Securities Terms and Definitions

Bear Spread (1) A strategy involving the simultaneous purchase and sale of options of the same class and expiration date, but different strike prices. In a bear spread, the option that is purchased has a lower delta than the option that is bought. For example, in a call bear spread, the purchased option has a higher exercise price than the option that is sold. Also called Bear Vertical Spread. (2) The simultaneous purchase and sale of two futures contracts in the same or related commodities with the intention of profiting from a decline in prices but at the same time limiting the potential loss if this expectation does not materialize. Exercise Price (Strike Price) The price, specified in the option contract, at which the underlying futures contract, security, or commodity will move from seller to buyer. Arbitrage A strategy involving the simultaneous purchase and sale of identical or equivalent commodity futures contracts or other instruments across two or more markets in order to benefit from a discrepancy in their price relationship. In a theoretical efficient market, there is a lack of opportunity for profitable arbitrage. See Spread. Equity As used on a trading account statement, refers to the residual dollar value of a futures or option trading account, assuming it was liquidated at current prices. Par Refers to the standard delivery point(s) and/or quality of a commodity that is deliverable on a futures contract at contract price. Buy (or Sell) On Opening To buy (or sell) at the beginning of a trading session within the open price range. Call An option contract giving the buyer the right but not the obligation to purchase a commodity or other asset or to enter into a long futures position Abandon To elect not to exercise or offset a long option position Butterfly Spread A three-legged option spread in which each leg has the same expiration date but different strike prices. For example, a butterfly spread in soybean call options might consist of one long call at a $5.50 strike price, two short calls at a $6.00 strike price, and one long call at a $6.50 strike price. Margin The amount of money or collateral deposited by a customer with his broker, by a broker with a clearing member, or by a clearing member with a clearing organization. The margin is not partial payment on a purchase.

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	Did You Know?
	Settlement Price: The daily price at which the clearing organization clears all trades Settlement Price: The daily price at which the clearing organization clears all trades and settles all accounts between clearing members of each contract month. Settlement prices are used to determine both margin calls and invoice prices for deliveries. The term also refers to a price established by the exchange to even up positions which may not be able to be liquidated in regular trading.