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. Commodity

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

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

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

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

    A security whose price is dependent upon or derived from one ...
  6. Limit Down

    The maximum amount by which the price of a commodity futures ...
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. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  2. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  3. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  4. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  5. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
  6. Earnings Before Interest After Taxes - EBIAT

    A financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT ...
Trading Center