by … More
Clearinghouse: A clearinghouse is an entity separated from an exchange, but associated with it. It acts as guarantor for sellers and buyers of futures contracts. The clearinghouse acts as seller to all buyers and as buyer to all sellers. The clearinghouse … More
Coal: Coal is a combustible black or brownish-black sedimentary rock normally found in layers or veins called coal beds or coal seams. Coal is composed primarily of carbon with variable quantities of other elements: sulfur, hydrogen, oxygen and nitrogen. Coal has … More
Cocoa: Cocoa is a highly prized commodity. Cocoa derived products include cocoa powder, cocoa butter, and cocoa liquors. Cocoa is largely used in the production of chocolate, but other ingredients like cocoa butter can be used in the manufacture of soap … More
Commodities Exchange: A commodities exchange is an institution, organization, or association that serves as a market for trading various commodities and derivatives products. Exchanges also serve as a clearing house for the transfer and settlement of the physical commodities underlying most futures … More
Commodities Exchanges Around the World: US, Canada and Brazil Exchange Location Products Chicago Board of Trade (CME) (CME Group) Chicago, IL wheat, corn, soybeans, oats, livestock, forest products (lumber and pulp), diary Chicago Board of Trade (CBOT) (CME Group) Chicago, IL wheat, corn, soybeans (meal … More
Commodity: A commodity is a product for which there is demand and which is sold without qualitative differentiation across a market. The term commodity generally refers to physical goods that constitute the building blocks of more complex products. Commodity prices are … More
Congestion: Congestion or consolidation reflects a pattern without strong indication of a trend of commodity prices. During congestion aggressive buying and selling of commodity futures contracts occur within a limited range of price fluctuation.
Contango: Also referred as normal carry charge market, is the situation where the price of a commodity for future delivery is higher than the spot price, or a far future delivery price higher than a nearer future delivery price, due to … More
Contract Expiration Date: It is the time and day in which a futures contract stops trading and the final settlement price is determined. For a market where a physical commodity must be exchanged, the exchange process will begin on the expiration date.
Convergence: At expiration of a futures contract, cash prices and futures prices tend to converge (the basis approaches zero).
Cost to Carry: Costs associated with holding the physical commodity until the determined delivery date. These costs include storage and insurance of the commodity before it gets delivered. The price of a commodity in a cash market differs from the price of the … More
Cost, Insurance and Freight (CIF): A transaction where the seller must pay the costs, freight and insurance to bring the goods to the port of destination. Maritime transport only. Risk is transferred to the buyer once the goods have crossed the ship’s rail.
Cotton No. 2: Cotton of US origin only, of certain minimum standards of basis grade and staple length (strict low middling staple length: 1 2/32nd in) to be delivered at the following delivery points: Galveston (TX), Houston (TX), New Orleans (LA), Memphis (TN), … More
Crack Spread: A crack spread is a processing spread trade where crude oil futures are bought (long) and gasoline and heating oil futures are sold (short) simultaneously. Oil refineries use this hedging strategy to hedge the later purchase price of crude oil … More
Criollo Cocoa Bean: The Criollo cocoa bean is native to Central America. It is grown in Mexico, Nicaragua, Venezuela, Colombia and in some islands in the Indian Ocean. It constitutes only about 1-5% of the total cocoa world production. It is considered the … More
Crude Oil: Crude oil is a naturally occurring liquid composed mostly of hydrogen and carbon. It is usually found underground but can also be found above ground in oil seeps or tar pits. It is used to produce fuel for cars, trucks, … More
Crush Spread: A crush spread is a processing spread trade where soybean futures are bought (long) and soybean oil and soybean meal futures are sold (short) simultaneously. Processors use this hedging strategy to hedge the later purchase price of soybeans and the … More
CSX Coal: CSX Coal is coal transported by the CSX Corporation the largest coal transporter east of the Mississippi River, serving more than 130 load-outs in 9 states. CSX provides service from the largest number of active coal origination points: Alabama, Beem, … More
Cubic Meter: A cubic meter (m³) is the International System of Units (SI) derived unit of volume. It is defined as the volume of a cube with edges one metre in length. 1 cubic meter = 35.3146667 cubic feet
Delivery Date: The delivery date is the date when the actual commodity must be delivered after the futures contract has expired. Commodities futures contracts have typically two or more delivery dates per year. Delivery dates are different for each commodity.
