Commodity futures glossary of terms

Term	Definition
Arbitrage	The practice of exploiting price differentials between related assets across different markets to make risk-free profits.
Cost of carry	The cost of holding a position in a futures contract, including interest, storage, and other expenses.
Delivery date	The date the futures contract’s physical delivery or financial settlement occurs.
Exchange	An entity that acts as an intermediary in futures trading, ensuring contract performance, managing margin deposits, and reducing counterparty risks.
Expiration date	The final date when a futures contract must be settled by physical delivery, offsetting, or rolled over to a subsequent contract.
Futures contract	A standardized, legally binding agreement to buy or sell a specific asset at a predetermined price on a future date.
Hedging	A risk management strategy producers and consumers use to offset price fluctuations in the underlying asset through futures contracts.
Long position	A futures position where the trader agrees to buy the underlying asset at a future date, anticipating its price to rise.
Margin	A deposit required by exchanges from traders to cover potential losses on futures positions. The initial margin is the amount needed to open a position, while the maintenance margin ensures position viability.
Market maker	A trader or firm that provides liquidity by buying and selling assets at quoted prices in futures markets.
Open interest	The total number of outstanding futures contracts for a specific asset that have not been closed or delivered.
Regulatory oversight	Supervision and enforcement of rules by regulatory bodies to ensure fair trading practices, market integrity, and investor protection in futures markets.
Short position	A futures position where the trader agrees to sell the underlying asset at a future date, expecting its price to fall.
Speculators	Market participants seeking profits from price movements in futures contracts without the intention of physically delivering the asset.
Spot price	The current market price of the underlying asset for immediate delivery or settlement.
Volume	Volume is the total number of contracts traded on a particular futures market or contract during a specified period, usually a trading session or day.

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Commodity futures contracts: glossary of terms

Keywords and phrases used to describe commodity futures markets