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 Down

    The maximum amount by which the price of a commodity futures ...
  2. Daily Trading Limit

    The maximum gain or loss on a derivative contract, such as options ...
  3. Limit Move

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

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

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

    A financial contract obligating the buyer to purchase an asset ...
Related Articles
  1. Canada's Commodity Currency: Oil And ...
    Forex Strategies

    Canada's Commodity Currency: Oil And ...

  2. Trading The Soft Commodity Markets
    Options & Futures

    Trading The Soft Commodity Markets

  3. Hotshots Needed For Commodity Trading ...
    Options & Futures

    Hotshots Needed For Commodity Trading ...

  4. Commodity Prices Are Pinching Consumers
    Personal Finance

    Commodity Prices Are Pinching Consumers

comments powered by Disqus
Hot Definitions
  1. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  2. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  3. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  4. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  5. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  6. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
Trading Center