Commodity Futures 101: Learn How to Trade Commodity Futures

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Commodity Option Prices

Commodity options control futures contracts; and futures contracts, in turn, control physical commodities. With options, however, your risk is much less than with futures, which is why many people prefer them. But how much do you make if a futures contract rises above a call option's strike price?

Commodity options are different than stock options. With stock options each contract controls 100 shares of stock. Of all commodity futures options, only the 100-ounce gold contract is the same as stock options. Many commodity futures contracts, including those on cattle, hogs, copper and coffee, are priced in cents per pound. The value of a 1-cent move in a given contract differs from commodity to commodity, because each contract is for a different size or quantity of the underlying commodity.

For example, a coffee contract covers 37,500 pounds, making a one-cent move worth $375, while a copper contract covers 25,000 pounds, so a penny move is worth $250. Wheat, corn, oats and soybeans are priced in cents per bushel, usually with a 5,000-bushel contract, so each 1-cent move equals $50.

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