Trading glossary

A - H

Active Delivery Month:  The quoted delivery month on the most frequently traded futures contract on a futures exchange.  Spot prices will be derived from the contract price for the active delivery month.

Ask:  Lowest price at which a dealer is willing to sell a commodity or security (alternative term to offer).

Assay:  Test of precious metal purity or fineness.

Assay mark:  The stamp placed by an assayer on a precious metal product as a guarantee of its fineness.

Assay office:  An organisation setting and monitoring the fineness of precious metals in a particular country

Backwardation:  Market scenario when the spot price of a commodity is higher than the forward price.  In the precious metal  markets this is the result of the monetary interest rate being less than the precious metal lease rate.

Base Price:  See Johnson Matthey Base Price.

Bear:  A dealer who expects the value of a commodity, security, currency or market sector to fall.

Bear market:  A market in which prices are falling or are expected to fall.  Dealers are more likely to be sellers than buyers in a bear market.

Bear position:  A position taken by a dealer in a bear market, involving selling commodities, securities or currency without owning them.  See also short selling.

Bid Price:  The highest price at which a dealer is willing to buy commodities, securities or currency.

Bid - Offer/Ask spread:  the difference between the price at which a dealer is willing to buy (Bid) and sell (Offer/Ask) a commodity, security or currency.  The Bid will be the lower of the two prices and the offer price the higher.

Bull:  An investor who expects the value of a commodity, security, currency or market sector to rise.

Bull position:  When a dealer buys a commodity, security or currency without making a corresponding sale.  See also long position.

Bull market:  A market in which prices are rising or are expected to rise. In a bull market it is more likely that dealers will be buyers than sellers.

Bullion:  Precious metals such as platinum, palladium, gold and silver in bulk form, i.e. in the form of bars, ingots  or plate rather than in coin, grain or sponge.

Buying forward:  Buying commodities, securities or currency at a specified price for delivery at a future date.

Closing Price:  The price at the end of the day's trading on a commodity market or stock exchange.

Commodity:  A physical substance traded on a commodity market.  Examples of hard commodities include platinum, copper and oil, whereas soft commodities include grain, cotton and rubber.

Commodity Futures Trading Commission (CFTC):  The United States Government's regulatory body for US future markets.

Contango: Market scenario when the forward price of a commodity is higher than the spot price.  In the precious metal markets this is the result of monetary interest rates being greater than precious metal lease rates.

Dealer:  An individual or organisation that buys and sells products.

Delivery date:  The day in the month that commodities on a futures contract have to be delivered.

Delivery month:  The month in which commodities on a futures contract have to be delivered. See Active Delivery Month.

Fineness:  The proportion of precious metal in a product or alloy typically expressed as parts in 1,000.

Forward price:  The fixed price at which a specified amount of a commodity,  currency or security is to be delivered on a fixed date in the future.

Futures contract:  An agreement to buy or sell a fixed quantity of a specified commodity, currency or security for delivery at a fixed date in the future at a fixed price.  Futures contracts are standardised agreements traded on futures exchanges.

Grain:   Granules of metal usually derived from melting sponge and pouring the molten metal into water.

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I - Q

Illiquidity: Illiquid markets are typified by low levels of trading, with little underlying stock readily available.  Buying and selling can cause exaggerated price fluctuations.

Ingot:  A form of metal bar, often a preferred form for delivery.  Derived from casting into a simple shape for hot working or remelting.

International Precious Metals Institute (IPMI):  An international association of producers, refiners, fabricators, scientists, users, financial institutions, merchants, private and public sector groups, and the general precious metals community formed to provide a forum for the exchange of information and technology.  

Johnson Matthey Base Price:  The Johnson Matthey Base Price is the company's quoted selling price for platinum group metals set by our trading desks in the USA, Hong Kong and London, based on market offer prices.  The price is for metal in sponge form, ex-JM refinery, and is normally available to our customers for several hours following the setting - an advantage not offered by any other price setting or fixing.  The Johnson Matthey Base Price is set 5 times a day Monday to Friday; for the Asia time zone, at 08:30 and 14:00 Hong Kong time; for the Europe time zone, at 08:00 London time and for the USA time zone, at 09:30 and 15:00 Eastern Standard Time. If markets move sharply higher or lower between these times, prices may be adjusted accordingly. Johnson Matthey Base prices are also published in Platt's Metals Week, Metal Bulletin and American Metals Market.  

Liquidity:  Liquid markets are typified by high levels of trading, with underlying stock readily available and buying and selling causing minimal price fluctuations. 

Lease rate:  See precious metal lease rate.

