Breaking News. If the price of orange juice stays around the same levels (say at 133 cents) at the time of expiry, the option will get exercised. In all the possible scenarios, using a put option of orange juice contracts has provided the farmer dual benefits. A stock option gives an investor the right, but not the obligation, to buy or sell a stock at an agreed upon price and date. Brazilian orange juice companies used this cash influx to come into the U.S. and buy out Florida's production facilities, making Brazil a financial backer of much of America's orange juice. Buying the put option will give the orange farmer the right, but not the obligation, to take a short position in one orange juice futures contract at the predetermined price of 135 cents at the time of option expiry. A common grocery orange that comes in several varieties including Cara cara, Bahia and dream navel. The ICE Exchange has FCOJ A options available for trading across the cities of New York, London and Singapore, ideally covering all geographical locations across APAC, Europe, and the United States during the 24-hour cycle. Assume it is January and frozen concentrated orange juice is currently trading at 135 cents/pound (the spot price). Long options also limit the losses (capped to option premium paid), while futures have unlimited loss potential on both long and short positions. She can buy oranges at the market price of 150 cents, taking the total buy price to 139.5 cents/pound (150 – 10.5 = 139.5 cents/pound). Apart from hedging scenarios, traders actively make speculative bets on orange juice contracts to benefit from price changes and arbitrage opportunities. These futures are traded in the Intercontinental Exchange. Ingredients-1 bunch of organic celery, ends and leaves chopped off, washed and chopped -1/2 cup water. In orange juice options trading, the underlying asset is one FCOJ-A futures contract. There are several styles of juicers but they operate on similar principles. She paid the upfront option premium of 4.5 cents taking net profit to 10.5 cents/pound. This convenience comes at the cost of nonrefundable option premium being paid upfront and is prone to time decay. For simplicity, all the below examples use one unit of frozen concentrated orange juice. ... carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed. January, March, May, July, September, November. a revolution in orange juice extraction VSS – Vertical Squeezing System, a unique internationally patented system able to squeeze the oranges separating the bitter oils of the peel from the juice, maximizing the yield and avoiding waste, with the highest standard of cleanliness and hygiene. She can square it off at the converging price of 150 cents, as gaining (150 – 135) = 15 cents from the futures position. Deducting the 4 cents he paid as option premium, his net sale price will be 146 cents/pound (better than his expected level of 130 cents/pound). Frozen concentrated orange juice futures had their best rally in four months in October, gaining 3.7%, as adverse weather hit citrus groves in Florida. I explored many different concepts when I first decided to invest in a franchise, but I was immediately drawn to Booster Juice because of the companies vision for future growth, head office support and easy operations processes. They serve as a juice price benchmark and provide provide opportunities for portfolio diversification and hedging. At the time of expiry, this call option, if in-the-money, will give her the right to take a long orange juice futures position which she can square off at existing market rates to lock the buy price. The offers that appear in this table are from partnerships from which Investopedia receives compensation. Because oranges are perishable, the futures contract tracks frozen concentrated orange juice (FCOJ). Organic oranges have the same nutritional values and calories as commercial oranges 1 . The processor is concerned that orange prices may rise, so he wants to limit his purchase price to a maximum of about 140 cents/pound. Orange juice option traders should be aware of these dependencies. View the futures and commodity market news, futures pricing and futures trading. Aside from home gym, video conferencing and delivery services, a winner in commodities may be orange juice. If the price of orange juice increases to say 150 cents/pound, the long orange juice call option will come in-the-money and will be exercised. For a 15,000 pounds contract, he will receive $19,650. The value of a CFD is the difference between the price of FCOJ at the time of purchase and its current price. Deducting the 4.5 cents she paid as option premium, the net buy price is 134.5 cents/pound (137 + 2 - 4.5 = 134.5 cents). Currently, frozen concentrated orange juice futures contracts trade on the ICE exchange. Orange juice is largely produced for human consumption. He will get the short futures contract at 135 cents and can square it off at 133 cents, giving him a profit of 2 cents. The buyer will get the long futures position at 135 cents. The two top ETFs in the agriculture space stand out from their peers by a wide margin, but they take very different approaches to the sector. Both countries are impacted by hurricanes and unseasonable freezing and frosts. These weather events impact the orange crop, which impacts FCOJ prices and options prices. Government policies, local labor laws, and international trade developments can impact orange production and supply. Around 98 percent