A useful Glossary of Terms for the Commodities Sector (2024)

A

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

B

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

C

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 circ*mstances, 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…

D

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 circ*mstance 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.

E

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

F

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.

G

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

H

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

I

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

J

Jet Fuel – aviation fuel for gas turbine engines see the jet fuel price here

K

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

L

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 1/600^th 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

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 / co*king 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.

N

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

O

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.

P

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

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

R

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

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

T

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

U

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.

V

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.

W

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

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