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While the grain trade was conducted since the beginning of its use, grain futures appeared approximately 150 years ago. With the timeflow, wheat contracts have developed from the local market supply and weather-dependent tool to one of the global market instruments. The contracts are closer to commonly known future contracts than any other trading instruments, but they also have a unique place in the market. Traders have to understand specificity of these futures to trade successfully and take into account all factors that influence the market.
Wheat futures are standardized contracts, they are exchange-traded and presume that a contract buyer agrees to take delivery (and a seller agrees to deliver) specified quantity of wheat. Standard contract amount is 5000 bushels, but it can be different depending on a trading platform. The contract price is predetermined as well as the future delivery date. This contract mechanism allows wheat producers and their customers to minimize risks by trading wheat contracts. Futures operations make producers use a short hedge to fix the price of wheat at the moment of selling, while buyers can use a long hedge to define purchase price and get the resources they need.
Future contracts on wheat are also used by market speculators who try to find a favorable movement of the price to gain profit. They buy wheat futures when their price is low and sell them the price is higher, using their trading strategies to determine these moments.
Wheat futures are traded at the Chicago Board of Trade (CBOT) and the NYSE Euronext. Prices of CBOT Wheat futures are quoted in the U.S. dollars and cents per bushel, a standard amount of trading commodity is 136 metric tons or 5000 bushels. The Euronext Wheat futures incorporate two types: Milling Wheat futures are traded in 50 tonnes. Their prices are quoted in dollars and cents a bushel. Wheat No. 405 Futures which are quoted in pounds and pences per metric ton, use the size of 100 tonnes.
Silver futures are a precious metal contracts which legally bound a seller to deliver a specified amount of silver at the agreed price and time. All futures exchanges have standardized contracts, defining quantity, time/place of delivery, and quality of the delivered commodity. These contracts have varied price and this fact makes it one of the trading instruments.
Silver trade is conducted in the U.S. dollars and cents per ounce and big or mini contracts are differ from each other by the amount of commodity and by their price. A tick size of the contract is $0.001 per ounce, and this number makes the big contract to have a tick size of $5, and the mini contract – of $1, if trading volumes are 5 thousand ounces and 1 thousand ounces respectively. The CME contracts have specified vaults for silver in the New-York area and this condition is a delivery requirement.
The most active trading months are March, May, July, September and December, as they have the most intense interest open and trading volume. Silver futures may have limited position depending on the exchange rules. Silver often serves as the most malleable and the most conductive metal. Historical use of silver was varied in many forms, especially as jewelry and money. It was used as a currency, as tombs adornment, and mostly ruled the history of Europe after the New World discovery.
Even if silver is not as rare as gold, it generally has a strong influence on currencies and is connected with gold position the market. The British currency was historically based on a specific amount of silver (sterling silver pound), and the U.S. dollar was also backed by silver before the Civil War.
The metal had its own ticker symbol, its contract value and margin requirements. To trade this commodity, market players have to be aware of key components of silver futures value and forecast a potential loss or profit.
Platinum metal is a part of the global metal market, while the NYMEX is the largest exchange for it. Along with palladium, the metal belongs to so-called Platinum Group Metals. The contract on this metal is one of the oldest NYMEX contracts, which appeared in 1956. Platinum is also used to trade in options (starting from 1990). The metal is traded in three CME platforms: CME Globex, CME ClearPort, and the New York trading floor.
Future contracts on platinum are standardized, a quantity of the metal is specified and its price is predetermined along with delivery date.
Platinum metal is a very rare material, it is ductile and grey-white, with very high temperature of melting. The metal also serves as an electrical conductor and a chemical catalyst, and these qualities define its industrial use. Thus, the nature of this commodity defines it as a valuable metal due to its rarity. Demand from industrial countries affects its position in the commodity market by different set of factors.
Platinum future contracts can be traded at the New York Mercantile Exchange (NYMEX) and the Tokyo Commodity Exchange (TOCOM). The NYMEX Platinum futures (price is quoted in dollars and cents per ounce) have defined lot size of 50 troy ounces. The TOCOM Platinum futures have defined lot size of 500 grams (16.08 troy ounces) with their price quoted in the yen per gram.
