Futures Definitions

Exchange of Futures for Swaps

A privately negotiated transaction in which a position in a physical delivery futures contract is exchanged for a cash-settled swap position in the same or a related commodity, pursuant to the rules of a futures exchange. See Exchange for Physicals.

Exchange of Futures for Cash

See Exchange for Physicals.

Exchange for Physicals (EFP)

A transaction in which the buyer of a cash commodity transfers to the seller a corresponding amount of long futures contracts, or receives from the seller a corresponding amount of short futures, at a price difference mutually agreed upon. In this way, the opposit

Basis Risk

The risk associated with an unexpected widening or narrowing of basis between the time a hedge position is established and the time that it is lifted.

Spot Month

The futures contract that matures and becomes deliverable during the present month. Also called Current Delivery Month.

Ex-Pit

See Transfer Trades and Exchange for Physicals.

Basis Quote

Offer or sale of a cash commodity in terms of the difference above or below a futures price.

Even Lot

A unit of trading in a commodity established by an exchange to which official price quotations apply. See also: Round Lot

Basis

The difference between the spot or cash price of a commodity and the price of the nearest futures contract for the same or a related commodity. Basis is usually computed in relation to the futures contract next to expire and may reflect different time per

Speculative Position Limit

The maximum position, either net long or net short, in one commodity future (or option) or in all futures (or options) of one commodity combined that may be held or controlled by one person (other than a person eligible for a hedge exemption) as prescribed by an exchange and/or by the CFTC.