• Arbitrage
  • Ask
The simultaneous purchase and sale of similar commodities in different exchanges or in different contracts of the same commodity in one exchange to take advantage of a price discrepancy. 
Sometimes referred to as the “offer”. This is the price where someone is willing to sell an option or futures contract.   


  • Basis
  • Bear Market
  • Bid Price
  • Bull Market
The difference between the cash price of a commodity and its futures price. When basis is positive, the spot cash price is more expensive than the futures price. 
A market in which prices are declining. 
An offer to buy a specific quantity of a commodity at a stated price or the price that the market participants are willing to pay. 
A market in which prices are rising. 


  • Carry
  • Clearing House
  • Close Out Date
  • Closing Out a Contract
  • Contract
  • Convergence
Sometimes referred to as “cost of carry”. This is the cost it takes to hold a commodity until delivery. It is a combination of costs including interest, storage and insurance.

The clearing house is a regulated legal entity and “substitutes” itself between every buyer and every seller. The clearing house becomes the buyer to every seller and the seller to every buyer. All initial margin is deposited with the clearing house for safe keeping.

Close out date is the date at which the futures contract expire. After close out date the future contract no longer exists.

  • A futures contract is required to have a close out date because it is an instrument with a future date and therefore the time value of money is important to calculate. Interest is therefore required to be calculated into the price of the futures contract.
  • As all futures contracts are standardised, this date is set and known in advance. All standardised contracts have the identical close out date. At close out the price of the future always equals the price of the underlying asset. All futures converge to the underling asset on close out date.
  • If a trader wishes to maintain his futures position he must then roll-over his contract to the following close out date.

A trader may close out an open position in a futures contract at any time during the life of the contract. To close out an open futures position the trader simply executes a trade in the equal quantity, but opposite direction to the open position.  If a trader is long a contract he then simply sells a contract. If a trader is short a contract he then buys a contract and his position is “squared“ out. i.e he has no position in the market  - and no remaining obligations.

  • In South Africa equities close out takes place every three months. On the third Thursday of March, June; September and December.
  • Currency and interest rate futures close out every three months on the second business day preceding the third Wednesday of the months of March, June, September and December.
  • An active market for rolling over contracts usually exists as close out date becomes imminent.

A contract is the mechanism through which an investor will access the futures market. A contract is the instrument that is either bought or sold on a futures exchange.


A contract gives the trader the exposure to the underlying market he or she wishes to participate in.  Future contracts on an exchange are standardised. Contracts are identical and thereby interchangeable with one another.


The minimum size a trader can participate in is one contract. Contracts may represent different underlying assets. The details of each standardised contract are published by the exchange. Contracts may be on indices, individual equities, commodities, currencies, interest rates and agricultural commodities. 

The tendency for prices of physical commodities and futures to approach one another, usually during the delivery month.  



  • Default
  • Derivative

The failure to perform on a futures contract as required by exchange rules, such as a failure to meet a margin call or to make or take delivery.


A financial instrument, traded on or off the exchange, the price of which is directly dependent upon the value of one or more underlying securities, equity indices, debt instruments, or any agreed upon pricing index or arrangement. 




  • Fundamental Analysis
  • Futures

An approach to market forecasting that emphasises the analysis of factors affecting supply and demand (opposite of technical analysis).

A futures contract, is the obligation to buy or sell a standardised quantity of an underlying asset, at a specified price determined now, for a specified date in the future.

  • The underlying assets can be equities, commodities or currencies.
  • Futures resemble forward contracts, but there are two fundamental characteristics that distinguish them from forwards.
  1. Futures are standardised contracts and
  2. They have to be traded on a regulated, formal exchange.
  • Every contract has to be standardised in terms of its size, the method of price quotation, the delivery date and the contract expiry months.


  • Gearing

Refers to the ratio between the deposited amount of cash relative to the exposure to the underlying asset. 

Gearing is sometimes also calculated on the amount of cash utilised for “initial margin” relative to the exposure to the underlying market. In an investment portfolio it is the ratio of the funds deposited for investment relative to the market exposure.

A gearing of 1:3 means that for every R 100.00 invested, an exposure of R 300.00 is obtained in the market. The higher the gearing the greater the exposure to the market, the higher the reward and the higher the commensurate risk.





  • Implied Interest
  • Initial Margin

All futures contracts have a forward date. In any instrument with a forward date, time value of money plays a role. As a future is not settled on trade date, funding interest is required to be priced into the future.

  • Therefore futures prices include the expected price of interest, plus or minus any incidental accruals or costs.
  • The difference between the spot price and the futures prices includes the funding rate. The interest rate is therefore implied in the futures price. The implied interest rate can be calculated from the futures price.

Initial margin is commonly referred to as a “good faith deposit”. It is required to be deposited by both the buyer and the seller. Initial margin is one of the primary risk mitigation methods that the clearing house uses to guarantee performance of each contract.

  • Initial margin can be viewed as potential loss, paid up front, prior to it being realised.
  • Initial margin is determined by the clearing house. Initial margin is based on historic volatility of the underlying instrument and may vary from anywhere between five and twenty percent of the value of the underlying asset. All initial margin is deposited with the clearing house (SAFCOM in South Africa), and is interest bearing. 


