Glossary: P-R

– P –

Par: Refers to the standard delivery point or points or the quality of a commodity that is deliverable on a futures contract at contract price. Serves as a benchmark upon which the base discounts or premiums for varying quality and delivery locations (in bond markets, an index “usually 100″ representing the face value of a bond).

Parity: Par Rate.

Pegged Price: The price at which a commodity has been fixed by agreement.

Pit brokers: A member who executes orders for the account of one or more clearing members.

Point: A measure of price change equal to 1/100 of one cent in most futures traded in decimal units (in grains, it is of one cent; in T-bonds, it is one percent of par).

Position: One’s interest in the market, either long or short, in the form of one or more open contracts.

Positive Carry: The cost of financing a financial instrument, where the cost is less than the current return of the financial instrument.

Premium: Above par, it is the amount a price would be increased to purchase a better quality commodity and it refers to a futures delivery month selling at a higher price than another.

Primary Market: Vital distribution centres at which spot commodities are originally accumulated for shipment into commercial channels.

Prime Rate: The interest rate charged by the financial institutions to their biggest and creditworthy clients.

Put: Option contract which gives the holder the right to sell a specified quantity of a particular commodity at a given price (the “strike price”) prior to or on a future date.

Pyramiding: The use of profits made on a previously established position as margin for adding to that position.

– Q –

Quotation: The actual price or the bid or ask price of either cash commodities or futures contracts.

– R –

Rally: An upward movement of prices after a decline (same as Recovery).

Range: The high and low price of a commodity during a given period.

Ratio Hedge: The number of options in comparison with the number of futures contracts bought or sold in order to establish a hedge that is risk neutral.

Reaction: The decline in price movement tendency of a commodity after a price advance.

Recovery: Description of a price advance after a decline.

Regular Warehouse: A warehouse that satisfies exchange requirements for financing, facilities, capacity, and location and has been approved as acceptable for delivery of commodities against futures contracts.

Registered Representative: A person employed by soliciting business for a futures commission merchant.

Roundturn: The purchase and sale of a contract.

Retracement: A reversal within a major price trend.

Revaluation: An official increase in the exchange rate or price level of the currency.

Round Lot: A quantity of a commodity equal in size to the corresponding futures contract for the commodity.

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