Location swap:  The dealer practice of exchanging a quantity of metal in one location for an equal quantity of metal in an alternative location held by another dealer.  Location swaps help to reduce shipping costs and can reduce manufacturing lead times.

London Platinum & Palladium Market (LPPM) Fixings:  The London Platinum & Palladium Market (LPPM) Fixing (Pt and Pd only) - sometimes referred to as the London Fix - is a snapshot of the price taken each day at 09:45 (am fix) and 14:00 (pm fix) London time. It serves as a reference point and is published widely. The fix is a bid price loco Zurich plate - a price which the members of the LPPM would have been prepared to pay for platinum and palladium in the form of plate or ingot, deposited in a Zurich vault. Customers can instruct dealers to purchase metal at the fix price prior to the fix but they will incur charges for brokerage, conversion and transportation. Again payment is generally due within two days and of course buyers do not have the benefit of knowing what the price is before they purchase. Prices have been known to move considerably between fixes!

Long position:  (i) Position on a futures exchange where a dealer is a net holder of contracts, i.e. contracts bought outweighs contracts sold. (ii) The position of owning a commodity or security.

Long liquidation:  Reducing the amount of a commodity, security or contracts held.

New York Mercantile Exchange (NYMEX):  The largest physical commodity exchange in the world.  Futures contracts are traded on the Exchange in an anonymous, open, and competitive auction, based on open outcry.  The exchange acts as the counterparty on every trade, clearing (matching) orders amongst the members.  The Exchange's platinum contract is the longest continuously traded precious metals contract in the world's marketplace, first traded in 1956.

Offer price:  Lowest price at which a dealer is willing to sell a commodity or security (alternative term to ask).

Open interest: The number of open or outstanding contracts on a futures exchange for which the holders are still obligated to the futures exchange concerned. No offsetting sale or purchase has yet been made against it. Open interest is used as an indicator of the level of commercial activity in a particular futures contract.

Open position:  A long or short trading position that is not yet closed.  In either case the dealer remains vulnerable to fluctuations until the position is closed.

Plate:  bullion form of metal.

Platinum Group Elements/Platinum Group Metals (pge/pgm): The six metallic elements platinum, palladium, rhodium, ruthenium, iridium and osmium.

Precious Metals:  The six platinum group metals, gold and silver.

Precious Metal lease rate:  An interest rate charged for borrowing precious metal.

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R - Z

Rally:  A considerable rise in the value of a commodity, security or market after a decline.

Short selling:  (i) A strategy in which a speculator sells a commodity or security that he or she does not own in order to profit from a falling market.  The speculator will borrow the commodity or security from a third party and then immediately sell on to the buyer. At a later date, the speculator must make good on the loan by buying back the commodity or security from the market to close the position.  If the value of the commodity or security has fallen during this period the speculator's profit will be the difference between his original sale price and the buyback price (minus interest charges and fees).  However, if the market moves against the speculator there is the potential for limitless losses. (ii) Selling a futures contract.

Short covering:  The act of buying back a commodity, security or opposing futures contract to close out a short position.

Short position:  Position resulting from a short selling strategy.

Sponge:  A powdered form of a pgm.  Commonly, the form required for manufacture of many pgm-based chemicals and catalysts.

Spot market:  A market in which commodities are bought and sold for cash and immediate delivery.

Spot month:  The nearest delivery month on a futures contract.

Spot price:  The delivery price of a commodity being traded on a spot market.

Spot purchasing:  Purchasing a commodity in the spot market for immediate payment and delivery (typically two working days).

Spread:  The difference between the current bid and offer (ask) prices for a commodity or security.

Square position:  A trading condition in which a dealer has neither a long position nor a short position.

Tokyo Commodity Exchange (TOCOM):  The Japanese futures exchange, which has offered platinum contracts since 1984 and palladium contracts since 1992.  Unlike NYMEX, trading of these contracts is conducted electronically and not by open outcry.  TOCOM trading also differs in that the exchange does not act as the counterparty for all members through the clearing process.

Trade date:   The date on which a trade is executed for a specified value date.

Trading volume:  (i)The total number of contracts traded in a set period of time on a futures exchange. (ii) The amount of a physical commodity, security or currency traded in a particular market or during a set period of time.

Troy ounce:  The traditional unit of weight for precious metals. One troy ounce = 31.1034807grams; 32.150746568 troy oz = 1 kilogram. 

Value date:  The date on which a commodity is delivered to an account and usually when payment is due (unless other payment date arrangements are made between the relevant parties).

Volume: see trading volume.

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