How to Calculate a Coffee Futures Option
While calculating the price of a coffee futures option may seem like a complicated task at first glance, it's easy if you know what numbers to look for. The coffee options market, like all commodity options markets, is derived from an underlying commodity futures market. Once you find out how the futures market is priced, you can calculate options prices with ease.
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Instructions
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Note the point value of the coffee futures market. In the coffee futures market, one point is worth $3.75, or 375 cents.
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Study a coffee futures option table. You can view options tables for free on various financial and investment websites. Make sure you select the table for the contract month that you're considering. Options tables list options by strike price, and typically include information such as the opening price, daily high, daily low and closing price for each option along with other statistics such as trading volume and open interest.
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Notice that coffee options are available at strike prices occurring every five points. Use the strike prices to find the option you're interested in. For example, assume that the coffee futures market is trading at 142.7, and you want to buy the call option that is closest to the market price without being in the money. In this case, the option you're looking for is the one with a strike price of 145.
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Multiply the point value of the option by 375. This number relates to the point value in the underlying coffee futures market. Going back to the option with the 145 strike price, say you refer to the option table and find that this option closed at 6.83 for the most recent trading period. Multiply 6.83 by 375 and you get 2561.25. Therefore, the price of the coffee futures call option with a 145 strike price is $2,561.25.
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