Did you know most common commodity terms?

Q: What are some of the most common terms when discussing Commodity Products?

USDA
United States Department of Agriculture

Chicago Board of Trade (CBOT)
Trading platform where many commodities are bought & sold. Now known as the CME Group.

CME Group
Chicago Mercantile Exchange and CBOT merged to create the CME Group. The largest trading platform globally.

Basis
A premium or discount to the futures market

Board
Current futures price.

Bull
A trader who thinks the market will trend higher 

Bear
A trader who thinks the market will trend lower

Short
A term used to identify selling a commodity or derivative

Long
A term used to identify buying a commodity or derivative

Front Month
Current futures trading month

Back Months
Any trading month beyond the front month

Future Contract
A legally binding agreement to buy or sell a commodity or financial instrument at a later date pursuant to the Rules of the Exchange

Forward Contract
A private, cash-market agreement between a buyer and seller for the future delivery of a commodity at an agreed price. In contrast to futures contracts, forward contracts are not standardized and not transferable.

Carryover
Last year’s ending stocks of a storable commodity

Correction
When the market makes a full about-face moving by 10% or greater

Retracement
When the market makes an about-face, but not as strong as a correction

CWT
Centum Weight or 100 weight

Backwardation
A term used mostly in energy trading referring to inverted futures where prices currently are higher than in deferred months.

Long
Refers to buying

Short
Refers to selling

 

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