Denatured Fuel Ethanol: Denatured Fuel Ethanol is ethanol intended for blending with unleaded or leaded gasoline for use as a spark-ignition automotive engine fuel. Denaturants used for blending with fuel ethanol include natural gasoline, gasoline components, or unleaded gasoline at the minimum concentration … More
Deterministic: A system in which no randomness is involved in the development of future states of the system.
Diesel Fuel: Diesel Fuel is a crude-oil distillate fuel oil used in compression-ignition engines. Alternative types of diesel can also be obtained from alternatives sources that are not derived from petroleum, such as biodiesel, biomass to liquid (BTL) or gas to liquid … More
Dry Metric Tonne Unit: A Dry Metric Tonne (Ton) Unit (dmtu) is the internationally agreed-upon unit of measure for iron ore pricing. It has the same mass value as a metric tonne, but the material has been dried to decrease the moisture level. A … More
Dubai Crude Oil: Dubai Crude, also known as Fateh, is a light sour crude oil extracted from Dubai. Dubai Crude is used as a benchmark for pricing exports of Persian Gulf sour crude oil to Asia. The other two main global oil price … More
Effective Price: The effective price is the price at which a commodity is sold or bought after the hedge has been lifted (liquidated). It can be calculated either by adding/substracting the basis change to the original cash price, or by adding/substracting the … More
Energy Commodities: Energy commodities are energy-generating products. Those include electricity, crude oil, ethanol, natural gas, crude oil distillates ( gasoline, gasoil, kerosene, diesel, heating oil) and coal.
Ethanol: Ethanol, known also as ethyl alcohol, is a bio-fuel produced from either sugar cane (Brazil) or corn (United States). It is produced by a process of fermentation. Ethanol uses are wide. It is used as solvent, as an alcoholic beverage, … More
European Gasoil: European Gasoil is a definition for Nº 2 Heating Oil and Nº 2 Diesel fuel. It is used as the pricing reference for all distillate trading in Europe and beyond. The underlying physical market is heating oil barges delivered in … More
Exchange-Traded vs. Non-Exchange-Traded Commodity: A exchange-traded commodity is a commodity for which spot (cash) and futures markets are established and where official or settlement prices can be determined. Exchange-traded commodities include: wheat, corn, soybeans, oats, live cattle, cocoa, frozen orange juice, sugar, gold, silver, … More
Ferrous Metals: Ferrous metals are metals that contain iron. Ferrous metals include steel, stainless steel, pig iron, iron ore and iron oxide. Iron and steel are used in used in everything from building, ship and bridge construction, to the manufacture of automobiles … More
Forastero Cocoa Bean: The Forastero cocoa bean is possibly native to the Amazon Basin. It grows in several South American countries, including Peru, Ecuador, Colombia, Brazil, Guyana, and Venezuela, as well as in Africa and South-East Asia. The Forastero cocoa bean is the … More
Forward Contract: A forward contract is a non-standardized contract between two parties that establishes the price of a commodity to be delivered at a specific date in the future. It differs from a spot contract which is an agreement to buy or … More
Forward Price: The forward price is the agreed upon price of an asset in a forward contract. The difference between the forward and the spot price is the forward premium (if percentage is positive, meaning the forward price is higher than the … More
Free On Board (FOB): Free On Board (FOB) refers to a transaction where the seller pays for transportation of the goods to the port of shipment, plus loading costs. The buyer pays cost of marine freight transport, insurance, unloading, and transportation from the arrival … More
Front Month: The front month is the nearest unexpired futures contract of a given commodity. When commodity prices are quoted, the price being quoted is the price of the front month of the commodity. The front month is also known as the … More
Futures Contract: A futures contract is a standardized contract for selling or buying an asset, such as a physical commodity or a financial instrument, at a specified future date and at a price agreed today (the futures price). The contracts are traded … More
Futures Price: A futures price is the price in a futures contract that specifies the amount of money to be paid for a commodity to be delivered at a later date.
