Commodity options

A cap allows you to set a maximum (or strike) price you'll pay on the maturity date for an agreed notional quantity of a commodity, while also allowing you to participate in price falls below the strike price.

A cap is sometimes referred to as a call.

Benefits

• ​Assists you in protecting against adverse commodity price movements.
• Allows you the opportunity to benefit from price falls below the fixed (strike) price by transacting at the prevailing market price.
• Provide protection against the commodity price rising.

Points to consider

• A premium is normally paid at the commencement of the option.
• The premium is still payable if the option is not exercised.

Who might need it?

If you’re a consumer with uncertainty about the volume of your physical consumption or you want to manage the risk of a commodity price rise.

You may also be a consumer who’s looking for price protection for a known, upfront cost that allows you to participate in favourable price movements.

​A floor allows you to set a minimum (or strike) price on the maturity date for an agreed notional quantity of a commodity, while also allowing you to participate in price rises above the strike price.

A floor is sometimes referred to as a put.

Benefits

• ​Assists you in protecting against adverse commodity price movements.
• Allows you the opportunity to benefit from price rises above the fixed (or strike) price by transacting at the prevailing market price.
• Provides protection against the price falling below the strike.

Points to consider

• A premium is normally paid at the commencement of the option.
• The premium is still payable if the option is not exercised.

Who might need it?

If you're a producer:

• with uncertainty about the volume of the physical production or you want to manage the risk of a commodity price fall, or
  
• looking for price protection at a known, upfront cost that also allows you to particpate in favourable price movements.

A collar provides you with a known maximum (or strike) price (and minimum/strike price) on the maturity date for an agreed notional quantity of a commodity, while also allowing you to participate in price movements between these two prices.

Points to consider

• A premium is normally paid at the commencement of the option.
• Limits the benefit you can obtain from favourable price movements.

Who might need it?

1. If you're a producer or consumer with uncertainty about the volume of your physical production or consumption; or wanting to limit the cost of your price protection.
2. If you're a consumer and your intention is to manage the risk of a price rise by the maturity date.
3. If you're a producer and your intention is to manage the risk of a price fall by the maturity date.

• Commodities Agricultural Swaps & Options - Product Disclosure Statement (PDF, 4.33MB)