Commodity Markets

Overview:

Introduction:

This training program provides a thorough overview of commodity products, trading strategies, and financing methods. This program equips individuals to navigate commodity markets successfully and optimize trading outcomes.

Program Objectives:

At the end of this program, participants will be able to:

• Review and fully comprehend the methods and processes used in the cash market.

• Gain knowledge of the regulatory frameworks

• Describe how risk is managed using derivatives and structured products.

• Describe the workings of several related derivative products as well as collateralization requirements and problems.

• Understand intuitively the pricing, hedging, and other problems related to derivative products.

Targeted Audience:

• Managers of corporate risks.

• Dealers, Brokers, and Traders.

• Asset Managers.

• Managers of Sales Compliance.

• Portfolio Directors.

• Audit.

• Employees in accounting and finance departments.

Program Outline:

Unit 1:

Commodity Market Structure and the Corporate Risk Environment:

• Corporate operations and the role of commodity risk.

• Commodity market categories.

• The unique nature of physical vs financial assets.

• Market characteristics: Exchange traded vs OTC.

• Price discovery and market transparency.

Unit 2:

Market Participants:

• Ags, Energies and Metals – who are the participants.

• Speculators, hedgers and investors.

• More detail on energy markets – products, suppliers and consumers.

• More detail on Metal markets – products, suppliers and consumers.

• More detail on Ag markets – products, suppliers and consumers.

Unit 3:

Primer on Derivatives: Linear Products:

• The role volatility, black swans and market blow-ups.

• Pricing forwards and futures.

• The cost of carry model.

• Mean reversion in commodity pricing.

• Hedging and risk reduction.

Unit 4:

Option Trading II:

• How option prices change.

• American vs. European options.

• Option spread trading – money spread and calendar spread.

• Taxonomy of option trading methods.

• Trading strategies involving two options.

• Trading strategies with three or more options.

Unit 5:

Adjusting risk exposure with option trades:

• Understanding risk exposure and its significance in trading decisions.

• Identifying strategies to manage risk through option trades.

• Hedging techniques using options to mitigate downside risk.

• Adjusting risk exposure dynamically based on market conditions and portfolio objectives.

• Evaluating the effectiveness of option trades in achieving risk management goals.