Glossary of Terms
Accumulation – The process of buying large chunks of stock/commodities at the start of a bull market
Actuals – Physical Commodity that is ready for shipment, referenced as the underlying asset of a futures contract
Acquisition – The purchase of one company by another
Aframax – a medium size oil tanker with a capacity of 80-120,000DWT
Alloys – A metal created by combining two or more metallic elements, usually to provide properties of increased strength or to prevent staining etc.
Aluminium/Aluminum – the chemical element of atomic number 13, a light silvery-grey metal see the LME aluminium price here
Analyst – An individual who performs market research, commentary and analysis for the purpose of supporting trading decisions, analysing trading risks and market risk factors
Arbitrage – The process of trading a commodity or security on two different markets simultaneously to take advantage of slight differences in price between exchanges/markets
Arabica – A grade of coffee see the arabica coffee price here
Asset – Economic or Financial resource that is deemed to be beneficial to a business or individual
At-the-market – The execution order to buy or sell a contract at the best price possible once the order reaches the floor
ADR – ADRs (American Depositary Receipts) allow US investors to get exposure to shares in foreign companies without the hassle of owning shares denominated in a foreign currency…
Agent – someone who acts on behalf of someone else. For example, a conveyancer who acts on behalf of a couple buying a house.
Aggregate: The total sum of everything added together or compiled into a single place.
Agreement – where two parties reach consensus on a set of facts or course of action. For example, when a formerly married couple agree the terms of their divorce.
AIFMD – Alternative Investment Fund Managers Directive – an EU framework for funds and investment firms
AIM – The Alternative Investment Market (Aim) was first established in 1995 by the London Stock Exchange as a way for newer firms to gain access to public funds…
Alpha: Alpha (which is also known as the alpha coefficient) is a way of analysing the value that an active fund manager…
Alternative dispute resolution – arbitration and mediation are alternative ways in which a dispute can be resolved, without going to court.
Altman Z Score: Devised in the 1960s by Edward Altman, a Z score indicates the probability of a company entering bankruptcy within the next two years…
AML – Anti-Money Laundering
Amortisation: Amortisation has two slightly different meanings, depending on whether you’re in America or Britain….
Appreciation: When an asset’s value increases over time.
Arbitrage – Arbitrage is a technique used to take advantage of differences in price in substantially identical assets across different markets
Arbitration – a way of seeking to resolve a dispute without going to court: a third party (the arbitrator) looks at both sides of the dispute and makes a decision as to how it should be resolved. Those involved may agree to be bound by the decision of the arbitrator.
Assets: All items owned by the company which helps them run, e.g. money, equipment, land, buildings, vehicles, etc.
Auditor: The law requires an independent person to sign off that a firm’s financial statements are “true and fair” and have been prepared using the relevant legislation
Back office – The team who handle the financial and administrative tasks to support front office trading/broking teams
Barrel (oil) – A unified measurement used in crude oil trading/production
Bars – Uniform and smooth pieces of metal
Base Metals – Industrial non-ferrous metals including copper, lead, nickel and zinc. Some definitions include aluminium, iron, tin and steel (such as US Customs)
Basis – The difference in price of a commodity between the sell/quote phase and the futures contract maturing
Basis/Contract grade – Specific property formats set by exchanges on the underlying commodity, stipulated in the exchange’s contracts
Bear Market – A market on a downward trend; ‘a bear market’
Bid – Made on the trading floor/pit of an exchange, to purchase a definite quantity of a futures contract at a specified price (opposite to offer [sell ask])
Billet – Circular or Square cross-sectioned length of metal with an area less than 36”sq. Billets are semi-finished casting products
Biodiesel – Fuel made from offtake/recycled edible oils and fats that can be used in a diesel combustion engine
Biofuel – Includes biodiesel as well as any other fuel made from vegetable matter – a renewable energy
Break – A fast and extended drop in price of an instrument/commodity
Brent Crude – Major classification of sweet (low Sulphur), light (low density) crude oil used as a benchmark in global pricing see the brent crude price here
Broker / Brokerage – A person/firm who offer transactional services to investors/firms for the purchase and sale of futures contracts, normally for hedging and risk management purposes. Although becoming less commonplace, brokers can also be active in the physical markets, introducing buyers/sellers of physical commodity stock
Bulge – A sharp/fast increase in prices of an instrument/commodity
Bulk – The way of trading large quantities of product ‘by bulk’, as opposed to container
Bull – A market on an upward trend where prices are expected to continue to increase
Bunker Fuel – A term to describe all fuel used to power ships. A heavy oil product used in ship engines
Butter – Dairy product made from cream, a yellow fat see the butter price here
Bad debts: Overdue payments that are unlikely to be received, even after an effort is made to retrieve the funds. It is written off as a loss in accounts.
