Commodity Option

• financial tool, with which you can secure against fluctuations of commodity prices
• by purchasing a commodity option you obtain the right (not an obligation) to settlement between a market price and an agreed fixed commodity price
• you get the right to the payment of the difference in prices, if the market commodity price develops in your favour
• contrary to the commodity swap, you are not obliged to pay the difference, if the price develops against you
• this right has its cost – the premium
• you pay the premium after the acquisition of the option
• the amount of premium depends on the agreed price, its comparison with the current price, time period and assumed price movement
• we distinguish between two basic types of commodity options:
  • Cap (Call) – is used to secure against price increase
  • Floor (Put) – is used to secure against commodity price decrease
• by a combination of both you can create Collar (a zero-cost structure) – insure against extreme fluctuations in commodity prices
• the product is designed for clients, whose subject of business is directly related to fluctuations in commodity prices
• you may conclude a contract only in major global currencies
• a minimum trade volume is €25,000

In order to get the product you need to sign a contractual documentation.