Futures Spreads: Futures spreads combine both short and long positions (called legs) at the same time in related futures contracts. Spread volatility is lower than short or long positions held individually since prices of related contracts tend to move in the same … More
Gasoil: Gasoil is a petroleum distillate (obtained by fractional distillation of petroleum) intermediate in boiling range and viscosity between kerosene and lubricating oil. It is used as diesel fuel and heating oil. In general, gasoils are derived from oils with a … More
Gasoline: Gasoline, also known as petrol, is a liquid mixture obtained by the process of fractional distillation directly from crude oil. It is used as fuel in internal combustion engines and also as solvent. It contains the additives toluene and benzene … More
Gulf Coast Gasoline: Gulf Coast Gasoline is defined as M Grade conventional gasoline traded on the Gulf Coast, the primary refining center and delivered into the Colonial Pipeline. The Gulf Coast is one of two key trading centers in the cash market. The … More
Gulf Coast Harbor Ultra Low Sulfur Diesel: Gulf Coast Harbor Ultra Low Sulfur Diesel (ULSD) is the new standard for highway diesel fuel in the United States since December, 2010. Physical delivery is into the Colonial Pipeline at a variety of injection stations: Texas, Pasadena and Houston … More
Gulf Coast Sour Crude Oil: Mars-type crude oil of the Louisiana offshore. Gulf Coast Sour Crude Oil futures are traded at the NYMEX under ticker symbol MB. Contract size is 1,000 barrels with a contract price quoted in US Dollars and Cents per barrel. Delivery … More
Haircutting: When securities such as stocks and bonds are used as the investment margin, they are discounted at a percentage to determine their collateral value. Discounting these securities by a certain percentage to determine their margin value is referred to as … More
Hard Commodities: Hard commodities are the ones extracted through mining. Those include precious metals (gold, silver, palladium, platinum), non-ferrous or base metals (aluminum, copper, lead, nickel, zinc), ferrous metals (iron ore, steel), minor metals (cobalt, molybdenum, magnesium, sylicon, titanium, etc.), rare earth … More
Hard Red Winter Wheat: Hard Red Winter Wheat is a hard, brownish, mellow high-protein wheat used for bread, hard baked goods and all-purpose flour. It can have either hard or soft endosperm. Hard red winter wheat is seeded in the fall. It is produced … More
Hedgers: Commodity hedgers are the sellers or buyers of the actual physical commodity (e.g. farmers, oil companies, millers, etc.) who engage in hedging strategies by selling or buying commodity futures contracts to protect themselves from the adverse effects of commodity price … More
Henry Hub Natural Gas: Henry Hub is the pricing point for natural gas futures contracts traded on the NYMEX. It is a point on the natural gas pipeline system in Erath, Louisiana. Spot and future prices set at Henry Hub are generally seen to … More
Hundredweight: Also referred to as centum weight, the hundredweight (cwt) is a unit of mass expressed in terms of pounds. In commodity trading the (short) hundredweight is used as unit for rough rice (RR) future contracts traded at the CBOT. Imperial … More
Indo Sub-bituminous Coal: Indo Sub-bituminous Coal is seaborne thermal coal delivered FOB into ocean going vessels from a range of East and South Kalimantan load-outs (Borneo). It represents the types of coals currently supplied by companies like Adaro Resources, Kideco Jaya Agung, Bumi … More
Initial Margin: Initial margin is the minimum amount required to open a futures position. Initial margin requirements are determined by the board of directors of an exchange and are based on the volatility and price of the futures contract.
Light vs Heavy Crude Oil: Light Crude oil is liquid petroleum that has low density and that flows freely at room temperature. It has low viscosity, low specific gravity and high API gravity due to the presence of a high proportion of light hydrocarbon fractions. … More
Liquidating Market: A liquidating market occurs when the majority of investors are liquidating their positions at the same time, usually when contracts approach delivery. This can also happen when a financial bubble bursts and investors stop buying and are liquidating their investments … More
Long: In commodities trading vocabulary long is synonymous with buy. If a trader buys futures or options, or owns a cash commodity, she is going long. Opposite of short.
Long Cash Position: A long cash position implies the physical commodity is owned.
Long Hedger: A long hedger is someone that will need to buy a commodity in the future and protects its futures cost by buying futures. A long hedger benefits from a weakening basis.
Long the Basis: Being long the basis means to have a long actuals position (you own the commodity or you will own it in the future), hedged with a short futures position. Short hedgers want the basis to remain the same or to … More
Long the Market: Having a market bullish stance. A speculative strategy that profits from an increase of prices. Opposite of short the market.
