After picking up you daily dose of caffeine at the local coffee shop each morning, you might want to find a way to earn some of that money back. With coffee futures you can make a leveraged bet on the price action of the beans that go into your daily brew. Unlike the stock markets, electronic futures trading operates nearly around the clock from 6 p.m. Sunday to 5:15 p.m. Friday, 5 1/2 days a week.
Coffee Futures Contract
The Coffee C futures contract calls for the delivery of 37,500 lbs. of Arabica coffee. The quoted price is in dollars per pound with a minimum increment of 5/100ths of a cent or 0.0005 cent. For example, on a day in April 2013, the futures price was $1.3715, making one coffee contract worth $51,431.25. Pit trading of the Coffee C futures takes place on the London and New York trading floors of the Intercontinental Exchange — ICE. An electronic version of the coffee futures also trades on the CME Globex system.
ICE Trading Hours
Floor trading of coffee futures occurs simultaneously in London and New York. On the London ICE trading floor, trading hours are 8:30 a.m. to 7 p.m. Monday through Friday. This means trading in New York starts at 3:30 a.m. Eastern Time and goes until 2 p.m. Traders working in the New York coffee trading pit go to work very early in the morning, and probably need some of what they are selling. If you want to trade coffee, the electronic trading hours will be more convenient.
CME Globex Trading Hours
The CME Globex is an electronic futures system that extends the available trading hours beyond the pit hours to provide almost 24-hour trading. The NYMEX Coffee futures — as it is called by the CME Group — starts trading at 6 p.m. Eastern Time on Sunday and continues until 5:15 p.m. Friday, except for 45-minute breaks starting at 5:15 p.m. Monday through Thursday. The 45-minute breaks are used by the exchange and brokers to update accounts.
Trading a Coffee Contract
You can trade coffee futures by opening an account with a registered commodity futures broker. Futures contracts trade in either direction. If you think the price of coffee is going up, you can buy one or more contracts. If you think the price will fall, you can “sell to open.” The opposite orders — sell and buy, respectively — close out the positions in your account. The broker will require you to put up an exchange-mandated margin deposit for each contract you trade. On a day in early April 2013, the coffee futures margin amount was $4,950. The use of margin allows you to trade coffee futures with just a 10 percent deposit on the contract value.