CALL OPTION

An option to take a bought futures position at a predetermined price. (See Option).

CARRYING CHARGE

The expense, such as storage charges, insurance, interest charge, and other incidental costs involved in ownership of stored physical commodities over a period of time. May be reflected in futures contracts by successively higher prices for each succeeding future month in so-called "normal" or contango markets.

CASH and CARRY

Buying the physical commodity or instrument, holding it and later delivering it against sold futures contracts. An arbitrage transaction used to profit from price differences between the cash market and the futures market. In markets where there is no delivery, a simulated cash and carry is achieved by buying the physical, selling futures and later reversing both transactions.

COMMODITY

The actual physical commodity as distinguished from futures contracts. Sometimes called "spot commodity".

CASH MARKET

Market for immediate delivery of and payment for commodities.

CASH PRICE

The price in the market place for actual cash or spot commodities to be delivered via customary market channels.

CASH SETTLEMENT

A procedure for settlement of contracts by automatic close-out at a cash price designated by the Clearing House in futures markets which make no provision for delivery, eg. Share Price Index.

CLEARING

The process of matching, registering and guaranteeing transactions.

CLEARING HOUSE

A body which guarantees the fulfilment between Clearing Members of all contracts traded on the Exchange. The Clearing House holds all deposit and margin requirements of the Clearing Members who have to cover their commitments with the Clearing House on a day to day basis. The Clearing House handles all cash settlement within the market and provides the documentation necessary to record all business.

CLOSE OUT

To liquidate a position or fulfil an obligation by taking an equal and opposite position eg. a trader who has bought a futures contract, would close-out, or get out of the contract, by taking out a contract to sell.

COMMISSION

The fee made by a broker for buying or selling commodities in the futures or cash markets.

CONTANGO

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

CONTRACT

A term of reference describing a unit of trading for a commodity future. Also an actual bilateral agreement between buyer and seller.

CONTRACT MONTH

The month in which delivery or cash settlement is to be made in accordance with a futures contract.

CONTRACT UNIT

The actual amount of a commodity designated in a given futures contract.

COUPON

The annual rate of interest that a bond guarantees to pay, based on the bond's face value. See also yield.

COVER

To cancel a short position in any future by the purchase of an equal quantity of the same future. Also known as short covering.

CROSS

To buy and sell simultaneously in the same contract month for the same commodity for different clients.

CURRENT DELIVERY (MONTH)

The futures contract which matures and becomes deliverable during the present month; also called spot month.