of U.S. oranges come from Florida, where the crop is susceptible to extreme weather events like hurricanes or unexpected cold snaps that can wipe out the entire season’s crop. The upfront option premium cost is 4.5 cents per pound (4.5 cents X 15,000 pounds = $675). Orange Juice Put Option Calculations at Expiration. A put option gives the farmer the right to sell the underlying asset at a specified sell (or strike) price within a certain timeframe. Adding the 4.5 cents per pound she paid as the call option premium, her net buy price will be 114.5 cents per/pound (better than his expected level of 140 cents/pound). Our commodity experts created two sets of guides. The buyer will not be able to exercise the option and will not get the long futures contract. Commodities Analysis by Investing.com (Barani Krishnan/Investing.com) covering: Orange Juice Futures. Example of Using Orange Juice Options for Hedging. The margin for growth is extremely wide given the present consumption of around one third of a litre per capita. Source: United Nations Statistical Database, 2005 figures. Orange Juice Call Option Calculations at Expiration: In this case as well, using orange juice options guarantees a maximum capped buy price in all scenarios, with the benefit of lower buy price in case of market price declines. If the damage from bad weather turns out to be less than expected, prices can retrace back to where they started. Other commodities that trade on commodities exchanges include silver, platinum, rice, sugar, orange juice, oats, cattle, corn, copper, cocoa, soybeans, and coffee. This means that if an orange juice option contract expires in-the-money (ITM), the buyer of the orange juice call/put option will get the right to enter into a long/short orange juice futures contract. For a 15,000 pounds contract, he will receive $21,900. Hurricane forecasts can result in steep price rises as traders anticipate damage to the orange crop. The orange juice maker will get the long futures contract at a predetermined 135 cents and can square it off at 137 cents, giving her a profit of 2 cents/pound. Investing in Orange Juice through Future Market Contracts. While marketmaking, arbitrage, and speculation continue to remain the heart of trading, hedging is the primary purpose for which so many products continue to get enabled for trading on leading global exchanges. If the price of orange juice declines to 110 cents at the time of expiry, the option will expire worthless (as the current price is lower than strike price of call option). The physical settlement of one contract equal to 15,000 pounds of orange solids is done through delivery in drums or tanks. The orange and orange juice demand and supply report from U.S. Department of Agriculture covers estimates across all orange-producing regions in the United States and abroad. I have been a proud Booster Juice Franchise Partner for the last 6 years. This particular form is suitable for storage and fits one of the criteria for inclusion in the futures arena: that the underlying commodity be deliverable. If the price of orange juice stays around the same levels (say at 137 cents/pound) at the time of expiry, the option will get exercised (as the current price is higher than strike price of the call option). Clicking on the links column icons (Q C O) displays the quotes, charts, options and historical market data for each Futures contract - as well as the Orange Juice Futures Cash. Read Investing.com (Barani Krishnan/Investing.com)'s latest article on Investing.com UK. The concentration of most of the crop in a single location and the possibilities of extreme weather events, as well as similar conditions in Brazil, have led to high uncertainty and hence high volatility in orange prices. In anticipation of the winter freeze damaging the orange crop and reducing supply, prices often go up in November. Orange Juice ICE Futures Contract. No. The FCOJ contract is available for trade on the New York Board of Trade (NYBOT). How Are Orange Juice Options Different from Futures? A long position conveys bullish intent as an investor will purchase the security with the hope that it will increase in value. Deducting the 4 cents he paid as option premium, his net sale price is 131 cents/pound (133 + 2 - 4 = 131 cents/pound). Marketmakers also make an important contribution by offering sufficient liquidity and tight spreads in the options market. In fact, the majority of oranges for orange juice are grown in two locations, Florida and Brazil. Plain Celery Juice In A Blender Recipe. Soft Commodities, which include cotton, cocoa, orange juice, coffee, sugar, are now finding place in trading portfolios of active market participants as an alternate class of tradable securities. Futures trading in frozen concentrated orange juice started in 1945 and is claimed to be one of the reasons for oranges taking one of the top spots in U.S. crops. Make sure to take into consideration weather and seasonality when investing in FCOJ futures. Start trading with IFC Markets We are ready to support you with any kind of questions, 24 hours a day. Start trading with IFC Markets We are ready to support you with any kind of questions, 24 hours a day. To gain price protection, the processor can buy one orange juice call option. However, a clear advantage long options have over futures is that long option positions don’t need margin money or a daily mark-to-market like futures. Being one of the world's most popular fruit juices, orange juice