An American Income Trust is a type of royalty trust. A royalty trust is a type of corporation created to act as the owner of the mineral rights to wells, mines and similar properties. It exists only to pass income generated from the sale of the property's assets (gold, oil, etc.) to shareholders.
Also called a far month contract, a back month contract is a futures contract that has an expiration date that is the farthest beyond the next approaching expiration date (called the “front month contract). For example, let’s assume that John Doe wants to buy orange juice futures.
Back months are the expiration dates of futures contracts that fall furthest from the nearest expiration date. For example, let’s assume that John Doe wants to buy orange juice futures.
Backpricing is a method for pricing commodities, whereby the buyer and seller agree to buy/sell a commodity but set the price at a later date. For example, let's assume that John wants to buy some corn.
Backwardation describes a downward sloping forward curve in a commodity market.This means that as the price of a commodity for future delivery is lower than the spot price -- the price of a commodity today. Backwardation starts when the cost of carry – i.e., storage, financing and convenience fees, exceeds the difference between the forward and spot price. This situation usually arises when a commodity that normally experiences contango faces a positive demand or negative supply shock.
A barrel of oil equivalent (or BOE) is a unit measure of unused energy resources.Expressed frequently in the financial statements of energy companies, BOEs are defined by the U.S.
The call rule is a rule that requires the official opening price of a cash commodity to be near the previous day's closing price of that commodity. For example, let's assume that on June 1, the price of gold is $1,000 an ounce at the end of the trading day.
A Canadian income trust is a type of investment trust that holds stable, income-producing assets and pays out at least 90% of its net cash flows to its unitholders (shareholders are known as unitholders in trust lingo).These trusts usually hold assets such as oil, coal, natural gas, or other natural resources, which generally have a steady demand and therefore steady revenues. Canadian income trusts usually have no management or employees but are instead run by financial institutions.
The Chicago Mercantile Exchange (CME) is a commodities futures and options exchange.Several dozen types of contracts trade on the CME, and the exchange facilitates hundreds of millions of these trades each year.
Commodification, also known as "commoditization", refers to a good or service becoming indistinguishable from similar products. To be considered a commodity, an item must satisfy three conditions: 1) it must be standardized and, for agricultural and industrial commodities, in a "raw" state; 2) it must be usable upon delivery; and 3) its price must vary enough to justify creating a market for it.
A commodity is any homogenous good traded in bulk on an exchange. Grain, precious metals, electricity, oil, beef, orange juice, and natural gas are traditional examples of commodities, but foreign currencies, emissions credits, bandwidth, and certain financial instruments are also part of today's commodity markets.According to the New York Mercantile Exchange, "A market will flourish for almost any commodity as long as there is an active pool of buyers and sellers." To be considered a commodity, an item must satisfy three conditions: -- It must be standardized (for agricultural and industrial commodities it must be in a "raw" state).
The Commodity Futures Trading Commission (CFTC), was established in 1974 as an independent government agency with the purpose of regulating commodity futures and options markets. The Commodity Futures Trading Commission was established by a government mandate in 1974 to enforce rules stated in the Commodities Exchange Act.
A commodity index is an index of the prices of items such as wheat, corn, soybeans, coffee, sugar, cocoa, hogs, cotton, cattle, oil, natural gas, aluminum, copper, lead, nickel, zinc, gold and silver. The Goldman Sachs Commodity Index (GSCI) is one of the most popular commodities indexes.
A commodity market is a place where buyers and sellers can trade any homogenous good in bulk.Grain, precious metals, electricity, oil, beef, orange juice and natural gas are traditional examples of commodities, but foreign currencies, emissions credits, bandwidth, and certain financial instruments are also part of today's commodity markets.
Commodity parity price refers to the price of a commodity based on a single price or average of prices during a previous span of time. A commodity's parity price is a benchmark price against which its current price may be compared in order to gauge its purchasing power for producers.
The Commodity Research Bureau Index (CRB) tracks the general trend of the commodities markets. The CRB Index gauges the collective price trend of the commodities markets.
Contango occurs when the current futures price of an asset (as quoted in the futures market) is higher than the current spot price of the underlying asset. There is a relationship between the spot price of an asset (its price right now) and the expected spot price on the date when a derivative contract expires.
The e-CBOT is an automated trading platform for trading futures on the Chicago Board of Trade (CBOT). The CBOT is a commodities futures and commodities options exchange.
Fool's gold is a shiny mineral called pyrite which bears great resemblance to, and is often confused with, real gold. Actually an iron-based mineral, pyrite is known for being yellow and shiny and appearing no different from real gold.
Gold bugs are people who are fans of investing in gold. Gold is generally considered a safe haven against the ravages of inflation and volatile markets.
The AMEX Gold BUGS Index (also known as HUI) is one of two major gold indices that dominate the market.BUGS is an acronym for "Basket of Unhedged Gold Stocks." The index was introduced on March 15, 1996.
A gold bull is someone who believes the price of gold will go up. Gold bulls generally consider gold a "safe" hedge against inflation and even against volatile markets.Throughout history, gold has traditionally risen in value when things such as wars, the Great Depression, or high inflation have occurred.
A gold certificate is a piece of paper that entitles the bearer to a certain amount of actual gold. From 1863 to 1933, the U.S.
A gold fix occurs when the The London Gold Market Fixing Ltd.sets the price of gold.
A gold fund is an exchange-traded fund (ETF) or mutual fund that invests in gold. For example, let's assume that John wants to invest in gold.
A gold option gives the holder the right, but not the obligation, to purchase or sell a specific quantity of gold at a specified strike price on the option's expiration date. Options are derivative instruments, meaning that their prices are derived from the price of another security.