  • JSE

The Johannesburg Stock Exchange. The JSE owns and operates the South African Futures Exchange (SAFEX).  Intrepid Capital is a licensed member of the JSE.





  • Limit Order
  • Liquid
  • Long

An order given to a broker by a customer which has some restrictions upon its execution. Such as price or time.  

A characteristic of a security or commodity market with enough units outstanding to allow large transactions without a substantial change in price. Institutional investors are inclined to seek out liquid investments so that their trading activity will not influence the market price. 

If the investor believes the share price will go up in future, he buys a contract, also known as going long.



  • Margin Call
  • Market Order
  • Mark-to-Market

Demand for additional funds or equivalent because of adverse price movements or some other contingency.

An order for immediate execution at the best available price. 

The practice of crediting or debiting a trader's account based on the daily closing prices of the futures contracts he is long or short.

Each contract is marked to market on a daily basis, meaning the contract is valued at the end of each day. Profits or losses are settled, based on this valuation, on a daily basis through actual cash flow.





  • Offer
  • Open Interest
  • Open Order
  • Option Contract

Offer / Ask / Sell. An offer to sell a specific quantity of a commodity at a stated price. (Opposite of a bid.)

The total number of futures or options that have not been closed or delivered upon. A market with historically high open interest can sometimes indicate a near term top or bottom on the horizon.  

An order that remains good until filled, canceled, or eliminated. See “Good-‘till-canceled”.  This is not available in the derivative markets

A contract that gives the bearer the right, but not the obligation, to be long or short a futures contract at a specified price within a specified time period. The specified price is called the strike price. The futures contract that the long or short may establish by exercising the option is referred to as the underlying futures contract.



  • Position
  • Price Discovery
A commitment, either long or short, in the market.
The process of determining the price level of a commodity based on supply and demand factors.  




  • Roll
  • Rolling Positions Over
The simultaneous exit and entry of a position in different contract months. A roll takes place when a trader exit and enter positions in the same commodity in the new front month to avoid taking delivery.

If a trader has a position in a futures contract and wants to keep the exposure post the contract close out, he/she must roll the position over. This entails reversing the existing contract by trading an equal but opposite contract and simultaneously opening a contract in the following contract month.

  • For example, if a trader was long one contract in the March month; he would sell the March contract and simultaneously buy the June contract. If a trader was short the March contract, he would buy the March contract and sell the June contract. In this manner the trader maintains his open position in the market. He/she may exit that position at any time.


  • Settlement
  • Short
  • Speculator
  • Spot
  • Spot Market
  • Spread

The South African Future Exchange, (SAFEX), established in 1987 in Johannesburg. SAFEX is licensed and regulated by the Financial Services Board (FSB) of South Africa. SAFEX  trades Equity, Currency, commodities and interest rate futures.

SAFEX operates an electronic central order-book, on which all futures trades are matched. In order to trade on SAFEX a client is required to become a client of a regulated member of SAFEX.

Intrepid Capital is a regulated member of SAFEX. SAFEX is 100% owned by the Johannesburg Stock Exchange. (JSE.)

Every futures contract has to be settled on expiry of the futures contract. Two settlement methods exist:

  1. Physical settlement: On expiry of the futures contract the open position holders are required to settle the open positions. In physical settlement, transfer of the underlying asset has to take place. If a futures trader is long a contract on expiry then he/she has the obligation to purchase the underlying asset. The long futures holder must take physical delivery of the asset and remunerate the seller with full value for the asset. Likewise if a trader is short a futures contract at close out, he/she must make physical delivery of the underlying asset. He/she will in return receive full value consideration for the asset.   
  2. Cash settlement: Cash settlement of a futures contract means that on expiry of the futures contract, no physical delivery takes place between the long and short holder. (Buyer and Seller.) On cash delivered contracts, the cash differential between the traded price of the futures contract and the final close out value flows between the buyer and the seller. The cash amount represents the value differential should physical settlement of the underlying asset have taken place. In order to cash settle a futures contract a discernible, and reliable underlying asset price needs to be present.

If the investor believes the share price will go down in future, he sells a contract, also known as going short.

One who tries to profit from buying and selling future contracts by anticipating future price movements. 

Usually refers to a cash market price for a physical commodity that is available for immediate delivery.  

Also called the cash market or the underlying market. Purchasing an instrument on the cash market usually means taking  immediate physical delivery and paying full consideration for the asset.

Usually refers to a simultaneous purchase of a contract and sale of another. Spreads can be transacted between contracts with the same underlying commodity but different months; the same month but different commodities; or the same month and commodity but traded on different exchanges.



  • Technical Analysis (Charting)

In price forecasting, the use of charts and other devices to analyse price-change patterns and changes in volume and open interest to predict future market trends (opposite of fundamental analysis).



  • Variation Margin
  • Volatility

Variation margin is simply another name for “profit and loss”. Variation margin refers to the profit or loss that is incurred daily on an open position, based on the mark-to-market changes. Profit gets paid into a current account and losses must be funded from the account. Sufficient funds must always be available in the current account to fund daily movements.

A measurement of the change in price over a given time period. 


  • Zero-Sum Game
Type of game when one player gains only at the expense of another player.