- Trading orange juice has been increasingly popular around the world, with quantities continuing to rise.
- Farmers, processors, storage houses, market makers, and arbitrageurs are among the market participants who trade orange juice.
- Trading orange juice allows you to use a variety of financial products, such as futures and options.
- The fundamental asset in orange juice options trading is an FCOJ-A futures contract worth 15,000 pounds of concentrated orange juice solids.
Is it possible to trade orange juice futures?
Trading orange juice allows you to use a variety of financial products, such as futures and options. A futures contract is a legally binding agreement to buy or sell a commodity at a set price for delivery at a future date.
Is there an exchange-traded fund for orange juice?
Only if the price of FCOJ futures increases above the strike price by an amount greater than the premium paid for the contract does an options bet succeed.
To profit from their transactions, options traders must be correct about the size and timing of the move in FCOJ futures.
Buying Orange Juice ETFs
These financial products, like stocks, are traded on exchanges as shares.
There is currently no ETF that invests just in orange juice. The Elements Rogers International Commodity Agriculture Total Return ETN, on the other hand, trades in a wide range of commodities.
Where can you buy and sell orange juice futures?
The orange tree is a non-deciduous, semi-tropical tree, and the fruit is a hesperidium, a type of berry. The sweet orange, sour orange, and mandarin orange are the three principal types of oranges (or tangerine). Only sweet oranges are grown commercially in the United States. Hamlin, Jaffa, navel, Pineapple, blood orange, and Valencia are among them. Marmalade and liqueurs such as triple sec and curacao are made from sour oranges.
Oranges became the principal fruit crop in the United States after the development of Frozen Concentrated Orange Juice (FCOJ) in 1945.
Brazil is the world’s top orange juice producer, followed by Florida.
A cup of juice is produced by two to four medium-sized oranges, while advanced mechanical extractors can extract juice from 400 to 700 oranges per minute.
Orange oil is extracted from the peel prior to juice extraction.
The juice makes up around half of an orange’s weight, with the rest consisting of peel, pulp, and seeds, which are dried to make healthy bovine feed.
The marketing year for oranges in the United States begins on December 1st of the first year listed (e.g., the 2005-06 marketing year extends from December 1, 2005, to November 30, 2006).
During the U.S. hurricane season (officially June 1 to November 30) and the Florida freeze season, orange juice futures prices are vulnerable to upward increases (late-November through March).
The Intercontinental Exchange trades frozen concentrate orange juice futures and options (ICE).
The ICE orange juice futures contract is priced in cents per pound and calls for the delivery of 15,000 pounds of orange solids.
Supply – World orange production is expected to drop -10.9 percent year over year to 47.469 million metric tons in the 2019/20 marketing year. Brazil is predicted to be the world’s top producer of oranges in the 2019/20 marketing year, with 31.8 percent of global production, followed by China (15.4%), the European Union (12.3%), the United States (10.3%), and Mexico (9.3%).
Orange production in the United States increased by 36.1 percent year over year to 124.050 million boxes in 2018-19. (1 box equals 90 lbs). In 2018/19, Florida’s output increased by 59.3% year over year to 71.750 million boxes, while California’s production increased by +12.7 percent year over year to 49.800 million boxes.
The CRB Yearbook, the single most comprehensive source of commodity and futures market information available, provides information on commodities. Its sources – government reports, private industry reports, and trade and industry associations – are reliable, and its historical breadth for commodities data is unparalleled. The Barchart product range includes the CRB Yearbook. Please come to us for all your commodity data need.
Step-by-step instructions on how to trade futures
We’ve put together a step-by-step guide to help you learn how to trade futures. It covers everything from locating a brokerage/prop trading firm to technical analysis indicators, developing a trading strategy, practicing with real money, and the ultimate stage, the order’s settlement date.
Choose a Brokerage or a Prop Trading Firm
Futures trading can be done in two ways. These can be done through a brokerage or a firm that specializes in prop trading. These two techniques of trading futures have some significant distinctions, which we will discuss below.
