Author Archives: Claudia Soria
Commodities Exchange
A commodities exchange is an institution, organization, or association that serves as a market for trading various commodities and derivatives products. Exchanges also serve as a clearing house for the transfer and settlement of the physical commodities underlying most futures … Continue reading
Delivery Date
The delivery date is the date when the actual commodity must be delivered after the futures contract has expired. Commodities futures contracts have typically two or more delivery dates per year. Delivery dates are different for each commodity.
Contract Expiration Date
It is the time and day in which a futures contract stops trading and the final settlement price is determined. For a market where a physical commodity must be exchanged, the exchange process will begin on the expiration date.
Backwardation
Backwardation is the scenario where the spot price of a commodity is higher than the futures price of the same commodity. This situation arises under abnormal conditions such as shortage of supply of a commodity in the short term.
Contango
Also referred as normal carry charge market, is the situation where the price of a commodity for future delivery is higher than the spot price, or a far future delivery price higher than a nearer future delivery price, due to … Continue reading
Cost to Carry
Costs associated with holding the physical commodity until the determined delivery date. These costs include storage and insurance of the commodity before it gets delivered. The price of a commodity in a cash market differs from the price of the … Continue reading
Arbitrage
Arbitrage is the practice of taking advantage of a price difference between two or more markets. It can yield a profit generated by the difference between the market prices. In commodity markets, if the difference in price between the futures … Continue reading
Commodity
A commodity is a product for which there is demand and which is sold without qualitative differentiation across a market. The term commodity generally refers to physical goods that constitute the building blocks of more complex products. Commodity prices are … Continue reading
Front Month
The front month is the nearest unexpired futures contract of a given commodity. When commodity prices are quoted, the price being quoted is the price of the front month of the commodity. The front month is also known as the … Continue reading
Spot Date
Spot date is the normal settlement date for a transaction done today. This kind of transaction is referred to as a spot transaction or simply spot. The spot date may be different for different types of financial transactions. A transaction … Continue reading