Backwardation: If the current cash price for an asset slips above the price for forward delivery, that’s known as ‘backwardation’.
Balance of payments: The balance of payments refers to the accounts that sum up a country’s financial position relative to other countries.
Balance sheet: This is a report that summarises the business’ financial situation; it details the assets, liabilities, and capital of the business. It also shows the balance of income and expenditure as of the date specified. Balance sheets help highlight what the business owns and owes.
Baltic Dry Index: The Baltic Dry Index is a key barometer of global freight activity – measuring the cost of ferrying raw materials around the planet.
Bank of England: The Bank of England is the UK’s central bank. It started life in 1694 as a private bank set up by London merchants as a vehicle to lend money to the government and to deal with the national debt.
Bankrupt – the legal status of a person or organisation that is unable to repay debts owned to its creditors.
Bernanke put: There is a widespread belief that the US central bank can always rescue the economy by decreasing interest rates. Since the current chairman is Ben Bernanke this is known as the ‘Bernanke Put’
Beta: Beta (or the ‘beta coefficient’) is a way to measure the relative riskiness of a share.
Bid-offer spread: The bid-offer spread is simply the difference between the price at which you can buy a share and the price at which you can sell it.
Big Bang: The ‘Big Bang’ refers to the deregulation of the London Stock Exchange, which took place on 27 October 1986.
Bonus issue: A bonus issue is common among British companies. In America the nearest equivalent is a stock split.
Book value: Book value is the total value of the net assets of a company attributable to – or owned by – shareholders.
Bottom-up investing: Bottom-up investing is a strategy that overlooks the significance of industry or economic factors and instead focuses on the analyses of individual stocks and companies.
Bovespa: The Bovespa is the Brazilian stock market’s benchmark index.
Break-even: The break-even point on an option is the price that the underlying asset has to hit in order to enable the option buyer (holder) to recover their premium.
Buyouts and buyins: A management buyout (MBO) occurs when the management of a company buys up a controlling interest (often by buying all outstanding shares).
BUY SIDE – Buy side firms are institutions concerned with the purchase of investment services including: hedge funds, pensions funds and mutual funds
CAC-40: The CAC-40 is France’s benchmark stockmarket index.
Canola – Modified oilseed rape in Canada, used in edible oils and in foodstuffs
Capesize – ultra large cargo vessels with a capacity exceeding 150,000DWT
Carbon Credit – a permit allowing an organization to produce a certain volume of carbon emissions and trade the excess
Carry Charge – the cost of processing a physical commodity in storage, warehousing and insurance costs
Cash Commodity – The actual physical commodity as opposed to the futures contract based on the physical commodity. see Actuals
Cash Market – Market for spot trading (immediate) whereby the commodity is for delivery immediately rather than a future date
CFTC – Commodity Futures Trading Commission
CTA – Commodity Trading Advisor
Close – The end of a trading period as stipulated by an exchange
Closing Price – The price as it is at the exchanges official close
Casting – The process of shaping molten metal into specified shapes/sizes
CBOT – Chicago Board of Trade, a derivatives exchange in Chicago, USA
Cheese – A dairy product made from curds of milk see the cheddar price here
Chinamax – large bulk carriers with 380-400,000DWT often used in trade to and from China
Chromium – The chemical element of atomic number 24, hard white metal used in alloys, notably stainless steel see the chromium price here
Clearing – The process of funds moving between one financial institution to another at the point of sale of a contract, often overseen by an intermediary such as a clearing broker, to ensure a smooth and timely market process
Clearinghouse – A body associated with particular exchanges, responsible for handling the finances for trades, acting as a buyer to the seller and a seller to the buyer to manage the safe and timely flow of money between counterparties
CME – Chicago Mercantile Exchange, a derivatives exchange in Chicago, USA
Cocoa – A soft commodity; a powder used in food production made from cacao seeds
Commodities – A raw material or primary agricultural product that can be bought or sold, for example coffee, cocoa, metal or oil
Container – Used in the shipping of commodities, normally for higher value, smaller quantity commodities such as coffee or foodstuffs
Copper – The chemical element of atomic number 29, a red brown metal used in construction and electronic applications see the copper price here
Cotton – A soft fibrous substance harvested from the cotton plant, traded for use in textile production see the cotton price here
Credit Risk – The risk of a loss if a buyer/seller in a derivatives transaction does not deliver payment in a timely manner. Credit Risk exposure relates to the risk/probability of a specific transaction of default
Crop Year – A year long period from the harvest of a specific crop. Varies by commodity.