Long Tonne: A long tonne or ton is a unit of mass used in the United Kingdom as part of the Imperial System . long tonne (ton) = 2,240 lb (1,016.047 kg)
Maintenance Margin: Maintenance margin, also known as minimum margin, is the lowest level to which an investor’s account can drop before additional funds are required. Maintenance margin requirements are determined by the board of directors of an exchange and are based on … More
Margin: Margin is the amount of money (or sometimes stocks or bonds) an exchange requires an investor to have on deposit in an account in order to open and maintain positions in futures contracts. That amount of money will cover, at … More
Margin Call: A margin call is made when the amount of money (stocks or bonds) in an investor’s account drops below the maintenance margin required. The investor must deposit enough cash or securities in order to bring the account to initial margin … More
Margin Percentage: The margin percentage is established as the cash deposit relative to the commodity. The margin percentage can be calculated in two ways: The investment margin per unit divided by the unit price of the commodity The total margin investment amount … More
Market Liquidity: Market liquidity is defined by the number of participants in that market. The more the number of participants, the more liquid the market. Illiquid or thin markets, by contrast, have fewer participants. High liquidity commodity markets posses higher efficiency, which … More
Metric Tonne: A metric tonne or ton is a unit of mass equal to 1,000 kg or approximately the mass of one cubic metre of water at four degrees Celsius. 1 metric ton = 1,000 kg (2,204.623 lb) See also: Wikipedia – … More
Minor Metals: Minor metals can be defined as metals that are by-products of other metals according to the LME. Additional criteria has been formulated to define minor metals. Minor metals are used in many end-use applications: rechargeable batteries, lasers, high temperature alloys, … More
MMBTU: 1 MMBtu is equal to 1 million BTU (British Thermal Unit). Natural gas is measured in MMBtu’s. 1 MMBtu = 28.263682 m3 of natural gas at defined temperature and pressure. 1 standard cubic foot of natural gas yields ≈ 1030 BTU (between 1010 … More
Natural Gas: Natural gas is a gas composed mainly by methane. Before it can be used as fuel it must undergo a process of purification in which other elements such as ethane, propane, butane, pentanes, and higher molecular weight hydrocarbons, elemental sulfur, … More
New York Harbor Ethanol: New York Harbor Ethanol is denatured fuel ethanol that must conform to standard specification ASTM D4806 and shall meet any state requirements at the time and place of delivery. It is delivered F.O.B. at the seller’s terminal facility in New … More
New York Harbor No. 2 Heating Oil: New York Harbor Nº 2 Heating Oil is a liquid petroleum distillate used as fuel for burning in furnaces and boilers in buildings. It accounts for 25% the yield of a barrel of crude oil, the second largest cut after … More
New York Harbor Ultra-Low Sulfur Diesel: New York Harbor Ultra-Low Sulfur Diesel (ULSD) is the new standard for highway diesel fuel in the United States since December, 2010. It is physically delivered at different New York Harbor fuel stations. New York is one of two key … More
Newcastle Coal: Newcastle Coal is thermal coal exported (delivered FOB) out of the port of Newcastle in New South Wales, Australia. It is the price benchmark for seaborne thermal coal in the Asia-Pacific region. Newcastle coal futures are traded at the ICE … More
Oman Crude Oil: Oman Crude is a medium sour crude from Oman destined for East of Suez markets. Oman crude futures are traded at the Dubai Mercantile Exchange (DME) under ticker symbol OQD (the DME is a fully electronic exchange, and its contracts … More
OPEC Reference Basket: The OPEC Reference Basket (ORB) is a weighted average of prices for crude oil blends produced by OPEC countries. It is used as an important benchmark for crude oil prices. The Reference Basket currently consists of a weighted average of … More
Open Interest: Open interest is the number of outstanding contracts that have not been delivered or closed (positions that have been opened). For every long position there must be a respective short position. Open interest increases as more traders enter the market. … More
Over The Counter: Over The Counter (OTC), also known as off-exchange trading, is trading financial instruments such as stocks, bonds, or commodities directly between two parties. OTC contracts are bilateral contracts in which two parties agree on how a particular trade or agreement … More
Overbought Market: An overbought market is characterized by massive buying of futures contracts and by a sharp increase in futures prices during a short period of time, generally as a consequence of factors not explained by fundamentals. This occurrence can be interpreted … More
