Commodity Investing: From Theory to Practice · Dr MAI Huu MinhChapter 6 of 22 · Module 2: Markets and instruments
CHAPTER 6
Options and Volatility in Commodities
Protection, income and the price of uncertainty
Opening question
“How can a coffee exporter lock in a minimum price without giving up a price rise?”
In this chapter
- Calls and puts on commodity futures, and the vocabulary of options
- What makes an option expensive or cheap: price, strike, time and volatility
- Why commodity volatility is high and why it changes over time
- Floors for producers, caps for consumers and low-cost collars, with a robusta example
- Volatility skew and seasonality in energy and agriculture
- Options for investors: covered calls on gold, protective puts and the risks of selling options
- How options are used by producers and traders in Vietnam and Asia
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This chapter is in the full book
Chapter 1 is free to read online. The full text of chapter 6 — with its tables, figures, worked examples and practice lab — is available in the complete edition of Commodity Investing: From Theory to Practice (Volume 2, NXW Investment Library).
Read Chapter 1 freeGet the full book — [email protected]Sections of this chapter
6.1 Options on futures: rights, not obligations
6.2 The language of options
6.3 What an option is worth
6.4 Why commodity volatility is high and unstable
6.5 Floors for producers
6.6 Caps for consumers and low-cost collars
6.7 Skew and seasonality
6.8 Options for investors
6.9 Options in Vietnam and Asia