M
Market Maker: A dealer who makes a market, i.e. quotes bid and offer prices to counterparties and is prepared to deal at those prices.
Market Order: An order to buy or sell a futures contract at whatever price is obtainable at the time it is entered.
Mark-to-Market: Part of the daily cash flow system used by the clearing corporation for open positions in futures contracts to maintain a minimum level of margin equity by calculating the gain or loss in each contract position resulting from changes in the price of the futures contracts at the end of each trading session. These amounts are collected/paid to the brokers losing/gaining money. The open positions are carried forward at the latest closing price.
Metric ton: In the metric system, the unit of weight equal to 1,000 kilograms or 32,150.7 troy ounces. A metric ton is equivalent to 2,204.61 pounds.
Minimum Price Fluctuation (Minimum Tick): Smallest increment of price movement possible in trading a given contract.
Minimum Tick: See Minimum Price Fluctuation.
N
Naked Option: The sale of a call or put option without holding an equal and opposite position in the underlying instrument.
Net Position: The difference between the open long contracts and the open short contracts held by a trader in any one commodity.
O
Offer: Indicates a willingness to sell a securities/derivatives contract at a given price. (See bid.)
Option assignment: The random selection of an option writer to take a futures position when an option is exercised.
Option Class: All options of the same type - calls or puts -listed on the same underlying instrument.
Option Series: All options of the same class having the same exercise/ strike price and expiration date.
Option Premium: The price paid for an option is known as the premium; the strike price is the pre-determined price at which an option may be exercised.
Option: A contract granting the right, but not an obligation, to buy (a call option) or sell (a put option) a commodity or financial security at a specified price (strike price) on a specified date in the future.
Open Interest: The total number of futures contracts long or short in a delivery month or market that has been entered into and not yet liquidated by an offsetting transaction or fulfilled by delivery. Also called open contracts or open commitments.
Open Order (or Orders): An order that remains in force until it is canceled or until the futures contracts expire. See Good ‘Till Canceled and Good This Week orders.
Option Writer: The person who originates an option contract by promising to perform a certain obligation in return for the price or premium of the option. Also known as option grantor or option seller.
Option Pricing Model: A mathematical model used to calculate the theoretical value of an option. Inputs to option pricing models typically include the price of the underlying instrument, the option strike price, the time remaining till the expiration date, the volatility of the underlying instrument, and the risk-free interest rate (e.g., the Treasury bill interest rate). Examples of option pricing models include Black-Scholes and Cox-Ross-Rubinstein.
Order: An instruction by a customer to a broker/trader to buy or sell at certain price or market price. The order remains valid until executed or cancelled by the customer/exchange.
Out-Of-The-Money: A term used to describe an option that has no intrinsic value.