Traders can manage risks connected with changes in platinum price, using platinum future contracts.This way includes a short hedge for producers to lock the price and a long hedge for customers to fix the price. Traders use platinum futures as a trading instrument and react to the price movement by buying futures before the price goes up and selling them before the price goes down.
Along with platinum, palladium is an important participant in the NYMEX trade (the largest trade for the Platinum Metals Group) and in the world metal market. Contracts on both metals are the oldest on the NYMEX. Palladium contracts was settled in 1968, and options on palladium started in 2010. This metal may be traded on three CME platforms: CME Globex, CME ClearPort, and New York trading floor.
Palladium future contracts have a standardized structure: they are exchange-traded contracts, a buyer agrees to take delivery from a seller, while the metal quantity, its price and delivery date are predefined.
Palladium is hard, has a silver-white color, and in most conditions, it is alloyed with gold and other platinum-group metals. Palladium is a catalyst and is used in the automobile industry. To analyze the price movement of palladium, traders have to pay attention to demand levels of industrially developed countries, especially with automaking giant corporations located in.
Palladium futures can be traded at the New York Mercantile Exchange (NYMEX) and the Tokyo Commodity Exchange (TOCOM). The NYMEX quantity of contract is at 100 troy ounces per lot, quoted in the U.S. dollars and cents. The TOCOM Palladium futures presume a size of 500 grams (16.08 troy ounces) per lot and are quoted in the yen per gram.
Both producers and consumers of this commodity can operate with its price by using future contracts to minimize the risk. Producers can use a short hedge to define an appropriate selling price and fix it. Consumers can use a long hedge to make a purchase price secured for them. Traders use palladium future contracts to take profit from the price movement, if they know the risk both producers and purchasers want to avoid. Traders try to buy palladium contracts if they think their price grows, and they sell contracts if they think the price goes down.
Natural gas futures have standardized mechanism. A contract buyer agrees to take a delivery, a specific amount of commodity (natural gas), while its price and date are predetermined. These future contracts is exchange-traded.
Natural gas futures are placed third as the largest ones by trading volume. They are used as a national benchmark price of natural gas, and the price continually grows according to the energy market events in the U.S. and all over the world. In addition, natural gas is a stand-alone commodity.
The Henry Hub distribution hub is located in Erath, Louisiana. It is a pipeline system owned by Sabine PipeLine LLC (a subsidiary of EnLink Midstream Partners LP). Its name is used to mark a pricing point of natural gas futures on the New York Mercantile Exchange (NYMEX) and at the Intercontinental Exchange (ICE). Major pipelines incorporate interstate and intrastate lines, including Acadian, Columbia Gulf Transmission, Gulf South Pipeline, Bridgeline, NGPL, Sea Robin, Southern Natural Pipeline, Texas Gas Transmission, Transcontinental Pipeline, Trunkline Pipeline, Jefferson Island, and Sabine. Both spot and natural gas futures are quoted in the U.S.dollars and cents per millions of British thermal units. A major price of natural gas on the North American markets is formed from Henry Hub.
Since the Henry Hub is used as an official delivery location for natural gas future contracts on the New York Mercantile Exchange (NYMEX), its price settlement is used as a benchmark for natural gas prices in North America. The difference between a defined location’s gas price and the Henry Hub price is used as a basic price.
The use of natural gas futures of Henry Hub makes market players secure risks connected with the highly volatile price of this commodity. Its price is influenced by weather conditions and related demand movements. These future contracts are the most secured instrument for operations with Henry Hub benchmark.
Gold futures are standardized, exchange-traded contracts which presume that a buyer agrees to take delivery from a seller in a form of specific amount of gold (100 ounces), while both delivery date and price are predetermined.
Gold futures are traded by using the U.S. dollars and cents. If the price is 500$ per ounce then the contact value is $50,000, and if traders sell futures while the price is $550 per ounce, they take the profit of $5,000. The downside movement of the price makes traders have a loss. The minimum tick size of the gold is 10 cents.
