Commodity options

A commodity call option is a transaction in which the seller of the option pays, on a one-time basis or in instalments, the difference between the floating rate (e.g. the average of fixes in a given month) and the predetermined fixed rate (so-called strike option) multiplied by the notional volume of the commodity hedged. The seller will only pay this difference if the floating rate is higher than the strike option (or if the difference between the floating and the fixed rate is a positive number). The buyer of the option pays a premium for this hedging. This product serves to hedge the risks out of the given commodity price growth. A commodity option is only offered to hedge the risks resulting out of, and connected with, a client’s commercial activities.

Product features

• The buyer of the option is hedged against the commodity price growth.
• Flexibility of parameters - easily adjustable to actual commodity requirements/consumption.
• The buyer does not have the opportunity to benefit from the commodity price decreases.
• Buyer pays a premium.

Variations of the product

• Commodity Collar - a combination of a commodity call option and a commodity put option. Normally offered as a zero cost strategy.
  

A commodity put option is a transaction in which the seller of the option pays, on a one-time basis or in instalments, the difference between the predetermined fixed rate (so-called strike option) and the floating rate (e.g. the average of fixes in a given month) multiplied by a notional volume of the commodity hedged. The seller will only pay this difference if the strike option is higher than the floating rate (or if the difference between the fixed and the floating rate is a positive number). The buyer of the option pays a premium for this hedging. This product serves to hedge the risks out of the given commodity price decrease. A commodity option is only offered to hedge the risks resulting out of, and connected with, a client’s commercial activities.

Product features

• The buyer of the option is hedged against the commodity price decrease.
• Flexibility of parameters - easily adjustable to actual commodity requirements/consumption.
• The buyer does not have the opportunity to benefit from the commodity price growth.
• Buyer pays a premium.
  
  

Variations of the product

• Commodity Collar - a combination of a commodity call option and a commodity put option. Normally offered as a zero cost strategy.