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 Orange Juice Futures and Options Market Trading

 

The No Nonsense Guide to Buying and Selling Options

 

*The information contained within this webpage comes from sources believed to be reliable. No guarantees are being made to the content's accuracy or completeness.

 

Orange Juice Futures Trading Facts

The orange tree is a semi-tropical tree consisting of three major varieties including the sweet orange, the sour orange and the mandarin orange. Only the sweet orange is grown in the United States commercially. The Frozen Concentrated Orange Juice (FCOJ) futures contract began in 1945 and was the catalyst for oranges becoming the main fruit crop in the United States. The frozen concentrate orange juice futures contracts at the ICE have the second lowest volumes of the softs. The 15,000 pounds of orange solids specified by the orange juice future contracts can come in drums or tanks, at the seller’s option. Approximately 50% of the orange weight comes from its juice and the remainder is the peel, pulp and seeds which are dried and then fed to cattle.

The United States and Brazil outpace all others in orange juice production and are therefore very influential on the price of orange juice futures prices. In 1873, 3 navel orange trees were brought from Brazil to Riverside, California and one of those trees is still alive and producing fruit.

 

ICE Orange Juice Futures and Options Quick Facts

  • 15,000 pound contract size

  • each one cent move equals $150

  • trades Jan., Mar., May, July, Sep., Nov.

  • Orange juice futures symbol (JO)

 

Here is the brochure from the ICE for FCOJ orange juice futures and options.

ICE orange juice brochure

 

The orange crop is another commodity more susceptible to weather than most. Systems such as hurricanes, freezes and tropical storms can cause the orange juice futures market to rally dramatically if they hit at the right time. More than 98% of the U.S. crop comes from Florida, which recently was hit by 5 hurricanes in the space of two years. This geographic concentration can lead to extremely volatile trading in the orange juice futures and orange juice options markets during the June-December hurricane season.

A tree can take as long as 15 years to reach maturity. This means that any damage to mature trees can affect the orange supply and therefore the orange juice futures prices for years. In recent years, citrus canker and citrus greening have been cutting into the yields of orange juice producing regions. Orange juice futures and options are used by end users, producers and speculators to offset or benefit from large orange juice futures price moves.

 

Are you an orange juice hedger? If so, click here to learn more.

 

Orange Juice Options on Futures Contracts Explained

A orange juice call option gives the purchaser the right but not the obligation to purchase the underlying futures contract for a specific time period and a specific price (strike price). Let's say that you wanted to purchase a January orange juice $1.00 call option and pay a premium of $1,200.

This means that you bought the right but not the obligation to buy 15,000 pounds of January frozen concentrated orange juice for $1.00 per pound. Of course, very few options are bought for the purpose of taking delivery but that is one potential outcome. Chances are that you either bought the orange juice option to hedge your price risk in the physical orange juice market (you may be a producer and own orange groves or you may be an end user) or you are speculating that orange juice prices will go higher in an attempt to make a profit.

A orange juice put option gives the purchaser the right but not the obligation to sell the underlying futures contract for a specific time period and a specific price. Let's say that you wanted to buy a January orange juice .90 cent put option and pay a premium of $2,500.

This means that you have the right but not the obligation to sell 15,000 pounds of January orange juice at .90 cents per pound.

What is the delta factor?

The delta factor of an option represents the estimated percentage of change an option will receive based on the movements in the underlying futures contract.

Let's assume the January orange juice $1.00 call option above has a 30% delta factor. This means that if the underlying futures contract were to rally by $1,000, then the call option would accrue by approximately $300 or 30% of $1,000 in the orange juice futures contract.

What is theta?

Options are wasting assets which means that they lose value as time passes. The theta of an option is the measure of time decay.

Let's assume that you bought a January orange juice $1.00 call option with 60 days left until expiration. Let's also assume that the orange juice futures prices have moved very little over the last month and are exactly the same price 30 days later. Your option will have lost 30 days worth of time and therefore will be worth less today that it was when it had 60 days left until expiration.

What is vega?

Vega is a measure of the implied volatility of an option contract as it relates to its underlying futures contract. For instance, if the underlying futures contract is extremely volatile then the implied volatility of the options of that futures contract will be affected.

In a high implied volatility environment option premiums tend to expand. Conversely, in a low implied volatility environment the option premiums tend to decrease.

 

*Contract information changes from time to time. Please click here to see the most recent contract specifications and click here for the most recent trading hours.

 

ICE Frozen Concentrate Orange Juice (FCOJ) Contract Specifications
Orange Juice Futures and Orange Juice Options

 

Trading Unit - 15,000 lbs. of orange solids (3% more or less).

Trading Hours - 8:00 a.m. - 2:00 p.m. (NY time).

Price Quotation - Prices quoted in cents and hundredths of a cent.

Trading Months - January, March, May, July, September, November with at least two January months listed at all times.

Futures Ticker Symbol - OJ

Minimum Fluctuation - 5/100 of a cent per pound ($7.50 per contract).

Last Trading Day - 14th business day prior to the last business day of the month.

First Notice Day - First business day of contract month.

Daily Price Limit - Daily limit: 5 cents ($7.50 per contract) above or below the previous day's orange juice futures settlement price.
Spot Month Limit: A moveable 10 cents ($1500 per contract) above or below the previous day's orange juice futures settlement price.

Point Value - $1.50

 
   
   
   

 

Orange Juice Options

Trading Unit - One Orange Juice Futures Contract

Price Quotation - Prices quoted in cents and hundredths of a cent

Trading Months - In addition to a February options contract, each listed futures month will have its option month listed for trading (two Januaries, March, May, July, September, November). In addition, the newest calendar month which is not a futures month will be listed (April, June, August, October, and December).

Ticker Symbol - OJ

Minimum Fluctuation - 5/100 of a cent per pound ($7.50 per contract)

Last Trading Day - The third Friday of the month preceding named option month

Expiration Date/Time - Until 5:00 p.m (New York time) on any trading day including last trading day.

Daily Price Limits - None

Strike Price Increments - 5 cent increments for all contract months

Minimum Price Fluctuation - 1/100 of a cent

**Click Here Now! for actual orange juice futures and options quotes, prices, expirations, charts .....

 

The No Nonsense Guide to Buying and Selling Options

 

 

To visit other soft commodities go to cocoa futures, coffee futures, sugar futures and cotton futures.

 

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The information presented in this commodity futures and options site is not investment advice and is for informational purposes only. No guarantees are being made to its accuracy or completeness. This information can be considered a solicitation to enter into a derivatives trade. Investing in futures and options carries substantial risk of loss and is not suitable for some people. Past or simulated performance is not indicative to future results.