Futures Trading Terminology
Below are some frequently used terms in futures trading. We'll post more next time.Call Option - buyers of a call options acquire the right, but not the obligation to purchase a particular futures contract at a particular price on or before a particular date.
Commission - the fee charged by brokers to a customer for performance of a specific duty, such as the buying or selling of futures contracts.
Futures Contract - a legally binding agreement to buy or sell a commodity or financial instrument at a later date. Futures contracts are standardized according to the quality, quantity and delivery time and location for each commodity.
Hedging - the practice of offsetting the price risk inherent in any cash market position by taking the opposite position in the futures market. Hedgers use the market to protect their businesses from adverse price changes.
Leverage - he ability to control large dollar amounts of a commodity with a comparatively small amount of capital.
Liquidity - a broadly traded market where buying and selling can be accomplished with small price changes and
bid and offer price spreads are narrow.
Long - someone who has bought futures contracts or owns a cash commodity.
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