Investing via a brokerage
The idea behind utilizing a broker is simple: to open an account, an investor approaches a broker, deposits funds, and then invests in futures. The broker executes all transactions at the client’s request, and the client reaps the profits or losses.
Investing via a prop trading firm
Proprietary trading, or prop trading for short, is when a trader is paid by a prop trading firm in the form of a salary, commission, or a combination of both. The trader is employed for the benefit of the firm and performs trades for internal personal/house accounts.
Learn about Economic Events
When trading E-mini S&P 500 Index futures, you are frequently trading economic events rather than the unique fundamentals of each component firm. You’ll discover that different economic events can have a significant impact on indexes and, by definition, futures contracts. The following are some of the major economic events:
Learn Technical Analysis Indicators
When you start looking into what moves markets, technical analysis, and different trading tactics, you’ll quickly realize the power of futures trading. You could believe that futures contracts are linked to the stock market. Futures contracts, on the other hand, can really move markets higher or lower.
Buying into an index
Whenever there is a favorable economic statement, it should improve the business climate, employment, and overall GDP growth. As a result, you decide to put your money into the S&P 500 index as a broad indicator of future company and economic possibilities. You can buy an S&P 500 index futures contract, the more cheap and highly liquid E-mini S&P 500 Index futures contract, instead of buying a share in each index component. In effect, you’re buying exposure to the S&P 500 index’s underlying components in one trade.
Futures contracts can be very volatile and move quickly. Several technical analysis indicators might help you focus on markets that are overbought or oversold. The Relative Strength Index is one such metric (RSI). It compares an index’s, stock’s, or commodity’s strength on up days to down days. This comparison is expressed as a score between 0 and 100, with 50 representing a balanced value. An RSI of 70 could indicate a short-term overbought condition, possibly indicating the start of a fresh bullish trend. Meanwhile, an RSI of 30 indicates an oversold condition or the beginning of a negative phase.
Traders will examine several forms of technical analysis indicators and take suitable action based on their findings. However, as we’ve seen, looking at a single indicator in isolation might leave a lot up to personal interpretation.
Learn about Risk Management
You must understand and implement a risk management strategy to be a successful futures trader (or any form of trader). In essence, this ensures that your heart never takes precedence over your head: it allows you to maximize earnings while minimizing losses. Minimizing your losses is just as important as running your winners!
Returning to our prior time machine scenario, let’s travel back to the 1800s. It makes sense for a grain producer exporting commodities halfway around the world to know the selling price before delivering. Then you may calculate your costs and earnings. In this method, the buyer can bring some consistency to their company’s pricing structure. The alternative is to load your ship and sail halfway around the world only to discover that grain prices have plummeted and you are losing money!
When trading futures, you can employ a variety of risk control measures. Setting stop-loss limits, employing futures contracts to safeguard an underlying investment portfolio, and establishing maximum exposure restrictions are just a few examples. For a trader/investor, especially those exposed to the fast-moving world of futures contracts, allowing your heart to govern your mind can be quite perilous.
Build a Trade Plan
It’s critical to create your own trade strategy. How can you plan how to go there if you don’t have a destination point? Individual trade plans will be unique and personal, and they will not be fixed in stone – you must always be adaptable. There are several considerations to be made, including:-
Individual trading strategy branch offshoots can be seen if you view your trade plan as the roots/foundations of a tree. The principle of your trade plan underpins and underpins everything.
Choose a Contract to Trade
It’s easy to fall into the trap of becoming a “jack of all trades, master of none.” Most of the time, however, it is preferable to concentrate on a single market and one form of futures contract (at least in the early days). Over time, you’ll likely discover that the skills/experience you’ve obtained can be applied to different markets and investments. Let’s look at the S&P 500 Index, which has both original futures contracts and E-mini S&P 500 Index futures. These futures contracts have drastically different values: –
It’s also a good idea to consider the margin requirements for various futures contracts. Your investment budget and overall strategy will be determined by this. As a result, pick a market that interests you and futures contracts that you can afford. Now it’s time to have some fun…..