The eCBOT and COMEX define delivery to New York area vaults. The vaults can be changed by the rules of the exchange.The most active trading period for gold futures is February, April, June, August, October and December.
The exchange can use a limited position (the number of deals a single market player can open) to maintain the order of the trade. It is important to note that speculators and hanging players have different limits.
Gold itself is a bright yellow metal, dense and shiny. It is used in jewelry crafting, and as a payment for goods and services. Gold serves as a safe asset commodity and as an alternative to the country currency. Since the most operations with gold are conducted in the U.S. dollar, its prices are also vulnerable to the currency position.
Gold futures are used by gold consumers and producers to minimize the risk of price changes since they use gold as a commodity. Besides its direct value, the yellow metal is also used in some segment of industry or as a material for jewelry-crafting. The market players try to use price changes, including possible risks, and operate gold futures as a trading tool.
Copper as a material was known from ancient times. It was successfully mined and used in many segments. For example, the metal is used in pipes production, and it is an electricity conductor. Because of its versatility, copper is strongly needed for countries with developed heavy industry, like China. Copper is often used in the energy segment and in the construction activity. According to the information from the New York Mercantile Exchange (NYMEX), copper contracts make it the third most widely used metal in the world.
Copper futures are standardized, exchange-traded contracts, which presume that a buyer agrees to take delivery from a seller in a form of specified amount of copper (25 tons), while delivery date and price are predetermined. Copper futures can be traded at the London Metal Exchange (LME) and the New York Mercantile Exchange (NYMEX). Futures at the LME ('A' Grade) have a lot size of 25 tonnes (55116 pounds) and are quoted in the U.S. dollars/cents per ton. Copper futures on the NYMEX have a lot size of 25000 pounds with the same quotation but per pound.
Copper futures is the instrument that helps both buyers and producers to manage possible risks of price movement. A producer can use a short hedge to fix copper price, and a buyer can use a long hedge to secure its price.
Market players speculate on the price movement and this activity incorporate the risks they find reasonable. Traders get profit through the difference in prices. They sell contracts if price likely moves down, or buying them if the price is about to go up. It is important for traders to analyze the global market situation, including the trade balance of countries, and to find clues that copper price will move.
Coffee futures are standardized, exchange-traded contracts, which presume that a buyer agrees to take delivery from a seller in a specific amount of gold (10 tonnes), while delivery date and price are predetermined. Contracts on coffee are traded at the Brazilian Mercantile, Futures Exchange (BM&F), Intercontinental Exchange (ICE), Kansai Commodities Exchange (KEX), Multi Commodity Exchange (MCX), National Commodity and Derivatives Exchange (NCDEX), Singapore Commodity Exchange (SICOM), Tokyo Grain Exchange (TGE) and NYSE Euronext.
A major part of coffee production is located in Brazil, Vietnam, Indonesia and Colombia, and these countries develop this profitable business by exporting coffee all around the world. For example, in 2005 Brazil produced 2 million metric tonnes of coffee beans, while its nearest competitor, Vietnam, produced twice smaller volumes. Two main types of coffee beans are Arabica and Robusta. First mentioned type is considered more flavorful than second one, that is why Arabica coffee beans are placed first in the market. On the other hand, Robusta coffee beans have more intense effect as they have a 50% higher concentration of caffeine than Arabica beans.
Coffee futures are used by consumers and producers to minimize the risk of price changes since they use coffee as a commodity. Market players try to use coffee price changes and operate coffee futures as a trading tool. They buy contracts if they think their price will grow, and sell contracts if the price will likely go down.
Coffee traders have to be aware of possible shipment control, since this resource is produced in just a few countries. The delivery control can be used to make prices increase. Prices on coffee futures can be boosted just like other commodities (like oil or gold) because of the market deficit. In general, coffee futures have had a steady movement for recent years, but sharp price changes are possible according to the old price charts.
