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Hedging Against Rising Coffee Prices using Coffee Futures

Businesses that need to buy significant quantities of coffee can hedge against rising coffee price by taking up a position in the coffee futures market. These companies can employ what is known as a long hedge to secure a purchase price for a supply of coffee that they will require sometime in the future. To implement the long hedge, enough coffee...

Buying Coffee Put Options to Profit from a Fall in Coffee Prices

If you are bearish on coffee, you can profit from a fall in coffee price by buying (going long) coffee put options. Example: Long Coffee Put Option You observed that the near-month Euronext Robusta Coffee (No. 409) futures contract is trading at the price of USD 1,648 per tonne. A Euronext Coffee put option with the same expiration month and a...

Buying Coffee Call Options to Profit from a Rise in Coffee Prices

If you are bullish on coffee, you can profit from a rise in coffee price by buying (going long) coffee call options.   Example: Long Coffee Call Option You observed that the near-month Euronext Robusta Coffee (No. 409) futures contract is trading at the price of USD 1,648 per tonne. A Euronext Coffee call option with the same expiration month and a...

Coffee Options Explained

Coffee options are option contracts in which the underlying asset is a coffee futures contract. The holder of a coffee option possesses the right (but not the obligation) to assume a long position (in the case of a call option) or a short position (in the case of a put option) in the underlying coffee futures at the strike price. This...

Coffee Futures Trading Basics

Coffee futures are standardized, exchange-traded contracts in which the contract buyer agrees to take delivery, from the seller, a specific quantity of coffee (eg. 10 tonnes) at a predetermined price on a future delivery date. Coffee Futures Exchanges You can trade Coffee futures at NYSE Euronext (Euronext), New York Mercantile Exchange (NYMEX) and Tokyo Grain Exchange (TGE). Euronext Robusta Coffee (No. 409)...

Selling (Going Short) Coffee Futures to Profit from a Fall in Coffee Prices

If you are bearish on coffee, you can profit from a fall in coffee price by taking up a short position in the coffee futures market. You can do so by selling (shorting) one or more coffee futures contracts at a futures exchange.   Example: Short Coffee Futures Trade You decide to go short one near-month Euronext Robusta Coffee (No. 409) Futures...

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