Limit Move

DEFINITION of 'Limit Move'

The largest amount of change that the price of a commodity futures contract is allowed to undergo. It is not possible to trade a futures contract at a price either above or below the futures contract price after a limit move. The limit price is set by the exchange on which the futures contract trades.

BREAKING DOWN 'Limit Move'

For example, assume that a wheat futures contract is selling for $3.50, and has a limit of $4. If a severe drought drastically reduces the supply or wheat, the futures price will rise to the $4 limit level, but no higher. This is referred to as a lock limit.

Limit moves are set in place to limit the risk (volatility) in futures price movements.

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