VCMX Tutorial Part 1 Onsight Classroom Training

Less than one week

2 Days On Site Course Sponsor

 

INTRODUCTION TO DERIVATIVES

 

"How it all works"

 

Grains and Oilseeds are renewable resources with continuously fluctuating global supplies, largely determined by crop production cycles, weather and ongoing shifts in global market demand.  Grain and Oilseed futures and options serve commodity producers, end users and trading intermediaries seeking price risk management and price discovery tools.

In addition, these tools provide market liquidity, providing traders and investors with a vehicle to capitalize on the diverse opportunities agricultural markets have to offer.

8:00- 8:30 Registration Desk Course Sponsor

 

09.00      How it all works (Video) CME Group

 

09.15      Standard form Exchange cleared contracts, definitions and examples

               Futures,Options on Futures, Swaps/OTC

 

10:45 Coffee

 

TRADE GOVERNANCE/CFTC/CLEARING

 

11:00     Introduction to Financial Clearing, “buyer to every seller, seller to every

              buyer”, securing the transaction (Video)

            

              CFTC oversight (Commodity Futures Trading Commission)

              Clearing (Robust Trade Governance)

              Exchange Board of Governors
              Exchange Risk Committees

              Exchange Advisory Committees
              Exchange Default Management Committees

 

12:00     Lunch

 

BILATERAL CASH CONTRACTS vs CLEARED TRADES

 

13:00   Differences between common bilateral cash contract markets and financial

            cleared transactions

 

1.            Buyers Contracts vs Standard Form Cleared Derivatives and OTC contracts
2.            Payment assurance (cash margin accounts/performance bonds/mark to market)
3.            Member requirements (Clearing members FCMs/customers of clearing members)
4.            Clearing Memberships (Guarantors of customer accounts)
5.            Cleared transactions ( A trade guaranteed by a Futures Commission Merchant              that is a Clearing Member of a Clearing House
6.            Acceptable performance bonds
7.            Customer Gross Margin accounts
8.            Segregated funds FCM and its customers
9.            Price Discovery
10.            Transaction Anonymity
11.            Member Discipline

 

14:00                   

              Practical Exercise, Case Study – Cash Margin Transactions through a Clearing

                                                                 member

 

                   Margining a futures transaction ( initial margin/maintenance margin)
                   Margining an options transaction ( option premiums/maintenance margins)
                   Margining an OTC swap

 

15:00 Coffee Break

 

Hedging and Basis – The link between derivatives and cash markets

 

15:15  

 

Regulated Derivatives Exchanges do not in any manner participate in the process of price discovery. The Exchange is neither a buyer nor seller of contracts, nor does it have a role in the price level which prevails at any point in time. The role of the Exchange is to provide a central and governed market place for buyers and sellers of regulated derivatives contracts (futures/options/OTC)

 

Traditional bilateral cash contract markets are unregulated and subject to a high degree of contract variation in both form, terms and settlement process and an absence of trade governance

 

The process of hedging attempts to link existing cash and derivatives markets through the concept of basis

 

15:30 Practical Exercise, Quiz 1 Page 7 and 8 Self Study Guide to Hedging with Grain

                                                                        and Oilseed Futures and Options

 

16:00  Hedging with Futures and Basis

 

           The short hedge (futures)
           The long hedge (futures)
           Basis and the short hedger
           Basis and the long hedger

           Storage hedge (futures)
           Cash for futures

           Concept of carrying charges

 

17:00  End of Day 1 – Home Study Examples for Review Day 2, pages 17-22 Self Study Guide to Hedging with Grain and Oilseed Futures and Options

 

Day 2

 

8:30    Hedging with Options and Basis

 

            Review of assignment Day 1

 
            Quiz 4 page 23 Self Study Guide to Hedging with Grain and Oilseed Futures

            and Options

 

Commodity Options

 

When buying an option, a hedger is protected against an unfavorable price change but, at the same time, can take advantage of a favorable price change. In addition, buying an option does not require performance bond/margin, so there isn’t any risk of receiving a performance bond/margin call

 

Introduction to Options Video

 

9:00   What are commodity options? definitions and basic terminology

 

           Puts and Calls
           Strike Price
           Time to Expiration
           Underlying Interest
           Premium

 

10:00 How are options traded?

 

All buying and selling in regulated futures contract options occurs through competitive bids and offers made via the Exchange. An important difference between futures and options contract markets is trading in futures contracts is based on prices, while trading in options is based upon premiums

 

10:30 Coffee Break

 

10:45 Option Pricing

 

           Intrinsic Value
           Time Value
           At the Money
           In the Money
           Out of the Money

 

Practical Exercise, Quiz 5 Page 29, Quiz 6 page 32 Self Study Guide to Hedging with Grain and Oilseed Futures and Options

 

12:00 Lunch

 

13:00   How do you close an open option position?

