TERMINOLOGY

EDUCATION

Education is key to building trust. Here’s a breakdown of key financial terms and concepts to help our farming clients better understand topics like financial planning, investment strategies, and achieving their financial goals.

  • Futures

    An agreement to buy or sell a particular commodity at a predetermined price at a specified time in the future

  • Options

    An option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset (Wheat, Canola, Cattle, the Canadian Dollar, etc) at a specific price on or before a certain date. An option, just like a stock or bond, is a type of investment.

  • Call Option

     A call gives the holder the right to BUY at a certain price within a specific period of time. Buyers of calls hope that the asset will INCREASE before the option expires.

  • Put Option

     put gives the holder the right to SELL at a certain price within a specific period of time. Buyers of puts hope that the asset will DECREASE before the option expires.

  • Premium

    The cost you pay for your option.

  • Strike Price

    The level of protection you buy your option at.

  • Expiration date

    The last day that your option or futures contract is valid.

  • At-the-money

    An option is at-the-money (ATM) if the strike price is the same as the current price of the underlying asset.

  • Out-of-the-money

    Out of the money (OTM) is a term used to describe a call option with a strike price that is higher than the market price of the underlying asset, or a put option with a strike price that is lower than the market price of the underlying asset.

  • In-the-money

    An option is in-the-money if a CALL option's strike price is BELOW the MARKET PRICE of the underlying asset or that the strike price of a PUT option is ABOVE the MARKET PRICE of the underlying asset. 

  • Bullish

    Belief the market (or underlying asset) will INCREASE.

  • Bearish

    Belief the market (or underlying asset) will DECREASE.

  • Long

    Buying with the expectation the asset will INCREASE in value.

  • Short

    Selling with the expectation the asset will DECREASE in value.