IDIOT'S GUIDE TO FED2
FUTURES CONTRACTS
GLOSSARY
Futures introduces a whole new set of jargon for you to learn. Here's a glossary that explains exactly what they mean.
Long - a contract where you promise to buy the commodity at the given price. A good long contract is where the price is low - the value going up means profit to you.
Short - a contract where you promise to sell the commodity at the given price. A good short contract is where the price is high - the value going down means profit to you.
Cost - The price on the futures contract at the time you buy it.
Value - The current price on the futures contract, having factored in exchange movements and random events. This is adjusted hourly, every time the exchange settles up.
Margin - The money you pay to your broker when you take out a futures contract. Think of it as a float, or a deposit. Changes as the value changes.
Base price - The fixed price for a commodity, as shown on the table in the Trading section.
Exchange price - The price for a commodity on a specific exchange (somewhere between the buying and selling price).
Exchange event - A natural or man-made occurrence in the Solar System which either increases or decreases the stockpile, production or consumption for a particular commodity on one planet.
Futures price - The price on new futures contracts, as shown by 'DI FUTURES' in an exchange, which is recalculated every 5 or 10 minutes.
Settling Up - The process that each exchange does once an hour, where it adjusts the margin depending on how the futures price has changed.
Suspension - What happens to commodities if the cumulative changes exceed 5 groats either way during the hour before settling up. The price won't move any further and no further futures contracts in that commodity will be sold until the end of the hour.
Margin call - An instruction from your broker, telling you to pay 4,000 ig to top up your margin, should it fall below the minimum at settling up time.
Liquidate - Closing out, or selling, a futures contract to get back the margin from your broker.
