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Managing Commodity Price Risk Using Hedging and Options

Published by:
Online Location
http://www.omafra.gov.on.ca/english/busdev/facts/17-041.htm
Publication date
06/11/2007
Number of Pages
10
Language:
English
Type of Publication:
Online platforms & databases
Focus Region:
Global
Focus Topic:
Market / Trade
Type of Risk:
Market-related
Type of Risk Managment Option:
Risk reduction/mitigation
Commodity:
Other
Author
Ontario Ministry of Agriculture, Food, and Rural Affairs Staff
Organization
Ontario Ministry of Agriculture, Food, and Rural Affairs

This Factsheet provides an overview of commonly-used price risk management tools as well as concise and easily understandable definitions of terms used by those providing risk management advice. Futures markets are price discovery and risk management institutions. In futures markets, the competing expectations of traders interact to “discover” prices. In so doing, they reflect a broad range of information that exists on upcoming market conditions. Futures markets are actually designed as vehicles for establishing future prices and managing risk so you can avoid gambling if you want. Futures contracts are sometimes confused with forward contracts. While similar, they are not at all the same.