Crude Oil – Unrefined oil in its crude/raw state as it is upon extraction, composed of hydrocarbon deposits
Commodity Pool – A collective of investors in a fund/pool for the purpose of trading derivative (futures/options) contracts on the commodity markets
Capital asset pricing model (CAPM): The capital asset pricing model has been widely used for many years by the global financial services industry to try and predict the returns you should expect from a stock.
Carry trade: Carry trades seek to make money from the fact that the interest rates set by central banks around the world vary considerably.
Chapter 11: Chapter 11 of the American bankruptcy protection laws effectively puts a protective ring around a company, winning it time to renegotiate its debts and stopping creditors from claiming assets…
Closet tracker funds: An active fund with a portfolio of stocks that is little different from the overall market is called a “closet tracker”.
Cognitive bias: We use mental shortcuts (heuristics) to make decisions rapidly. These work in many circumstances, but when it comes to investing, they can be a major handicap, giving rise to “cognitive biases”.
Commodity forwards: A ‘forward’ is a contract agreed between two parties whereby one agrees to deliver a specific quantity of an asset – say one ton of aluminium – on an agreed date and the other agrees to pay a fixed price for it on that date…
Contango: The price of an asset for forward delivery is usually above the price you would pay today…
Continuation vote: An investment company’s articles of association often provide for shareholders to vote on whether the company should continue to exist. This is known as a continuation vote.
Cyclical stocks: The performance of cyclical stocks is heavily dependent on the economic cycle – they do well when the economy is booming but very badly when it falls off a cliff…
DAX: The DAX is Germany’s blue-chip index, the most cyclical of the major western indices, with almost 80% of it comprised of economically sensitive industries.
Dairy – Products that contain or are made from milk, usually from cows/sheep. eg. Milk, Butter, Cheese etc.
Day Ahead Market – An energy market for the next day / 24 hours ahead of the given time
Day Trade – A trade where the purchase and sale of the security/contract occurs on the same day
DCM – Debt Capital Markets. A market where firms can raise funds for trading through the trading of debt securities or bonds, such as government bonds or CDs
Delta – A risk parameter in options, measuring the sensitivity of price change in relation to the underlying asset/instrument
Deferred Swap – A swap where the payment of a swap is delayed but the swap isn’t, normally for accounting or tax reasons
Demand – The energy usage requirements/demand for a specified area or region
Demurrage – a charge owed to the owner of a ship in a circumstance where the transported goods are not loaded or unloaded in an agreed time frame; liquidated damages for breaching the laytime
Derivative – A financial contract underpinned by the price of a physical commodity, for example futures or options; traded on derivative exchanges or OTC (over the counter)
Diesel – A heavy refined oil product used in combustion engines see the diesel price here
Differentials – The premiums above or reductions below the base grade of a commodity to account for better or worse than exchange grade
Distillate – Liquid oil products, split by their density after distillation
Downstream – An oil or gas firm close to the end user in the supply chain. The more downstream a firm, the closer to the end user they are. Opposite of upstream
DWT – dead weight tonnage, used in ship sizing/capacity measurement
Defensive stocks: Defensive stocks are those that don’t tend to depend heavily on what’s going on in the wider economy for their growth.
Derivative: A derivative is the collective term used for a wide variety of financial instruments whose price derives from or depends on the performance of other underlying investments.
Dilution: In the world of finance, dilution means something is being watered down, typically earnings per share.
Discount rate: The discount rate is used to calculate how much the expected future income from an investment over a given period of time is worth right now.
Discounted cash flow: Discounted cash flow is simply a method of working out how much a share is fundamentally worth based on the present or discounted value of expected future cash flows.
Disposition effect: Investors have a tendency to hold onto losing positions long after we know in our heart of hearts, the stock is never going to recover, and to take profits on winning positions too early.