Oversold Market: An oversold market is characterized by massive selling of futures contracts and by a sharp decline in prices during a short period of time, generally as a consequence of market overreaction or panic selling among investors. This occurrence can be … More
Physically Settled Contracts: Upon expiration or exercise of commodity futures contracts, the buyer must take delivery of the underlying commodity, as opposed to a cash settled contract. Commodity contracts settled by this method only include Russian Export Blend Crude Oil (REBCO), Gulf Coast … More
Powder River Basin Coal: Powder River Basin coal is coal produced in the Powder River basin, a region located in southeast Montana and northeast Wyoming. It is defined as “sub-bituminous” coal with an average energy content of 8,500 btu/lb and low in sulfur dioxide … More
Precious Metals: Precious metals are rare naturally-occurring elements of high economic value. This category includes gold, silver, platinum and palladium. Historically, precious metals were used as currency, but are now regarded mainly as investment and as industrial commodities. These precious metals have … More
Processing Spreads: A processing spread is a spread trade where futures contracts are bought (long) on the input (raw materials) and futures contracts are sold (short) on the output (finished goods) simultaneously. Manufacturers and processors use this hedging strategy to hedge the … More
Pyramiding: Pyramiding is a speculating strategy where, after establishing a futures position, an speculator increases the size of his initial open profitable position by adding more contracts in declining increments if prices of the underlying commodity continue increasing. For example, let’s … More
Rally: A rally is characterized by fast buying of securities (stock, bonds) or derivatives (commodities) when the value of the asset is expected to increase. A rally will usually follow a period of sustained price decline.
Rare Earth Metals: Rare earth metals or rare earth elements are a collection of seventeen chemical elements located at the bottom of the periodic table. They are key elements in the manufacture of high technology components, hybrid cars, etc. Rare earth metals are … More
RBOB Gasoline: RBOB (Reformulated Gasoline Blendstock for Oxygen Blending) gasoline is a reformulated regular wholesale non-oxygentated blendstock that is ready for the addition of 10% denatured fuel ethanol (92% purity) at the truck rack. It is traded at the New York Harbor … More
Reverse Crush Spread: A reverse crush spread is a an opposite strategy to the crush spread. In this strategy the speculator buys (long) futures contracts on soybean oil and soybean meal (output) and sells (short) futures contracts on soybean (input). This is a … More
Richards Bay Coal: Richards Bay coal is coal shipped at the Richards Bay terminal in South Africa, the largest export coal terminal in the world, with a design capacity of 91 million tons annually. Richards Bay coal futures are traded at the ICE … More
Robusta Coffee: Robusta coffee beans have a slightly bitter taste and contain more caffeine than its arabica counterpart. Low quality blends consists of a mix of arabica and robusta beans or entirely of robusta beans. Countries that produce robusta coffee beans include: … More
Rotterdam Coal: Rotterdam Coal is coal delivered at the port of Rotterdam in the Netherlands. Rotterdam Coal is traded at the ICE Europe under ticker symbol ATW. Contract size is 1,000 tons quoted in US dollars and cents per ton. Contract is … More
Russian Export Blend Crude Oil: Russian Export Blend Crude Oil (REBCO), also known as Urals oil, is a medium gravity sour crude. It is a mix of heavy oil from the Urals and the Volga region with light oil of Western Siberia, set for delivery … More
Sell-off: A sell-off is characterized by fast selling of securities (stock, bonds) or derivatives (commodities) when the value of the asset is expected to decline. A sell-off will usually follow a period of sustained price increase.
Short: In commodities trading vocabulary short is synonymous with sell. If a trader sells futures or options, he is going short. Opposite of long.
Short Cash Position: A short cash position implies the hedger will receive cash now, owing the delivery of the commodity at a later date. The hedger will need to purchase the commodity before it can be delivered.
Short Covering: A short covering occurs when an short investor buys the exact same contract to remove himself from the market. This action reduces open interest in the contract. Investors will follow this strategy whenever they think that the futures price will … More
Short Hedger: A short hedger owns a commodity and protects its futures sales price by selling futures. A short hedger benefits from a strengthening basis.
Short the Basis: A hedger is said to be short the basis when he/she has a short cash position hedged with a long futures position. Long hedgers want to protect the price of a later cash commodity purchase or a short actuals position … More
Short the Market: Having a bearish stance. Engaged in a bearish option or futures spread. Opposite of long the market.
