Limit Up

AAA

DEFINITION of 'Limit Up'

The maximum amount by which the price of a commodity futures contract may advance in one trading day. Limit up refers to when a futures contract will have a maximum threshold in order to ensure that large unexpected or potentially catastrophic events do not push a contract's price into levels of irrational valuation based upon investor panic or manipulation.

INVESTOPEDIA EXPLAINS 'Limit Up'

Think of a limit up as a sort of circuit breaker on a futures contract's price movements. Some markets close trading of these contracts when the limit up is reached; others allow trading to resume if the price moves away from the day's limit. If there is a major event affecting the market's sentiment toward a particular commodity, it may take several trading days before the contract price fully reflects this change. On each trading day, the trading limit will be reached before the market's equilibrium contract price is met.

RELATED TERMS
  1. Limit Move

    The largest amount of change that the price of a commodity futures ...
  2. Commodity

    1. A basic good used in commerce that is interchangeable with ...
  3. Futures Market

    An auction market in which participants buy and sell commodity/future ...
  4. Futures

    A financial contract obligating the buyer to purchase an asset ...
  5. Lock Limit

    Commonly associated with the futures market, a lock limit occurs ...
  6. Derivative

    A security whose price is dependent upon or derived from one ...
Related Articles
  1. Forex Strategies

    Canada's Commodity Currency: Oil And The Loonie

    When the price of oil goes up, don't worry about how much gas is going to cost - get even by making a play on the Canadian dollar.
  2. Options & Futures

    Trading The Soft Commodity Markets

    Learn the contract specifications for a few of the most heavily traded commodities.
  3. Options & Futures

    Hotshots Needed For Commodity Trading Advisor Positions

    If you can multi-task and you enjoy a good challenge, this lucrative career could be a perfect fit.
  4. Personal Finance

    Commodity Prices Are Pinching Consumers

    Prices of commodities - cotton, wheat, coffee, etc. - have recently spiked. Learn how that affects consumers.
  5. Insurance

    Futures Fundamentals

    For those who are new to futures but want a solid understanding of them, this tutorial explains what futures contracts are, how they work and why investors use them.
  6. Active Trading

    Timing Trades With The Commodity Channel Index

    We introduce how to use this oscillator, which identifies cyclical trends, for determining buy and sell points.
  7. VelocityShares 3x Long Crude Oil ETN has the potential for huge returns, but there are several reasons why you might want to steer clear for now.
    Mutual Funds & ETFs

    A Leveraged Oil ETN For The Future (Just Not Now)

    VelocityShares 3x Long Crude Oil ETN has the potential for huge returns, but there are several reasons why you might want to steer clear for now.
  8. Options & Futures

    What are the differences between divergence and convergence?

    Find out what technical analysts mean when they talk about a market experiencing divergence or convergence and how they affect trading strategies.
  9. Options & Futures

    Futures Quotes Explained The "Easy" Way

    If there’s a security whose price fluctuates, there can theoretically be a futures marketplace for it.
  10. Chart Advisor

    Commodities Set Up For A Continued Move Lower

    Commodities have been suffering since late summer, and unfortunately for the bulls it doesn’t appear that the situation is about to change anytime soon.

You May Also Like

Hot Definitions
  1. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  2. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  3. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  4. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  5. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
  6. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
Trading Center