ECC – Clearing house owned by EEX, for clearing on securities traded on the exchange
Edible Oil – Oil produced from agricultural products, normally plants and seeds, used in food or food production processes eg. palm oil, vegetable oil and rapeseed oil
EEX – European Energy Exchange, A derivatives exchange focused on power and energy contracts based in Germany
Emissions – Pollutants caused by production processes. Traded between firms to reduce emissions and share caps/allowances
Energy – One of the core commodity areas including power, gas, oil, coal, renewables and biofuel
Equities – A share of a business sold as a security
ETF – Exchange-Traded Funds, an investment fund traded on a stock exchange; holding assets in stocks, bonds or commodities, generally operating an arbitrage mechanism
Exotics – options contracts with non standard terms in relation to the underlying asset or the payment schedule
FTSE 100: The FTSE 100 is Britain’s ‘blue-chip’ stock index. But its makeup means it is more of a global index than a snapshot of UK plc.
Ferroalloy – A mix of metals including at least one part iron
Fertilisers/Fertilizers – A chemical or natural substance added to farmland to improve crop yield/quality through increased fertility
Financial Risk – The risk to liquidity of any investment activity to an individual or firm
Floor Broker – An execution broker who conducts business ‘in the pit’ or on the floor of an exchange on behalf of clients
Flow – where a firm trades or invests through funds from clients rather than its own
FOB – Free on board, covers the cost of loading commodities for shipment
FFA – Freight Forward Agreements, a financial forward contract used in shipping to hedge against price volatility of freight routes, often offered by specialist derivative teams within shipbrokers
Foreign Exchange – Currency of other countries
Forward – A contract used for trading products to be delivered at a specified date in the future. Normally conduct ‘off’ exchange and bespoked to the buyers requirements with less regulation than exchanges
Forward Shipment – Contract covering commodities to be shipped a specified future date
Foundry – An installation for the purpose of casting metal products
Front Office – Responsible for the sales/trading activities of a firm. Client or Customer facing staff
Fuel – Commodities that are used to produce energy
Fuel Oil – A distillate obtained from petroleum distillation made of long hydrocarbon chains, used as heating oil see the heating oil price here
Fundamental Analysis – The process of analysing the markets, focused on supply and demand, for the purpose of identifying trigger points for price fluctuations
Futures Commission Merchant – A broker or individual who executes orders on future contracts
Futures Contract – An agreement/contract between two parties for the delivery of a commodity at a future date, regulated by exchange rules
Futures: A future is a tradeable contract that commits you to taking delivery (if you buy), or making delivery (if you sell), of an agreed amount of something at an agreed time.
Goodwill: The simplest way to describe goodwill is as a company’s reputation.
Gasoline – petrol see the gasoline futures price here
Gold – the chemical element of atomic number 79, a yellow precious metal used in jewelry, electronics and as a guarantee to national currency
Grain – the seeds of plants used in food production eg. wheat, corn, rice
Grid – an electrical distribution system
Hang Seng index: Hang Seng is Hong Kong’s benchmark index of stocks.
Handymax – small cargo ships with less than 60,000DWT, capable of operating in many ports due to their small size
Handysize – smaller than handymax ships with 15-35,000DWT, the most common global cargo carrier
Hard Commodities – commodities that are mined. Opposite of soft commodities which are grown
Hedging – risk management process of off-setting the price of one commodity against another by purchasing or selling long/short futures contracts
High – the highest price that a product/instrument has reached on that day
Hedge Fund – a collective pool of investments managed by a portfolio/fund manager utilizing specific investment structures to grow the value of the fund for profit for its investors and shareholders
Index fund: Index funds (also known as passive funds or “trackers”) aim to track the performance of a particular index, such as the FTSE 100 or S&P 500.
Indices: There are indices for every sort of market, but retail investors are probably most familiar with those related to stock markets.
ISEQ: Few national indices have changed as much as Ireland’s ISEQ since the peak of the credit bubble.
ICE – Intercontinental Exchange, an energy derivatives exchange
Index – commodity price indices showing the performance of a particular asset in relation to a median
Ingot – a cast of metal in an oblong shape
Introducing Broker – an individual or firm which accepts orders and works with a brokerage for the full process of the trade
Iron Ore – a rock or mineral from which iron can be extracted see the iron ore price here
Iron – the chemical element of atomic number 26, used in the steelmaking process
Initial Margin – the amount an investor must deposit into a margin account in order to buy a futures contract
Jet Fuel – aviation fuel for gas turbine engines see the jet fuel price here
Kospi: The Kospi is South Korea’s benchmark stockmarket index. It is typical of emerging markets, in that it is highly exposed to the global economic cycle.
