Taker: The buyer of an option contract.

T-Bond: See Treasury Bond.

Technical Analysis: An approach to forecasting commodity prices that examines patterns of price change, rates of change, and changes in volume of trading and open interest, without regard to underlying fundamental market factors. Technical analysis can work consistently only if the theory that price movements are a random walk is incorrect. See Fundamental Analysis.

Ted Spread: The difference between the price of the three-month U.S. Treasury bill futures contract and the price of the three-month Eurodollar time deposit futures contract with the same expiration month.

Tender: To give notice to the clearing organization of the intention to initiate delivery of the physical commodity in satisfaction of a short futures contract. Also see Retender.

Tenderable Grades: See Contract Grades.

Terminal Elevator: An elevator located at a point of greatest accumulation in the movement of agricultural products that stores the commodity or moves it to processors.

Terminal Market: Usually synonymous with commodity exchange or futures market, specifically in the United Kingdom.

Tick: Refers to a minimum change in price up or down. An up-tick means that the last trade was at a higher price than the one preceding it. A down-tick means that the last price was lower than the one preceding it. See Minimum Price Fluctuation.

Time Decay: The tendency of an option to decline in value as the expiration date approaches, especially if the price of the underlying instrument is exhibiting low volatility. See Time Value.

Time-of-Day Order: This is an order that is to be executed at a given minute in the session. For example, "Sell 10 March corn at 12:30 p.m."

Time Spread: The selling of a nearby option and buying of a more deferred option with the same strike price. Also called Horizontal Spread.

Time Value: That portion of an option's premium that exceeds the intrinsic value. The time value of an option reflects the probability that the option will move into-the-money. Therefore, the longer the time remaining until expiration of the option, the greater its time value. Also called Extrinsic Value.

Total Return Swap: A type of credit derivative in which one counterparty receives the total return (interest payments and any capital gains or losses) from a specified reference asset and the other counterparty receives a specified fixed or floating cash flow that is not related to the creditworthiness of the reference asset. Also called total rate of return swap, or TR swap.

To-Arrive Contract: A transaction providing for subsequent delivery within a stipulated time limit of a specific grade of a commodity.

Trade Option: A commodity option transaction in which the purchaser is reasonably believed by the writer to be engaged in business involving use of that commodity or a related commodity.

Trader: (1) A merchant involved in cash commodities; (2) a professional speculator who trades for his own account and who typically holds exchange trading privileges.

Trading Ahead: See Front Running.

Trading Arcade: A facility, often operated by a clearing member that clears trades for locals, where e-locals who trade for their own account can gather to trade on an electronic trading facility (especially if the exchange is all-electronic and there is no pit or ring).

Trading Facility: A person or group of persons that provides a physical or electronic facility or system in which multiple participants have the ability to execute or trade agreements, contracts, or transactions by accepting bids and offers made by other participants in the facility or system. See Many-to-Many.

Trading Floor: A physical trading facility where traders make bids and offers via open outcry or the specialist system.

Transaction: The entry or liquidation of a trade.

Transfer Trades: Entries made upon the books of futures commission merchants for the purpose of: (1) transferring existing trades from one account to another within the same firm where no change in ownership is involved; (2) transferring existing trades from the books of one FCM to the books of another FCM where no change in ownership is involved. Also called Ex-Pit transactions.

Transferable Option (or Contract): A contract that permits a position in the option market to be offset by a transaction on the opposite side of the market in the same contract.

Transfer Notice: A term used on some exchanges to describe a notice of delivery. See Retender.

Treasury Bills (or T-Bills): Short-term zero coupon U.S. government obligations, generally issued with various maturities of up to one year.

Treasury Bonds (or T-Bonds): Long-term (more than ten years) obligations of the U.S. government that pay interest semiannually until they mature, at which time the principal and the final interest payment is paid to the investor.

Treasury Notes: Same as Treasury bonds except that Treasury notes are medium-term (more than one year but not more than ten years).

Trend: The general direction, either upward or downward, in which prices have been moving.