Short Tonne: A short tonne or ton is a unit of mass used in North America. short tonne (ton) = 2,000 lb (907.1847 kg)
Soft Commodities: Soft commodities are goods that are grown. Exchange-traded soft commodities include sugar, coffee, cotton, cocoa, and orange juice.
Soft Red Winter Wheat: Soft Red Winter Wheat is a low to medium protein wheat with soft endosperm used to make cake flour, pastry flour and some self-rising flours (baking powder and salt added). Soft red winter wheat is seeded in the fall. It … More
Speculators: Commodity speculators are market participants that trade commodities with higher than average risk with the expectation of making higher than average profits. Commodity speculators try to forecast price changes and they base their futures positions on those forecasts. Speculators assume … More
Spot Contract: A spot contract is an agreement to buy or sell an asset today. The price agreed upon in this contract is referred to as the spot price.
Spot Date: Spot date is the normal settlement date for a transaction done today. This kind of transaction is referred to as a spot transaction or simply spot. The spot date may be different for different types of financial transactions. A transaction … More
Spot Price: Current market price of some product, commodity, security or currency ready for immediate delivery. Also referred to as spot rate. It is the price at which the asset changes hands on the spot date.
Stochastic: Stochastic means random. A stochastic process is one whose behavior is non-deterministic, which means that a system’s subsequent state is determined both by the process’s predictable actions and by a random element.
Strengthening Basis: A strengthening basis occurs when the difference between the cash market price of a given commodity and the futures price of the same commodity narrows. This happens when the cash market price increases relative to the futures price. The basis … More
Sub-bituminous Coal: Sub-bituminous coal is lignite that has been subjected to an increased level of organic metamorphism. Reserves are found mainly in six US western states and Alaska. It is used primarily as fuel for steam-electric power generation. It has carbon content … More
Sugar No. 11: The Sugar No. 11 contract is the world benchmark contract for raw sugar trading. The contract prices the physical delivery of raw cane sugar, free-on-board (FOB) the receiver’s vessel in a port within the country of origin of the sugar. … More
Sugar No. 14: Sugar No. 14 differs primarily from Sugar No. 11 in the shipping terms for the contract. Sugar No. 14 Calls for delivery of cane sugar in bulk at determined Atlantic and Gulf ports with Cost, Insurance and Freight (CIF) duty … More
Sugar No. 16: The Sugar No. 16 contract serves the hedging needs of U.S. sugar producers, end users and merchants. The contract prices physical delivery of US-grown (or foreign sugar with duty fees paid by deliverer) raw cane sugar at one of five … More
Sweet vs Sour Crude Oil: Sweet crude oil is considered “sweet” if it contains less than 0.5% sulfur. In comparison, sour crude oil contains impurity sulfur levels larger than 0.5%. Sweet crude oil contains small amounts of hydrogen sulfide and carbon dioxide and it is … More
Switching: Switching, also referred as rolling forward, is a speculating strategy where a speculator extends the holding period of a commodity futures position by closing a position in a contract month close to the expiration date and at the same time, … More
Trade Margins: Trade margins or lower hedge margins are available only to commodity hedgers and not to speculators. Hedgers face lower risks than speculators because they have opposite positions in cash and futures. Price movement opposite to the held position benefits the … More
Trinitario Cocoa Bean: The Trinitario cocoa bean is hybrid of the Criollo and Forastero varieties. Trinitario was created in Trinidad after the Forastero variety was introduced and crossed with the local Criollo variety in the eighteenth century as a consequence of the Criollo … More
Troy Ounce: The troy ounce (ozt) is a unit of mass (imperial system) used to gauge the weight and therefore the price of precious metals (gold, silver, platinum and palladium) and gemstones. 1 troy ounce = 31.1034768 grams 1 troy ounce = … More
Ultra Low Sulfur Diesel: Ultra Low Sulfur Diesel (ULSD) is defined as diesel fuel with 15 parts per million (ppm) or lower sulfur content. As of December, 2006, almost all of the petroleum-based diesel fuel available in Europe and North America is of a … More
Weakening Basis: A weakening basis occurs when the difference between the cash market price of a given commodity and the futures price of the same commodity widens. This happens when the cash market price increases more slowly relative to the futures price … More
Western Texas Intermediate: The Western Texas Intermediate (WTI), also known as Texas light sweet, is a light crude oil low in wax and sulphur content which makes it light and sweet. It is usually refined into gasoline, kerosene and diesel. It is used … More