Cocoa futures are standardized, exchange-traded contracts, which presume that a buyer agrees to take delivery from a seller with a defined amount of commodity (in this case - cocoa), while the price and delivery date are predefined.
Cocoa futures can be traded at the NYSE Euronext (Euronext) and the New York Mercantile Exchange (NYMEX). The Euronext cocoa futures trading presumes that a standard lot size is 10 tonnes, and the future is quoted in pounds per metric ton. The NYMEX cocoa futures are traded in the U.S. dollar per metric ton, and a lot size is 10 tonnes.
The scientific name of cocoa is Theobroma (“The food of the gods”)? And the plant have in its history a thousand of years. The plant was first discovered at the beginning of the Americas exploration and then it spread the Europe. Now, the production of cocoa is an international industry, but the trees themselve are mostly planted in West Africa, than processed in U.S. and Netherlands, and consumed all over the world.
Cocoa plants are vulnerable to the weather conditions, climate and other factors that play a huge role in their growth. That is why West Africa is a major cocoa beans supplier. More than 70% of cocoa is produced there. There are two different types of cocoa trees, Criollo and Forastero. The first type has more delicate flavor, but it is more vulnerable to climate. The second one is hardened. Some producers make attempts to hybrid cocoa plants to get the tree which has qualities of both Criollo and Forastero types (Trinitario is a natural hybrid, result of cross-pollination), although this method is not popular.
Cocoa futures are used by consumers and producers to minimize the risk of price changes, since they use cocoa as a commodity. Market players try to use the price changes and operate cocoa futures as a trading tool. They buy contracts if they think their price will grow, and sell contracts if the price will likely go down.
Crude oil belongs to natural resources. It is found in specific rock formations deep under the Earth's surface. Crude value is maximized by refining process which result in petroleum products. They include gasoline, liquefied petroleum gas (LPG), naphtha, kerosene, gas oil and fuel oil. The oil is created by drilling the earth with special equipment and machinery. For now, it is the global energy source.
Types of oil differ by their names and qualities. The crude oil can be light, heavy, sweet and sour. The global market trade use the light type of crude oil as a benchmark (it is also the sweet oil) because this type needs less refining and processing.
Oil futures are traded on the New York Mercantile Exchange (NYMEX), Intercontinental Exchange (ICE), Dubai Mercantile Exchange (DME), Multi Commodity Exchange (MCX), India's National Commodity and Derivatives Exchange (NCDEX) and the Tokyo Commodity Exchange (TOCOM).
The crude oil is measured in barrels (or 42 U.S. gallons). The global market demand on lighter and sweeter crude is higher, but the process of producing them become more expensive with the timeflow.
Crude oil futures are used by consumers and producers to minimize the risk of the price changes since they use it as a commodity. Market players try to use the price changes and operate crude oil futures as a trading tool. They buy contracts if they think the price will grow, and sell contracts if the price will likely go down.
Since the crude oil is globally vital for many countries and their economies, a lot of events have an influence on the oil movement. This factor is important for traders who use crude oil futures as a trading tool.
Since the crude oil is a unique commodity with very high liquidity, crude oil futures on Brent can be a profitable trading tool. The energy sector volatility has risen in a very sharp grade during recent years.
On the other hand, there are many specific factors traders must take into account to gain profit by trading Brent crude futures. Market participants often fail to take full advantage of crude oil fluctuations because they do not know unique characteristics of this market or because they are unaware of hidden pitfalls that can rob profits. Not all energy-focused financial instruments are created equally, with a subset of these securities more likely to produce positive results.
Brent Crude Oil is a benchmark for oil prices in the EMEA region and for two-thirds of the global oil trade. Brent is a sweet crude oil, although it is more sour than its American counterpart WTI crude. As a result, it is suitable for production of gasoline and middle distillates such as kerosene and diesel.
A type of sweet crude oil that is used as a benchmark for the prices of other crude oils. Brent blend is often found in the North Sea off the coast of the U.K. and Norway. Brent blend makes up more than half of the world's globally traded supply of crude oil, which is why it makes an obvious choice for the benchmark of crude oil.