Kerosene – a light fuel oil used in jet engines in the aviation industry as well as domestic boilers and burners
Kilowatt – one thousand watts. A unit of measurement used in electric flow
Kyoto Protocol – UN Framework governing global emissions trading
Long / short equity: Long / short equity is becoming increasingly popular as a hedge fund strategy.
Lambda – the ratio of fuel:energy production, represented by the total heat energy consumed to the electrical or power output
Lead – the chemical element of atomic number 82, a dense, soft and malleable metal used in batteries, construction and radiation protection see the LME lead price here
Letter of Credit – a guarantee from a bank on a buyer’s payment, eliminating the risk to the seller. The bank guarantees the payment should the buyer be unable to make payment
Leverage – a low investment for control of a larger variable/instrument. Futures and Options are examples of leveraged products as the initial investment is far lower than the nominal underlying amount
Light Distillates – oil products on the upper end of the distillation process including naphtha and LPG
Livestock – live agricultural animal food products such as cattle, lean hogs, poultry and fish
LME / London Metal Exchange – largest metals futures market based in London.
Long – The purchase side of an open futures contract
Lot – quantity of uniform grade commodities, used as the standard term for units of commodities in trading on the futures market
LNG / Liquified Natural Gas – natural gas cooled into liquid form for transport. Liquified natural gas takes up 1/600th of the volume of gaseous natural gas see the Henry Hub nat gas price here
LPG / Liquified Petroleum Gas – propane or butane. Used as fuel in household appliances, heaters and vehicles see the propane price here
M&A: Mergers and Acquisitions
Malaccamax – the largest ships that can fit through the straight of Malacca
Margin – cash posted as a guarantee on negative price movements or fluctuations of an open futures contract fulfillment
Market Maker – exchange member which buys and sells securities to allow market entry to buyers or sellers on both sides of the deal, creating liquidity for investors and exchanges
Market Risk – risk to commodity prices from market variables and changes, including foreign exchange, geopolitics and interest rates
Metallurgical Coal / Coking Coal – coal grade used in steel making
Middle Distillates – oil products from the middle of the barrel/distillation process including diesel, jet fuel and kerosene
Minor Metals – metals that are not widely available and produced in smaller quantities, often used for specific electronic applications or in specialist alloys
Marketer – someone who acts for commodity producers to sell their product into end users of manufacturers, earning a commission on the profit margin
Margin: When buying a derivative like a spread bet, an investor will only have to pay a small initial deposit, or ‘margin’, of say 10% of the value of the shares.
Margin account: A margin account is one that an investor holds with a broker, effectively allowing him to buy securities on credit.
Margin of safety: The margin of safety itself is the gap between the price you pay and what you think a stock might be worth.
Margin trading: Margin trading is when, typically US, investors put up only a percentage of the cost of an asset they buy.
Market capitalisation: Market capitalisation, often abbreviated to market cap, is the total value of all outstanding shares in a company.
Market neutral funds: Market neutral funds aim to deliver above market rates of return with lower risk by hedging bullish stock picks (buys) with an equivalent number of short bets (sells).
Marking to market: This is the process of updating a portfolio to reflect the latest available prices.
Modified Altman Z score: Altman’s original five-ratio model was designed for manufacturers, or sectors with high capital intensity, such as mining…
Money laundering: Money laundering is a catch-all term for any activity that tries to convert the proceeds of crime into legitimate money.
Moving average: A moving average of a share price is simply the average of the share prices of the last so many days.
Multinational – a business that operates in different countries.
Nikkei 225: The Nikkei 225 is Japan’s major stockmarket index.
Naphtha – a light distillate used as a solvent/cleaning solution and often as a blendstock in the production of petrol/gasoline see the naphtha price here
National Futures Association – industry wide regulatory organization of the futures industry
Natural Gas – gas formed of methane and hydrocarbons, naturally found underground. Used as a fuel see the Henry Hub nat gas price here
Nickel – the chemical element of atomic number 28, a corrosion resistant silver-white metal used in alloys, commonly stainless steel see the LME nickel price here
Non-ferrous Metals – metals that do not contain iron
Nut – a soft commodity, fruit consisting of a hard shell and an edible kernel/inner
NYMEX – New York Mercentile Exchange, a futures exchange based in New York, owned by the CME Group
Oil – a generic term for viscous, hydrophobic liquids. In energy terms, a black hydrocarbon liquid used in energy and petrochemical production through refining
Oilseed – seeds that can be crushed to produce oils, including sunflower, palm and soybean
Options – a contract similar to futures, where the buyer has the right but not the obligation to purchase a commodity at a specific time in the future
Origination – the process of ‘hunting’ new business opportunities and trading relationships
OTC – over-the-counter, a trade that occurs outside of a regulated exchange environment
OCF (ongoing charges figure): Fund managers publish their ongoing charges figure (OCF) – previously known as the total expense ratio (TER) – to give an indication of the cost of investing in their funds.