trading attracts a variety of market participants which include the farmers, processors, storage-houses, market makers and arbitrageurs. A must be filled (MBF) order is a trade that must be executed due to expiring options or futures contracts. Apart from the above listed factors which affect the orange spot prices, orange juice option trading is also impacted by factors specific to option pricing models - exercise or strike price, time to expiry, risk free rate of return (interest rate), and volatility. The value of a CFD is the difference between the price of FCOJ at the time of purchase and its current price. Oranges are no exception. Agriculture ETFs can be used to diversify or stabilize a portfolio, hedge risk to certain countries dependent on an agriculture commodity, or even create a new investing opportunity. Orange juice trading has become popular globally and trading volumes continue to increase. Get detailed information on the TR/CC CRB Orange Juice including charts, technical analysis, constituents and more. Ideally, either futures or options can be used for hedging, speculation, or arbitrage. A bull spread is a bullish options strategy using either two puts or two calls with the same underlying asset and expiration. The VanEck Vectors Agribusiness ETF focuses on investing in the stocks of companies that operate in agriculture. His risk is limited on the downside with a guarantee of minimum price level (131 cents), plus he is able to benefit from the upward price moves. Looking for Orange Juice: How to make and bottle your own homemade canned orange juice in 2020? She will buy her oranges at market rates of 137 cents. Orange Juice Futures Contracts The table below presents the last, change, open, high, low and previous close for each Orange Juice Futures Futures CFD contract. The orange farmer selects the option contract with strike price of 135 cents and the expiry in June, which is when his crop will be ready. By paying a fraction of the cost in the form of an option premium, the producer and consumer can effectively protect the downside risk and yet keep the upward profit/saving potential high. How to Make Celery Juice To trade orange juice options, one needs a commodity trading account with regulated brokers who have authorized membership with the respective exchange. Read Investing.com (Barani Krishnan/Investing.com)'s latest article on Investing.com The current price of one unit of FCOJ is 135 cents. Brazil tops the orange-producing nations list followed by the United States. An increase in consumption in the country where the oranges are grown could reduce the export supply. Allowed countries of origin for oranges are the United States, Brazil, Costa Rica, and Mexico. Orange juice options traders must pay close attention to seasons and weather forecasts. Brazil also suffers from droughts from May to June which can affect the orange crop. Among its top holdings, you'll find companies in the farm equipment, seed and fertilizer, animal health, and food transport and processing industries. Interest as well as diversification requirements have led to traders looking beyond the ordinary security classes of equities, bonds, and plain-vanilla commodities. Futures/Commodities Trading Strategy & Education. A soft commodity is a grown agricultural commodity such as coffee, cocoa, sugar, and fruit. This comes at the cost of the option premium of 4 cents/pound. Through processing, freezing, and flavoring agents, orange juice became the world’s favorite fruit drink and the commodity that it is today. Aside from home gym, video conferencing and delivery services, a winner in commodities may be orange juice. His net cost will be 114.5 cents * 15,000 pounds = $17,175. Already America’s favorite breakfast staple along with eggs, bread and ham, orange juice won new love from commodity investors through the height of their stay-at-home as it handily beat oil, copper and corn to deliver double-digit gains on the year.. Many scientists attribute increased hurricane activity in Florida to global warming. Orange juice futures CFDs are quoted in US dollars per 100 pounds (1 CFD includes 100 pounds, 1 lot contains 800 of 100-lbs equivalent juice packs). It is a staple on breakfast tables the world over, and is also used as a cooking ingredient in many countries’ cuisines. Orange juice options traders should also follow related news items specific to orange juice trading from popular market and news data providers like Bloomberg. If the price of orange juice rises to say 150 cents at the time of expiry, the option will expire worthless (as the current price is higher than strike price of the put option). One such futures contact is worth 15,000 pounds of concentrated orange juice solids. The NYBOT includes two versions of the FCOJ contract: one that tracks the Florida/Brazil oranges (FCOJ-A) and another one based on global production (FCOJ-B). Because oranges are perishable, the futures contract tracks frozen concentrated orange juice (FCOJ). Factors impacting orange price and orange option valuations: Any agricultural commodity is affected by weather and disease. Short options do require margin capital. The production of oranges is very sensitive to weather. He pays upfront an option premium of 4 cents per pound (4 cents X 15,000 pounds=$600). This volatility is reflected in orange options valuations. Mentions of oranges or orange juice refer to one unit of frozen concentrated orange juice. 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