Practice with Paper Money
So, you’ve thought about the different aspects of brokerage/prop trading firms, examined economic events that would affect your investments, studied technical analysis and risk management, and finally created a trading plan. To begin, select your market and the types of contracts that interest you and are compatible with your investment strategy. Then it’s time to get some experience with paper money!
The key to getting the most out of practicing with others is to start small “Staying true to your trade plan, trading tactics, and risk mentality is “paper money.” When you think about it, it’s a no-brainer “When you reach the point of “only paper money,” you should reconsider your viewpoint and suitability for investing in/trading futures contracts. This is the ideal setting for learning from your blunders. Learn to read markets and feel the difference between a profit and a loss.
If you choose to run The Gauntlet, it will track your progress as if you were making market deals. This is not the time to take a major risk in exchange for a huge reward. Futures trading is not all about taking big risks, contrary to popular opinion. Between a conservative and a speculative trader, there is an evident balance. There are times when you should be cautious and other times when you should be more daring. Finally, you must maintain control over whatever decision you choose.
Place and Monitor your Order
When you consider that futures contracts like the E-mini S&P 500 Index can be traded “after hours,” it’s evident that futures contract trading isn’t a weekend hobby. Futures contracts, such as the E-mini S&P 500 Index, are unique in that they may be traded online. You can place your order and keep track of prices on your laptop, desktop, or even your phone using apps. Set up limit alerts, regular updates, and everything else you need to maintain track of your open positions. Never overlook open market opportunities!
Watch for the Expiration and Settlement Date
Futures trading is a pretty easy process. Upon debut, each futures contract has a three-month expiry/settlement date. As a result, you may have contracts that expire in March, June, September, and December. There is, of course, the daily margin call adjustment, but that is something distinct.
While most futures contracts are closed before the expiration/settlement date, a contract may be maintained until it expires on rare occasions. Physical settlement (commodities, metals, etc.) or cash settlement are common in futures contracts, depending on the configuration. This would be a cash settlement in the case of the E-mini S&P 500 Index futures contract. The amount is determined by the index’s value on the contract’s settlement date.
Futures contracts must be monitored for expiry/settlement dates. Mostly because there will be additional fees if you keep them for the entire period. Additionally, your investment funds will be locked up until the settlement is completed.
Is it true that they exchange frozen concentrated orange juice?
NPR’s Planet Money is continually asking questions that we would never have thought to ask. They recently spoke with commodities traders to try to settle the 30-year-old issue of whether the film’s depiction of capitalist frenzy is accurate. Yes, in a nutshell.
It is possible to trade frozen concentrated orange juice. Traders do not arrive with carts brimming with small metal cans. Instead, they trade contracts stating that they will provide a particular amount of orange juice at a certain price (15,000 pounds at a time, not in small cans).
If you haven’t seen the movie in a long, or if you haven’t seen it at all, here’s a refresher plus some spoilers. (You ought to.) It’s held up better than most ’80s films, and you can watch it on Netflix or Amazon Prime. At Walmart, you can generally locate a copy in the bargain DVD bin.) The Duke brothers of Philadelphia, two wealthy jerks, plan to tamper with the lives of two individuals in order to resolve a feud. They plan the assassination of one of their employees, Dan Aykroyd’s Louis Winthorpe III. They steal his entire lifejob, expensive apartment, and alland pass it over to a particularly bright con guy they meet on the street: Eddie Murphy’s Billy Ray Valentine. Everything is taken away from the affluent trader, and he is forced to live on the streets.
Valentine recognizes the commodities dealers for what they are: extremely wealthy bookmakers. He and Winthorpe meet to discuss what transpired and plot their vengeance against the brothers. The brothers planned to profit handsomely in the frozen concentrated orange juice market by obtaining early harvest reports from the government through dubious means. The vengeance squad replaces it with a counterfeit and uses the information from the genuine report to make their own wealth and ruin the brothers.