The Brent Index is the cash settlement price for the Intercontinental Exchange (ICE) Brent Future based on the ICE Futures Brent index at expiry. Brent Crude Oil futures are delivered every year in all months.
The index represents an average price of trading in the 25-day Brent Blend, Forties, Oseberg, Ekofisk (BFOE) market in the relevant delivery month as reported and confirmed by the industry media. Only published cargo size (600,000 barrels (95,000 m3)) trades and assessments are taken into account.
Gas oil is a product of crude oil. It is used for heating purposes and for generating power. Therefore, it is also called heating oil in the US. Gas oil accounts for about 25% of the yield from a barrel of crude oil. This represents the second largest “cut” after petrol.
Gas oil is traded widely in Europe as a hedging tool for the physical industry. Traders can conduct trade in gas oil via futures, options, crack spread options or average price options contracts. The availability of several trading contracts offers traders improved flexibility in managing their price risks. Trading for gas oil futures contracts is conducted on the Intercontinental Exchange (ICE) and New York Mercantile Exchange (NYMEX).
Gas oil trading options and futures are used by companies to hedge against diesel and jet fuel costs. Both diesel and jet fuels trade in the cash market at a premium to NYMEX Division New York Harbor gas oil futures traders to capture profit-making opportunities. The underlying physical asset for gas oil futures contracts, as offered on the ICE exchange, is gas oil barges delivered in ARA (Antwerp, Rotterdam and Amsterdam). Gas oil futures contracts are used as the pricing reference for all distillate trading across Europe and other countries.
Gas oil futures are used by consumers and producers of the gas oil to minimize the risk of the price changes since they use this type of a commodity. Market players try to use the price changes and operate gas oil futures as a trading tool. They buy contracts if they think the price will grow, and sell contracts if the price will likely go down.
The spot price of the commodity indicates the commodity value for the defined asset to be sold or bought immediately. It differs from the futures price, which is specified by a place and time of delivery. Financial markets operate the spot prices in connection with commodity futures prices, especially wheat, oil, and gold.
The spot gold usually operates as a gold price in U.S. dollars and is similar to Forex in quotation and chart reading. The market operation and pricing is also quite similar. However, the spot prices are highly volatile, while the derivative or futures operations allow participants to lock the price and to avoid risks.
The spot prices differ from the future prices in a significant amount. The future prices are usually much higher than the spot ones. They include also the price of storage and delivery of the commodity, and incorporate possible risks that may be due to supply and demand changes in the market.
It is important to note that a major volume of operations with gold (including the spot gold) are conducted with the U.S. dollar as a payment currency. It also means that the U.S. dollar growth or weakening can influence the price of gold in futures, options, derivatives or direct buy-and-sell prices like at the spot gold commodity. The economy instability also impact gold prices, since it is treated by a major part of the world as a safe asset during hard economic periods.
Silver trading is often used by the traders who search for volatile assets to operate with, and also to minimise possible risks connected with the operations. Silver commodity in comparison with the gold spot is more volatile and less expensive. Silver trading operations can conducted with a small size of commodity (even with 1 ounce).
A spot operation (A spot contract, a spot transaction) presumes that a participant buys or sells a commodity or another asset (including currency), while the delivery date (or spot date) is two business days. Such a contract is an alternative to future contracts, or forward contracts, which presume the deal settlement at one date, and delivery and payment on another date in the future.
For the silver commodity the spot price reflects the market expectations on the future price movement, since the precious metal is a non-perishable asset. However, spot prices of perishable assets reflect a current price of the commodity. Both perishable and nonperishable commodities or assets, traded through the spot contract, have higher volatility, comparing with the futures.
Decrease of silver production can influence not only the delivery contracts and futures, but also the silver spot prices. Since the largest mining companies have difficulties with production values, as compared to profits, the impact on the market and price movement can affect the silver spot prices.