Off Exchange (OFEX): The Off Exchange (OFEX) was started as a way for shareholders to deal in the shares of small companies that do not meet the requirements of Aim and the LSE’s official list.
Over the counter (OTC): Many transactions are done privately between counter parties and with no exchange involved. These are known as over the counter, or OTC.
Overweight and underweight: The terms overweight and underweight are used by brokers and fund managers to indicate their preference for stocks or markets relative to particular indices or benchmarks.
Panamax – a ship class, that can just about fit through the Panama canal with a capacity of around 65,000DWT
Paper (Market) – derivative markets, where trades are settled through cash rather than physical delivery or trade
Paper (Agriculture) – a product of the timber industry
Petrochemicals – chemicals derived from the refinement process of petroleum or gas products, split into olefins and aromatics and used in the production of solvents, chemicals and plastics
Physical – conversely to the paper market, a trading market where physical commodities are traded and delivered by goods
Physical Supply – as opposed to back-to-back trading, the process of supplying bunker fuel via a physical asset/terminal in port to end users/ships
Power – electricity
Portfolio Manager – person responsible for investments into a fund and the strategy/trading of that portfolio
Precious Metals – metals that are naturally occurring but scarce in their supply and expensive by contrast such as gold, silver, Iridium and palladium
Premium – the amount over the base price of a commodity for increases in quality
Price Index – base point of commodity pricing
Piotroski score: The Piotroski score is designed to identify high-quality firms by looking at nine separate criteria.
Price elasticity: In general, the higher the price of a product the lower the demand for it. The extent to which this is true for each product is referred to as price elasticity.
Price to earnings growth (PEG) ratio: This key ratio compares the price to earnings ratio to a firm’s earnings growth rate to see whether a share is cheap or expensive.
Price to sales ratio: A company’s market cap divided by the company’s annual sales (or revenue) gives us the price to sales ratio.
Price/earnings (P/e) ratio: The price/earnings ratio is a quick way to establish a firm’s relative value.
Prime broker: Prime brokers are typically investment banks which are able to sell clients, often hedge funds, a ‘one-stop shop’ service.
Private equity: Private equity covers the many ways of raising finance ‘off exchange’.
Probate – a legal permission provided by a Probate Registry for someone to deal with someone else’s estate after they die. A Probate Registry is an office where someone can be interviewed in order to be provided with a probate permission. To find your nearest registry or for more information, visit GOV.UK.
Q ratio: The Q ratio, or Tobin’s Q, can be a reliable measure of stockmarket value.
Q-Max – largest LNG carrier in the world
Quant – quantitative analyst, someone who uses mathematical and statistical modelling to analyse events
Ratio Spread – a spread whereby there is a difference in the quantity of long and short market contracts
Refinery – a production facility where crude oil is separate through a distillation process into oil products
Refining – the process of turning raw materials into tangible products
Ring – a circular platform found in exchanges, often referred to as the trading ring
Renewables – eco-energy, energy production using non-fossil fuels, including solar, wind and hydro power
Residuals – heavy fuels left after the production of distillates, often used in industry and bunker fuels
Risk Management – a department or an outsourced process of managing market risks to trading firms, often utilizing futures trading, either in house or through a brokerage, to hedge against price volatility in the physical market
Robusta – a grade of coffee see the robusta price here
Rubber – an agricultural commodity, made from the sap of the rubber plant
Resistance points: Shares can often trade in channels, rarely breaking below or above consistent minimum and maximum prices. Those are a stock’s resistance points..
Risk – the likelihood that a particular choice or action might lead to a loss or damage.
S&P 500 index: America’s S&P 500 index is among the Western world’s most cyclical indices.
