Futures Definitions

Prompt Date

The date on which the buyer of an option will buy or sell the underlying commodity (or futures contract) if the option is exercised.

Primary Market

(1) For producers, their major purchaser of commodities; (2) to processors, the market that is the major supplier of their commodity needs; and (3) in commercial marketing channels, an important center at which spot commodities are concentrated for shipment to ter

Price Movement Limit

See Limit (Up or Down).

Price Basing

A situation where producers, processors, merchants, or consumers of a commodity establish commercial transaction prices based on the futures prices for that or a related commodity (e.g., an offer to sell corn at 5 cents over the December futures price). This pheno

CRB Index

An un-weighted geometric average, the CRB index was created in 1957 and currently contains 17 commodities. The index covers energy, grains, industrials, livestock, precious metals, and agricultures. Related Links: Crbtrader.com

Crack Spread

(1) In energy futures, the simultaneous purchase of crude oil futures and the sale of petroleum product futures to establish a refining margin. See Gross Processing Margin. (2) Calculation showing the theoretical market value of petroleum products that could be ob

CPO

See Commodity Pool Operator.

Precious Metals

Precious metals are a group of metals that are highly resistant to corrosion. Precious metals include gold, silver, platinum and palladium. See also: Base Metals

Prearranged Trading

Trading between brokers in accordance with an expressed or implied agreement or understanding, which is a violation of the Commodity Exchange Act and CFTC regulations.

Cover

(1) Purchasing futures to offset a short position (same as Short Covering); see Offset, Liquidation; (2) to have in hand the physical commodity when a short futures sale is made, or to acquire the commodity that might be deliverable on a short sale.