BACKWARDATION

Market situation in which prices are progressively lower in the future delivery months than in the nearest delivery month. For instance, if the Wool quotation for March is 480¢/kg. and that for July is 450¢/kg. then the backwardation for five months against March is 30¢/kg. (Backwardation is the opposite of Contango).

BASIS

The price difference between the actual or spot commodity and the futures market.

BASIS GRADE

Grade of a commodity used as the standard of the futures contract.

BASIS POINT

One per cent of one per cent (0.01%).

BEAR

One who expects a decline in prices (the opposite of "bull").

BEAR COVERING

The act of buying back a speculative short position on a steady or rising market, despite the original intention to await a market drop.

BEAR MARKET

Any market in which prices are in a declining trend. BEARISH and BULLISH When conditions suggest lower prices a bearish situation is said to exist. If higher prices appear warranted, the situation is said to be bullish.

BETA (OR BETA CO-EFFICIENT)

A statistical measurement of the relationship between the risk of an individual stock or stock portfolio and the risk of the overall market. The Beta of a stock or portfolio measures the volatility of that stock or portfolio relative to the volatility of the overall market. The market has a Beta of 1.0.

BID

An offer to buy, subject to immediate acceptance unless otherwise indicated, a definite quantity of a commodity at the (bid) price stated.

BREAK

A sharp decline or a sharp rise in price, usually after a sustained period of little or no movement.

BROKER

A trader or trading company given responsibility for the acceptance and/or execution of an order.

BROKERAGE

The fee charged by a broker for execution of a transaction.

BULL

One who expects a rise in prices. (The opposite of "bear").

BULL MARKET

A market in which prices are in an upward trend.

BUY A CONTRACT

Enter into a futures contract to buy a specified commodity.

BUY BACK

An offsetting purchase to "cover" or liquidate a short sale.

BUY ON OPENING

To buy at the beginning of a trading session at a price within the opening price range.

BUYERS MARKET

A condition of the market in which there is an abundance of goods available and hence buyers can afford to be selective and may be able to buy at less than the price that had previously prevailed.

BUYING HEDGE (OR LONG HEDGE)

Hedging transaction in which futures contracts are bought to protect against possible increased cost of commodities. See also hedging.