Scalping – the process of trading short term to make small but regular profits during a trading day/session
Scheduling – the process of managing the output of a power plant/transmission system to meet demand and operate efficiently
Seawaymax – largest ship than can pass through St. Lawrence Seaway with a draught of 26’
Security – a certificate attesting to right to ownership in connection with tradeable derivatives
Settlement – the process of a trade completing, whereby the goods are delivered, invoiced and paid, thus settling the trade
Silver – the chemical element of atomic number 47. A shiny grey precious metal used in jewelry, electronics and batteries as well as in alloy for specialist applications
SGX – Singapore Exchange, a derivatives exchange based in Singapore
Smelter – a facility used to extract metals from their ore/unrefined state
Soft Commodities – commodities that are grown. Opposite to hard commodities that are mined
Sorghum – a type of cereal, native to warm regions and used as grain in food and livestock feed
Spark Spread – the margin between the cost of production and price of electricity sale
Speculation – deliberately taking on price risk for the chance of a larger profit with no offsetting cash market position
Spot Market – the real time market for instant sale and delivery at the current price
Steel – a metal used widely in construction and machinery, made through an alloy of iron and coal see the steel price here
Stress Testing – the process of simulating extreme market risk scenarios and identifying the impact this has on prices or processes to enable firms to prepare or plan for potential future events or risks
Stop Loss Order – a limit on losses of an order, eg. Where a minimum sell price is set to limit the losses should the instrument lose value
Sugar – a natural substance found within plants including beet and cane, consisting of sucrose / glucose used in food production
Suexmax – The largest ship to go through the Suez Canal with a capacity of 120-200,000DWT
Supramax – a freight ship with a cargo capacity of 50-60,000DWT
Swaps – over-the-counter contracts between financial institutions whereby two firms will exchange the liability from two differing financial instruments
Secular trend: A secular trend is a long-term phenomenon, whereas a cyclical trend is short-term and will eventually reverse.
Segregated fund: A segregated fund is a managed pot of assets belonging to just one client, managed alongside – but separately from – other investments under a manager’s control.
Short squeeze: When a large number of short sellers target the same stock, the price can rise in a self-perpetuating circle known as a ‘short squeeze’.
SELL SIDE – Firms in the financial industry creating instruments, stocks, bonds and foreign exchange that are used by the Buy Side industry. These firms include investment banks, brokerages and market makers
Taiex: The TAIEX is Taiwan’s benchmark index, with technology companies accounting for just over a third of the market. Semiconductors are the main sub-sector.
Thermal Coal – coal used in the production of power and heat see the coal price here
Tick – a very small increment in price fluctuation of a futures contract
Tin – the chemical element of atomic number 50, a silver-white metal used in coatings to prevent corrosion and in alloys in magnets and specialist applications see the LME tin price here
Titanium – the chemical element of atomic number 22, a hard grey metal used in alloys to increase strength and corrosion resistance
Trade Execution – the process of completing a physical or derivative order, often handled by the operations team in physical commodity houses, managing the admin and back office support to complete a trade
ULCC – Ultra Large Crude Carriers, the largest oil carrying ships with a capacity of over 320,000DWT
Underlying – the variable on which a derivative contract is based
Upstream – the exploration and production of oil and gas products
Urea – used as a fertilizer in agricultural applications
Utilities: Utilities are companies involved in providing electricity, gas, water and similar services to consumers and businesses.
Vix (volatility index): The Chicago Board Options Exchange (CBOE) Volatility index (Vix for short) reflects how volatile traders expect the market to be over the coming year.
Value-at-Risk (VaR) – estimation of the largest possible loss from a days trading, using modelling to identify a realistic level, used in proprietary trading
Vega – option risk parameters that look at the risk of volatility of the underlying instrument
Vegetable Oil – term used to describe edible oils made from plant matter
Volatility – a statistical measure of the risk of a particular investment / security whereby deviation or variance is measured
VLCC – Very Large Crude Carriers, ships between 180-320,000DWT
Volatility: Volatility refers to the fluctuations in the price of a security, commodity, currency, or index.
Weather – risk contracts are traded to hedge against the risk of incremental weather in crop production
WTI Crude – Major classification of sweet (low Sulphur), medium (relatively low density) crude oil used as a benchmark in global pricing see the WTI crude price
Z score: The Z score indicates the probability of a company entering bankruptcy within the next two years.
Zinc – the chemical element of atomic number 30, a white-silver metal used in coatings to protect against corrosion see the LME zinc price here