Commodity Online Special
Do you know what is crop-marketing year or cross hedging? Probably, you may not. Yes, you need to know such lesser known terminologies if you are eager to play in the commodities market.

Know all of them here:

Actuals
An actual physical commodity someone is buying or selling, e.g., soybeans, corn, gold, silver, crude oil, etc.

Adjusted Futures Price
The cash-price equivalent reflected in the current futures price. This is calculated by taking the futures price times the conversion factor for the particular financial instrument (e.g., treasury bond or note) being delivered.

At-the-Money Option
An option with a strike price that is equal, or approximately equal, to the current market price of the underlying futures contract.

Bear Spread
In most commodities and financial instruments, the term refers to selling the nearby contract month, and buying the deferred contract, to profit from a change in the price relationship.

Brokerage House
An individual or organization that solicits or accepts orders to buy or sell futures contracts or options on futures and accepts money or other assets from customers to support such orders. Also referred to as "commission house" or "wire house".

Buying Hedge
Buyer futures contracts to protect against a possible price increase of cash commodities that will be purchased in the future. At the time the cash commodities are bought, the open futures position is closed by selling an equal number and type of futures contracts as those that were initially purchased.

Carryover
Grain and oilseed commodities not consumed during the marketing year and remaining in storage at year's end. These stocks are "carried over" into the next marketing year and added to the stocks produced during that crop year.

Commodity Pool
An enterprise in which funds contributed by a number of persons are combined for the purpose of trading futures contracts or commodity options.

Cross-Hedging
Hedging a cash commodity using a different but related futures contract when there is no futures contract for the cash commodity being hedged and the cash and futures markets follow similar price trends.

Crush Spread
The purchase of soybean futures and the simultaneous sale of soybean oil and meal futures.

Daily Trading Limit
The maximum price range set by the exchange cash day for a contract.

Deliverable Grades
The standard grades of commodities or instruments listed in the rules of the exchanges that must be met when delivering cash commodities against futures contracts. Grades are often accompanied by a schedule of discounts and premiums allowable for delivery of commodities of lesser or greater quality than the standard called for by the exchange.

Delta
A measure of how much an option premium changes, given a unit change in the underlying futures price. Delta often is interpreted as the probability that the option will be in-the-money by expiration.

Extrinsic Value
The amount of money option buyer is willing to pay for an option in the anticipation that, over time, a change in the underlying futures price will cause the option to increase in value. In general, an option premium is the sum of time value and intrinsic value. Any amount by which an option premium exceeds the option's intrinsic value can be considered time value.

Full Carrying Charge Market
A futures market where the price difference between delivery months reflects the total costs of interest, insurance, and storage

Futures Contract
A legally binding agreement, made on the trading floor of a futures exchange, to buy or sell a commodity or financial instrument sometime in the future. Futures contracts are standardized according to the quality, quantity, and delivery time and location for each commodity. The only variable is price, which is discovered on an exchange trading floor.

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