Trendline: In charting, a line drawn across the bottom or top of a price chart indicating the direction or trend of price movement. If up, the trendline is called bullish; if down, it is called bearish.


Unable: All orders not filled by the end of a trading day are deemed “unable” and void, unless they are designated GTC (Good Until Canceled) or open.

Uncovered Option: See Naked Option.

Underlying Commodity: The cash commodity underlying a futures contract. Also, the commodity or futures contract on which a commodity option is based, and which must be accepted or delivered if the option is exercised.

Variable Price Limit: A price limit schedule, determined by an exchange, that permits variations above or below the normally allowable price movement for any one trading day.

Variation Margin: Payment made on a daily or intraday basis by a clearing member to the clearing organization based on adverse price movement in positions carried by the clearing member, calculated separately for customer and proprietary positions.

Vault Receipt: A document indicating ownership of a commodity stored in a bank or other depository and frequently used as a delivery instrument in precious metal futures contracts.

Vega: Coefficient measuring the sensitivity of an option value to a change in volatility.

Vertical Spread: Any of several types of option spread involving the simultaneous purchase and sale of options of the same class and expiration date but different strike prices, including bull vertical spreads, bear vertical spreads, back spreads, and front spreads. See Horizontal Spread and Diagonal Spread.

Visible Supply: Usually refers to supplies of a commodity in licensed warehouses. Often includes floats and all other supplies "in sight" in producing areas. See Invisible Supply.

Volatility: A statistical measurement of the rate of price change of a futures contract, security, or other instrument underlying an option. See Historical Volatility, Implied Volatility.

Volatility Quote Trading: Refers to the quoting of bids and offers on option contracts in terms of their implied volatility rather than as prices.

Volatility Spread: A delta-neutral option spread designed to speculate on changes in the volatility of the market rather than the direction of the market.

Volatility Trading: Strategies designed to speculate on changes in the volatility of the market rather than the direction of the market.

Volume of Trade: The number of contracts traded during a specified period of time. It may be quoted as the number of contracts traded or as the total of physical units, such as bales or bushels, pounds or dozens.


Warehouse Receipt: A document certifying possession of a commodity in a licensed warehouse that is recognized for delivery purposes by an exchange.

Warrant: An issuer-based product that gives the buyer the right, but not the obligation, to buy (in the case of a call) or to sell (in the case of a put) a stock or a commodity at a set price during a specified period.

Warrant or Warehouse Receipt for Metals: Certificate of physical deposit, which gives title to physical metal in an exchange-approved warehouse.

Wash Sale: See Wash Trading.

Wash Trading: Entering into, or purporting to enter into, transactions to give the appearance that purchases and sales have been made, without incurring market risk or changing the trader's market position. The Commodity Exchange Act prohibits wash trading. Also called Round Trip Trading, Wash Sales.

Weak Hands: When used in connection with delivery of commodities on futures contracts, the term usually means that the party probably does not intend to retain ownership of the commodity; when used in connection with futures positions, the term usually means positions held by small speculators.

Weather Derivative: A derivative whose payoff is based on a specified weather event, for example, the average temperature in Chicago in January. Such a derivative can be used to hedge risks related to the demand for heating fuel or electricity.

Wild Card Option: Refers to a provision of any physical delivery Treasury bond or Treasury notes futures contract that permits shorts to wait until as late as 8:00 p.m. on any notice day to announce their intention to deliver at invoice prices that are fixed at 2:00 p.m., the close of futures trading, on that day.

Winter Wheat: Wheat that is planted in the fall, lies dormant during the winter, and is harvested beginning about May of the next year.

Writer: The issuer, grantor, or seller of an option contract.

Yield Curve: A graphic representation of market yield for a fixed income security plotted against the maturity of the security. The yield curve is positive when long-term rates are higher than short-term rates.

Yield to Maturity: The rate of return an investor receives if a fixed income security is held to maturity.

Zero Coupon: Refers to a debt instrument that does not make coupon payments, but, rather, is issued at a discount to par and redeemed at par at maturity.

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