More Futures Trading Terminology
This is a continuation of our previous post on futures trading terminology. If you're going to play the game, you should know the jargon.Margin - an amount of money deposited by both buyers and sellers of futures contracts and by sellers of option contracts to ensure performance of the terms of the contract
Offset - to take a second futures or options position opposite to the initial or opening position.
Option Contract - a contract which gives the buyer the right, not the obligation, to buy or sell a specified quantity of a commodity at a specific price within a specified period of time. The seller of the option has the obligation to sell the commodity or futures contract or buy it from the option buyer at the exercise price if the option is exercised.
Option Premium - the price a buyer pays for an option.
Position Limit - the maximum number of speculative futures contracts one can hold as determined by the Commodity Futures Trading Commission and/or the exchange where the contract is traded.
Price Limit - the maximum advance or decline from the previous day’s settlement price permitted for a futures contract in one trading session.
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