The Sugar No.11' futures is contracts for delivery of raw cane sugar. The price of these contracts includes a cost of shipping to a port inside of a selling country. A purchaser ship delivers the commodity from there. The main type of Sugar No.11 contracts are for delivery of 112,000 pounds of raw cane sugar. This type of contracts is a benchmark for global raw sugar trading. Delivered material is raw centrifugal cane sugar of 96 degrees average polarization. The Sugar No. 11 futures are traded on the New York Board of Trade, they are quoted in hundred cents per pound.
The used mark of "Number 11" defines the way shipping costs are counted and what part of them is paid by buyers or sellers (it differs from Sugar No. 14, for example). The type of delivery, called “Free on Board”, or FOB, means that sellers transport sugar to a port and pay loading fees. Buyers’ responsibility, according to the contract, is to pay for unloading costs.
The Sugar No.11 is a contract on sugar delivered from specified countries including: Argentina, Australia, Barbados, Belize, Brazil, Colombia, Costa Rica, Dominican Republic, El Salvador, Ecuador, Fiji Islands, French Antilles, Guatemala, Honduras, India, Jamaica, Malawi, Mauritius, México, Mozambique,Nicaragua, Peru, Republic. It also can have its origin from the U.S. Sugar is delivered to a port of one of the origin nation.
Soybeans can be used in many segments of production, including creation of vegetable oil and poultry feedstock. There are several types of soybean contracts that can be traded in commodity markets. They include soybean oil, soybean meal, and soybeans as a separate commodity.
Soybeans are standardized exchange-traded contracts, which give a buyer an ability to take a delivery from a seller with a specified amount of commodity, while the price and date of the delivery are predetermined.
The Soybeans futures can be traded at Chicago Board of Trade (CBOT) and Tokyo Grain Exchange (TGE). The CBOT Soybeans futures are traded with a lot size of 5000 bushels (136 metric tons) and their prices are quoted in U.S. dollars and cents per bushel. Soybean futures at TGE are traded with a size of 5000 bushels (136 metric tons), and the prices are quoted in yen per metric ton.
Both North and Latin America provide approximately 55% of the world’s soybeans, and U.S. volume of exports of the commodity is at 37% of the global amount. The second in productions amount is Brazil, it has more than 20% of the market.
Soybeans are known as a basis of vegetable oil production and animal feed, it generally has an industrial use. Starting from the beginning of 20th century, this commodity gained their popularity as a human meal all over the world.
Soybean meal is a high protein and high energy-content food with its primary use for several types of cattle, hog, and poultry. Soybean meal is extracted from soybeans and processed along with soybean oil. More than 48 pounds of soybean meal and 11 pounds of soybean oil can be produced from a bushel of soybeans. A strong connection between soybean production and soybean markets highly influence the soybean meal market.
Soybean meal is used as a source of protein for the cattle, it also has an influence on the market through changes in a number of herd and flock. Consumption rates have a direct correlation with prices. Soy is used to produce several types of diet food, soy beer; textiles, adhesives, and cleaning materials.
Soybean meal futures can be traded at CME. Since soybeans are a renewable resource and are used for industrial processes, animal feed, and human diet food production, investing in soybean meal futures is profitable. Soy as a component of the diesel fuel is also the factor which has an impact on energy markets, a construction segment and a track segment. The situation on mentioned markets affect the soybean meal market, and a range of soybeans constantly grows making the prices to follow the situation.
Cotton futures have 126 years of history. They are delivered typically in April or May, and the delivery size is around 50,000 lbs. of cotton. Leading countries that produce cotton are China and Uzbekistan (sometimes treated as a major exporter).
The United States is responsible for one-third of the global cotton trading volume and competes for the leading position against two earlier mentioned countries in terms of production and export. Cotton industry is profitable in the U.S. and is estimated at $25 billion. Cotton production provides more than 200,000 jobs. A major part of cotton production in the USA is located in the Southern part of the country and in California. The climate dictates the time of cotton planting, while the earliest time in March and the harvest can be conducted even in December. The most popular U.S. cotton is American Upland and it covers 97% of all U.S. cotton crop annually grown.
China has comparatively a little export volume but a huge inner demand, while country stocks of this commodity approach a half of global stocks. The U.S. is also a big consumer of the cotton due to the popularity of cotton clothes, but the competition is high since a wide use of polyester and rayon is chipper.