The Gold Reserve Act of 1934 nationalized gold and fixed the price of gold in terms of U.S.dollars.
The gold-silver ratio is measure of how many ounces of silver it takes to buy an ounce of gold. The formula for the gold-silver ratio is: Gold-Silver Ratio = Price of Gold per Ounce / Price of Silver per Ounce For example, let's assume that the price of gold is $1,500 an ounce today.
The Goldman Sachs Commodity Index (GSCI) is a commodities index now owned by Standard & Poor's. S&P acquired the index from Goldman Sachs on February 2, 2007 and renamed it the S&P GSCI.
Hard money is a broad term used in connection with currency and transfer payments. Hard money has two separate meanings.
The Federal Reserve Bank of New York provides, among other things, gold storage for foreign governments and central banks.This gold is in the form of bars, which allows the bank to weigh it, stack it, and move it easily.
A job lot is a commodities futures contract where the underlying commodity is denominated in smaller amounts than a regular futures contract. Commodity futures contracts are agreements between a buyer and a seller to deliver a specific amount of a commodity (for example, precious metals, oil, corn, etc.) on a future date at a predetermined price.
Joint supply is the simultaneous output of two or more products from a single process or material. Products that are generated in joint supply cannot be produced independently from one another.
The London Spot Fix occurs when the members of the London Gold Pool (five banks) have a conference call and set the price per ounce for several metals (gold, platinum, silver and palladium). To perform a fix, the members essentially determine where supply meets demand for all of the buy and sell orders that the banks have on hand.
A master limited partnership (MLP) is a publicly traded limited partnership.shares of ownership are referred to as units.
The New York Board of Trade (NYBOT), founded in 1870, is a physical commodity futures exchange located in New York City.The NYBOT trades options and futures on cotton, sugar, coffee, orange juice, and cocoa, as well as interest rates, market indexes, and currencies.
The New York Mercantile Exchange (NYMEX), founded in 1872, is the world's largest physical commodity futures exchange, headquartered in lower Manhattan.NYMEX handles trades worth billions of dollars in commodities that are bought and sold on the trading floor, as well as on overnight electronic trading computer systems for future delivery.
People who enjoy numismatics often have rare coins that can be quite valuable.But not all numismatics fans have to have money to keep collections.
An oil refinery is a factory that turns crude oil into marketable products such as gasoline, jet fuel, lubricants and heating oils. Refining oil is complicated, but generally the idea is to heat the crude oil, separate it out, and add things to the separated portions to formulate products.
Also called tar sands, oil sands are areas of the ground that contain a viscous form of oil called bitumen. Alberta, Canada, is famous for its oil sands, which are important sources of oil but require special extraction methods.
Operating netback is a measure used in the oil and gas industry to reflect the net profit on oil and gas after royalties, production, and transportation expenses. The formula for operating netback is: Operating Netback = Price - Royalties - Production - Transportation Let's assume that Company XYZ drills for oil in the Gulf of Mexico.For every barrel of oil it sells, it must pay $5 in royalties, $5 in production costs, and $10 in transportation costs.
Palladium is a metal used in manufacturing electronics and other items. Palladium is a rare metal that is silvery white.
Petrocurrency, also commonly referred to as "petrodollars," is cash -- usually U.S.dollars -- resulting from the sale of oil and deposited by oil exporters into foreign (usually American) banks.
Pork Bellies are a major commodity traded on the Chicago Mercantile Exchange. Pork bellies are a commodity of pork products traded as a futures contract on the Chicago Mercantile Exchange since 1961.
Price basing is a way to use the prices of futures contracts to determine the retail prices of commodities. Price basing happens all the time in the media when it comes to gasoline prices.
Price per flowing barrel is a measure of an oil and gas company's valuation as compared to the number of barrels of oil or gas it produces. The formula used to calculate a company's price per flowing barrel is: Price per Flowing Barrel = (Market Capitalization + Debt - Cash) / Barrels Produced per Day Let's assume oil company XYZ produces 50,000 barrels per day of oil per day and its market capitalization (shares outstanding x share price) is $45,000,000.
A reserve report is filed by companies in the oil and gas industry.It estimates remaining quantities of oil and gas (reserves) expected to be recovered from existing properties.
A royalty trust is a type of corporation created to act as the owner of the mineral rights to wells, mines and similar properties. It exists only to pass income generated from the sale of the property's assets (gold, oil, etc.) to shareholders.No income tax is paid at the corporate level as long as the bulk of income (at least 90%) is passed-through to shareholders in the form of distributions or dividends. Royalty trusts are most common in the U.S.
Shadow pricing is the practice of allotting a dollar-value to an abstract commodity for the purpose of cost-benefit analysis. Cost-benefit analysis takes into account abstract commodities (also called intangible assets) not normally purchased or sold in a marketplace.
Sour crude is a type of unrefined oil that contains sulfur. It is difficult to refine and usually fetches a lower price. Crude oil is considered sour when it has more than 0.5% sulfur.
Sweet crude is a type of yet-to-be refined oil which contains minimal amounts of impurities. Sweet crude oil meets standards for low levels of contaminants such as sulfur (below one percent).
Unconventional oil is crude oil produced by means other than a conventional oil well. Crude, unrefined oil stock is traditionally extracted from underground reservoirs through an oil well.
A vault receipt is a document that proves ownership of gold, silver or other precious metals stored elsewhere. Let's say John Doe purchases gold through a futures contract.
Wildcat drilling is the process of looking for oil and natural gas wells in non-typical areas. Drilling oil and gas wells can be a good opportunity for risk-tolerant investors, particularly if the field where the new well is to be drilled has consistently produced oil or gas or both in the past and is expected to continue.