Glossary: B

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Back Months: Futures delivery months with expiration; futures delivery months other than the spot or nearby delivery month.

Back pricing: Fixing the price of a commodity for which the commitment to purchase has been made in advance.

Backwardation: The market condition whereby futures prices underlie the spot price for an asset, moving inwards and upwards towards convergence. Often displayed through a rising price curve, backwardation is the less common of the two general market conditions.

Basis: The difference between the spot price and the futures price.

Basis Grade: The grade of a commodity used as the standard of the contract.

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

Bear: Trader who believes the prices will move lower, the opposite of a “Bull”.

Bear Market: A downplaying, pessimistic market in which future outlooks anticipate a downward price trend of the underlying asset or instrument. As contrasted with a bull market.

Bear Spread: A trading strategy used by futures traders who intend to profit from the decline in commodity prices while limiting potentially damaging losses.

Beta Coefficient: A measure of the variability of rate of return or value of a stock or portfolio compared to that of the overall market.

Bid: The buying price of an asset or instrument – contrast with ‘ask’.

Book Transfer: The transfer of title to buyer without physical movement of product.

Book Transfer: The transfer of title to buyer without physical movement of product.

Bulge: A rapid and sharp advance in prices.

Broker: A broker is an organisation that facilitates direct connections between traders and the markets, executing orders on behalf of their clients and carrying out instructions for their trading. Brokers also handle the financials of trading, and charge a commission in addition to any relevant financing costs to cover leveraged transactions.

Bull: Trader who believes the prices will move higher, the opposite of a “Bear”.

Bull Market: In contrast to a bear market, a bull market is a positive looking market, with a positive outlook for future value. The underlying asset or instrument will be anticipated to rise in price, and traders will bid up its value on that basis.

Bull Spread: The simultaneous acquisition and sale of two futures contracts in the same or related commodities with the intent of profiting from an increase in prices but at the same time limiting the potential loss if this expectation is wrong.

Buyer: A market participant who takes a long futures position or buys an option. An option buyer is also called a holder or owner.

Buy In: To cover or shut out a short position.

Buy On Close: To buy at the end of the trading session within the closing price range.

Buy On Opening: To buy at the beginning of a trading session within the open price range.

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