How? The Duke brothers purchased up every ounce of orange juice they could find at any price after the phony report predicted disastrous crops, aiming to corner the market and sell it at a premium after other dealers learned of the crop failure. Prices rose as a result of other dealers following their lead. Meanwhile, Winthorpe and Valentine were selling orange juice futures at inflated prices, knowing that once the genuine crop report was released and prices fell, they’d be able to get dirt cheap orange juice elsewhere. They ruined their bosses by shorting the FCOJ.
In a movie, this is great because the rich bastards get their comeuppance, and hearing everyone say “frozen concentrated orange juice” over and over is hilarious. It’s also shocking that it’s fairly realistic. People really do trade massive quantities of frozen OJ, and people really can be financially devastated by making terrible bets on margin (credit), as the Duke brothers do in the movie, according to real traders contacted by Planet Money.
Part of the reason no one makes good Wall Street movies anymore, according to one of their experts, is that a modern version of Trading Places wouldn’t have traders jostling and yelling in the basement of the World Trade Center: instead, the action would be a bunch of guys and gals tapping away at computers, just like any other American office. Yawn.
The curious issue is that in 1983, insider trading based on ill-gotten unreleased government information was not banned in the commodities market. Sure, in the stock market, but not when it comes to commodities. That didn’t change until the Dodd-Frank Act of 2010, when the Eddie Murphy Rule was enacted.
If you haven’t already, watch the Planet Money episode, which covers a lot of ground we haven’t covered here, and view Trading Places if you haven’t already.
Are you looking for more consumer news? Consumer Reports, our parent company, has the most up-to-date information on scams, recalls, and other consumer issues.
In trading places, what does Winthrop say?
This is what it means: He wants to commit to selling orange juice for $1.42 a pound in April. The number “30” in his line denotes that he intends to begin by selling 30 contracts. (One contract is a lot of orange juice.) (Also, that “30” could be a different number.) It’s difficult to comprehend what he’s saying. But it makes no difference because they sell a lot of contracts.)
All other dealers believe the price will be higher than $1.42 in April. The traders swarm Winthorpe and Valentine, offering to buy large quantities of orange juice for $1.42 per pound.
What are futures on orange juice?
The FCOJ-A futures contract is the global frozen concentrated orange juice market’s benchmark contract. The contract specifies the price of physical delivery of US Grade A juice (graded by the US Department of Agriculture) in exchangelicensed warehouses around the United States. The United States, Brazil, Costa Rica, and Mexico are among the permitted countries of origin.
What is the composition of fresh orange juice?
Orange juice is made up of organic acids, sugars, and phenolic substances at the molecular level. Citric, malic, and ascorbic acid are the three primary organic acids found in orange juice. Sucrose, glucose, and fructose are the three main sugars contained in orange juice. Orange juice contains hydroxycinnamic acids, flavanones, hydroxybenzoic acids, hesperidin, narirutin, and ferulic acid, among other phenolic components.
Is there an ETF for sugar?
Overview of the Sugar ETF Sugar ETFs manages $54.56 million in assets through two ETFs that are traded on US exchanges. 1.17 percent is the average expense ratio. ETFs that invest in sugar are available in the following asset classes: Commodities.
What makes orange juice a commodity?
Orange juice is one of the few frequently traded futures contracts that is based on a tropical fruit, oranges. In the Western Hemisphere, oranges are widely grown, particularly in Florida and Brazil. Although Brazil is by far the largest producer of oranges, the United States, particularly Florida, is also a major participant.
Due to the perishability of oranges, the futures contract follows frozen concentrated orange juice (FCOJ). This form is ideal for storage and meets one of the requirements for futures trading: the underlying commodity must be deliverable. This contract can be bought and sold on the ICE. The FCOJ contract is available in two variants on the ICE: one that tracks Florida/Brazil oranges and another that is based on global production.
Orange production is extremely weather-dependent. Hurricane season, for example, which is prevalent in the Florida region, can have a big impact on orange prices, both on the spot market and in the futures market. During the hurricane-filled years of 20042005, the price of the FCOJ contract skyrocketed. When investing in FCOJ futures, keep weather and seasonality in mind.