Operating range

This one is not written up yet

The definition above is the short version. A full explanation — how it works, a worked example and the exam traps — is still being written. In the meantime the chapter below covers it in context.

Written up from the same chapter

• Algorithmic tradingAny order generated by automated execution logic rather than typed in by a person — software that pushes buy and sell orders into the exchange once its parameters are met.
• Authorised personTwo different entities share this name: under SEBI, an agent appointed by a stock broker to give clients access to the trading platform; under FEMA, a dealer authorised by RBI to deal in foreign exchange.
• Base priceThe reference price a contract starts each trading day from — the theoretical futures price on the day it is introduced, and the previous day's daily settlement price on every day after.
• ConvergenceThe certainty that a futures price and the spot price of its underlying meet at expiry — because on the last trading day the contract settles at the cash market price, leaving no room for a difference.
• Daily Settlement PriceThe price at which every open futures position is marked and reset at the end of each day — the last 30 minutes' volume weighted average price of that contract, computed separately for each expiry.
• Final Settlement PriceThe price at which a commodity derivative is finally settled at expiry — a simple average of the polled spot prices of the expiry day and the two days before it.