Options
Options provide price protection by defining an up-front maximum or minimum price at which a commodity can be bought or sold. The following products allow for downside protection to maintain the upside potential and can be used in combination to achieve collars.
Call (Cap)
Provides the buyer with the right, not the obligation, to purchase a fixed quantity of a commodity at a fixed price on or before a given date.
The seller accepts the obligation to sell a fixed quantity of a commodity at a fixed price on or before a given date.
Put (Floor)
Provides the buyer with the right, not the obligation, to sell a fixed quantity of a commodity at a fixed price on or before a given date.
The seller accepts the obligation to buy a fixed quantity of a commodity at a fixed price on or before a given date.