• 01
  • Nov
Commodity  Market Terminologies

Commodity Market Terminologies

Let you introduce to the popular commodity market terminologies that will help you to understand about the commodity market very easily. By these terms you can easily grab the commodity situations very promptly. Let’s have a look on these terms. Let’s read the ABCD of the commodity market:
A
Arbitrage:
It is process of simultaneous buying selling of identical commodities in diverse markets in order to take benefit of a price discrepancy.

Arbitration:
Arbitration is the process of settling disputes among members or between the members and the customers.

AGDP:
Agricultural Gross Domestic Product
AGMARK:
Agricultural Marketing

Assayer:
An assayer is an entity may be a person or institution that validates and grades the commodities that are delivered in exchange accredited warehouses.

B
Basis:
It is the difference between the current cash price and the futures price of the same commodity. Simply it is the price difference between a cash contract and future contract.

Bar Chart:
Bar chart indicates the high, low and settlement prices for a specific trading session over a given a period of time.

Bear:
When the market prices will decline

Bull:
When the market price will incline

Bid:
The difference between the price at which a dealer is willing to buy and sell a commodity
Bid Price:
The maximum price at which a dealer is willing to buy commodities

Broker:
A company or individual that is medium for executing futures and option orders on behalf of financial and commercial institutions and general public.

BIS:
Bureau of Indian Standards

Bullion:
The general term for Gold and Silver

Buying Forward:
Buying commodities as stipulated price for delivery at a future date
C
Commodity:
Commodity is a physical substance that is traded on an authorized commodity exchange such as agricultural products, base metals, and bullion and energy products.
Cash Commodity:
The actual physical product on which a futures contract is based. These products can include financial instruments, agricultural commodities, and financial instruments and cash equivalents of index futures.
Closed Out Price:
It is the rate at which settlement of short delivery of commodities is completed.
Closing Range:
It is the range of prices at which buy and sell transactions took place during the market close.
CCI:
Cotton Corporation of India
CIF
Cost, Insurance and Freight
D
Day Traders:
Speculators who take positions in futures and liquidate them prior to the close of the same trading day
Delivery:
The transfer of cash commodity from the seller of future contracts to the buyer of future contract. Each future contract has some specific procedures for delivery of a cash commodity.
Delivery Date:
The day in the month that commodities on a futures contract have to be delivered.
E
Equilibrium Price:
Equilibrium is the condition at which the quantity supplied of a commodity equals the quantity demanded.
Expiration Date:
Options on futures generally expire on a specific date during the month preceding the futures contract.
F
Forward Price:
It is the fixed price at which a specified amount of a commodity is to be delivered on a fixed date in the future.
Fundamental Analysis:
A method of predicting future price movement using supply and demand information
F.A.O.:
Food and Agriculture Organisation
FCI:
Food and Agriculture Organisation
G:
GDP:
Gross Domestic Product
GNP:
Gross National Product
H
Hedger:
A hedger is an individual or company planning to own a cash commodity such as soyabeans, gold, silver and much more and concerned about the cost mat change in future. While holding it a hedger achieves protection against changing cash prices by purchasing or selling futures contracts of the same or similar commodity.
Hedging:
Hedging is placed to protect against the risk.
I
Initial Margin:
The amount that must be deposited by futures market participant into his margin account at the time of he is placing order to buy or sell a futures contract.
Inverted Market:
ISIN:
ISIN is the Commodity Identification Number by which each commodity with its specific details is uniquely represented.
L
Low:
It is minimum or lowest price of the day for a particular futures contract.
M
MCX:
Multi Commodity Exchange of India is an online commodity exchange through which various commodity trades promoted by Financial Technologies Ltd, SBI, UBI, BOI, BOB etc.
Margin Call:
It is a call from a clearing house to a clearing member or from a brokerage firm to a customer, to bring the margin deposits up to a required minimum level.
N
NCDEX:
National Commodity and Derivative Exchange of India is online commodity exchange on which basically agricultural entity is traded and promoted by NSE, ICICI, LIC, PNB, CRISIL and IFFCO etc.
O
Offer:
Offer can explained as an expression indicating one’s desire to sell a commodity at a given price, opposite of bid.
Offset:
Taking a second futures position opposite to the initial or opening position
OCEIL:
Online Commodity Exchange India Ltd.
Open Position:
A long or short trading position that is not yet closed
P
Position:
A buyer of a futures contract is said to have a long position and seller of futures contracts is said to have a short position.
Price Limit:
The maximum incline or decline from the previous day’s settlement price permitted for a contract in one trading session according to the rule of exchanges.
R
Rally: An adequate rise in the value of a commodity market after a decline.
S
Short Selling:
A strategy in which a speculator sells a commodity in which he or she does not own in order to profit from a falling market. The speculator will borrow the commodity from a third party and then immediately sell it to another buyer.
Settlement date:
On this date a contract must be fully paid for and delivered.
T
Trade Date:
The date on which a trade is executed for a specified value date.
U
Unique Client code:
The unique code is allotted to all members of exchange that will tell you about all the details of clients.
V
Volatility:
Volatility is the measure of the change in price over a given time period. Generally expressed as a percentage and calculated as the annualized standard deviation of percentage change in daily price.
Volume:
The volume is defined as the number of purchases or sales of a commodity futures contract placed during a specified period of time in one trading day.
W
Warehouse Receipt:
It shows the existence and availability of a given quantity and quality of a commodity in a storage, basically a depository or warehouse receipt is allotted when delivery takes place in a commodity exchange. It also defines the grade and quality of commodities.

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