Option

An option may be suitable if you require protection against adverse commodity price movements but also want to benefit if prices move in your favour.

Benefits

• Price protection - you receive protection against adverse commodity price movements through a guaranteed worst case price.
• You are not locked into a fixed price and have the potential to benefit from favourable commodity price movements.
• Customisation - you determine the quantity of the commodity you want to cover, the timeframe, the option style, the currency and the price protection level that suits your needs.
• Simplicity - do the transaction in the currency of your choice. By transacting in Australian dollars, you eliminate the need to hedge the associated foreign currency exposures.

Points to consider

• The transaction does not cover the basis risk, which is the risk arising from entering into the transaction not being identical to the risk being covered.
• You must pay a premium to the Bank to enter into an option transaction. The transaction may expire worthless resulting in the premium being an additional cost to you.
• For an example of how an option works, click here.   

Important information about advice
As this advice has been prepared without considering your objectives, financial situation or needs, you should, before acting on the advice, consider its appropriateness to your circumstances. View our  Financial Services Guide (PDF 59kb).

View the Product Disclosure Statement (PDS) for Agricultural Options (PDF 141kb) issued by the Commonwealth Bank of Australia, and consider it before making any decision about the product.