Cotton no.2 contracts can be traded at NYBOT, while cotton futures contracts are traded on the NYMEX.
Corn futures are standardized exchange-traded contracts, which give a buyer an ability to take a delivery from a seller with a specified amount of commodity, while the price and date of the delivery are predetermined.
Corn futures can be traded on Chicago Board of Trade (CBOT), NYSE Euronext (Euronext), and Tokyo Grain Exchange (TGE). The CBOT Corn futures have a lot size of 5000 bushels (127 metric tons), and their prices are quoted in U.S. dollars and cents per bushel. Corn futures are traded at Euronext with a lot size of 50 tons and the prices are quoted in U.S. dollars and cents per metric ton. The TGE corn futures have a lot size of 50 tons, and their prices are quoted in yen per metric ton.
Annual production rate of corn is approximately 525 million metric tons. The USA is a leading producer of this resource. It produces almost 260 million metric tons of corn. China is placed second, it produces more than 110 million metric tons a year. The third place by production rates belongs to Brazil with 37.5 million metric tons of its annual corn production. Only rice and wheat are produced with comparative rates in the world.
Corn is mainly used for animal feeding (especially in the U.S.). It is also used in alcohol industry, plastic production and fuel production. Moreover, corn fuel (corn ethanol) is cleaner than oil based fuel.
Heating oil (as a separate product) is produced as a bypass of crude oil production. Oil is separated into several fractions during the refinement. One of them is heating oil. Heating oil has a no. 2 fuel oil name. Heating oil contracts differ from general fuel and oil contracts by quality standards, but their connection with oil production allows traders to hedge by using them against price fluctuation in jet fuel and diesel fuel.
Heating oil contracts belong to a standardized exchange-traded type. These contracts give a buyer an ability to take a delivery from a seller with a specified amount of commodity, while the price and date of the delivery are predetermined.
Heating oil futures can be traded on the New York Mercantile Exchange (NYMEX). A lot size of NYMEX future contracts is 42000 gallons (1000 barrels), and the contract price is quoted in U.S. dollars and cents.
Heating oil future contracts are used by consumers and producers to manage risks of price changes by short hedge and long hedge respectively. Market players can use these futures as a trading instrument and react to price changes by buying or selling these contracts in appropriate market conditions. If the price presumably goes up, a speculator buys contracts, and vice versa.
Gasoline is widely known in the world and used as fuel. It was discovered as a side-product from crude oil refining and kerosene production, and become popular as an optional automobile fuel. The global gasoline production is based on the oil refinement, and price of this commodity can fluctuate in a wide range from small periods of time influenced by oil production and refinement price or related events.
Gasoline futures are standardized, exchange-traded contracts, on which a buyer agrees to receive a fixed amount of commodity (50 kiloliters), while the price and delivery date are predetermined. Gasoline futures can be traded on the New York Mercantile Exchange (NYMEX) and Tokyo Commodity Exchange (TOCOM). Prices NYMEX Gasoline futures are estimated in the U.S. dollar and cents per gallon, while their trading amount is 42000 gallons (1000 barrels). Gasoline futures at the TOCOM have a lot size of 50 kiloliters (13210 gallons) and are quoted in the yen per kiloliter.
Before 1947, orange juice was supplied after production from fresh material, and the market was highly vulnerable to the state of orange fruits, which were easy to perish if not stored and transported right in time. Unappropiate conditions often led to supply shock. Frozen concentrated orange juice (FCOJ) technology was invented in 1947 and it formed a new standard for this industry, delivery and storing orange juice, also making the market fully international.
The world leading exporting country in the matter of FCOJ is Brazil. It has been dominating the global market for 30 years. The country provides more than 80% of the global FCOJ export, and 30-50% of products are supplied to the U.S. The Intercontinental Exchange (ICE), after squaring the New York Board of Trade (NYBOT) in 2007, offers both FCOJ and "Not From Concentrate Orange Juice" contracts.