 

           • Offset

           • Exercise

           • Expiration

 

Practical Exercise, Quiz 7 page 37, Self-Study Guide to Hedging with Grain and Oilseed Futures and Options

 

14:00   Basic Option Hedge Strategies

 

           Buying Put options against unsold inventory
           Buying Call options against forward cash contracts
           Selling Put Options to  lower cash contract purchase prices in a stable market
           Selling Call Options to collect storage income anticipating strengthening basis

 

         Practical Exercise, Quiz 8 page 42, Quiz 11 page 52, Self-Study Guide to Hedging

         with Grain and Oilseed Futures and Options

 

15:00    Coffee Break

 

15:15   Other Strategies for Marketing Commodities

 

A commodity marketer (seller/buyer) should be acquainted with all of their alternatives and understand when a specific strategy should be employed or revised.  A marketing strategy and contracting that worked effectively for one

commodity sale/purchase may not be the best for your next commodity transaction in the next production/marketing cycle

 

Review of current market conditions and risk management issues Illustrate current potential marketing strategies using, cash, futures and options contracts,  facilitator led with current online market prices and cash contracting opportunities

 

14:00 Introduction to the VCMx Exchange - Overview

 

The VCMx Exchange platform brings the information, infrastructure, verification, transactional assurance, trade governance, and exchange associated services needed for large-scale product differentiation in global markets.

 

By allowing buyers access to specific crops, varieties and quality attributes, and then identity preserving the product, the inherent value can be captured facilitating direct marketing value chains.

 

The VCMx exchange will act to reduce transaction costs and ensure security for any trade specialty or otherwise, transacted across its international secured negotiable transaction platform, Value Chain Management

 

As VCMx buyers and sellers and service providers see the economic opportunity, there will be incentives to shift from undifferentiated commodities to value add products and services, and more efficient global value chains

 

http://www.vcmx.ca

 

"Building and Managing Global Value Chains"

 

 

 

 

 

$1200 Cdn funds + GST

$1200 Canadian Funds + GST

 

Course cost includes training materials and credit towards VCMx Exchange Membership requirements as amended by VMx International Governance Council

 

 

 

 

 

Principal Traders ( Buyers/Sellers)

 

Logistics Asset Owners (terminal operations, primary elevators, track loading facilities, farm site loading faciltators, processors, warehouse operators, transportation asset owners, rail, trucking, ocean marine

 

Physical Product and Logistics brokers

 

Professional Trade Services Providers (grading, agronomy,insurance,accountants, legal, foreign exchange, banking, consultants, educators)

Certificate

Participants will receive 25 Continuing Professional Development Credits VCMx Exchange for this 2 day programme

 

Course materials and supplemental information will be provided electronically by the VCMx Exchange 1 week prior.

 

Participants are required to bring the materials to the course either electronically or in paper form to refer to.

 

Lectures are provided in the English language

Classroom
On-site/On-farm

On sight classroom ( boardroom) training

 

Site location to be determined by Course Sponsor (Course Broker)

 

The course is taught through a blend of lectures, online visual presentations, questions and answers and practical written exercises base around real worls examples and case studies

Year-round

Booking Terms and Conditions:

 

Payment is due on booking—payment is due irrespective of attendance once an indication has been made to attend—this may be by completion of an on-line or manual booking form or by sending of any communication indicating an intention to attend this event. 

 

The event will only be confirmed when 20 registrations are confirmed—the organisers will notify participants 4 weeks in advance if the event is not proceeding due to a lack of subscribers.

 

Course details contained here are provisional.  The organisers reserve the right to change the speakers at any time. Course materials, additional documents, and case studies will be provided in English in advance for participants to be able to review.  Participants are required to bring copies of materials with them to the course, as well as sufficient paper to take notes.

 

Cancellation Terms:

 

Delegates wishing to cancel their place on this course must inform VCMx Exchange Education Department in writing, and receive written confirmation of receipt of this cancellation 1 month prior to confirmed course date  Full payment will remain due for any cancellations received after this date.  Delegate substitutions may be made at any time to course commencement

General

Business Planning, Strategy and Structure
Financial Management (includes production economics)
Marketing (includes value added)

Managing Commodity Price and Market Risk - Derivatives Contracts Part 1

 

In North America , trading futures began in the mid-19th century with the establishment of central grain markets where farmers could sell their products either for immediate delivery, also called the spot or cash market, or for forward delivery.

 

These forward contracts were private contracts between buyers and sellers and became the forerunner of today’s exchange-traded futures and options contracts.

Both forward contracts and futures contracts are legal agreements to buy or sell an asset on a specific date or during a specific month. Where forward contracts are negotiated directly between a buyer and a seller and settlement terms may vary from contract to contract, a futures contract is facilitated through a futures exchange and is standardized according to quality, quantity, delivery time and place.

 

The only remaining variable is price, which is discovered through an auction-like process that occurs on the Exchange trading floor or via CME Globex, CME Group’s electronic trading platform.

 

With the backing of Centralized transaction Clearing, the financial integrity of derivative markets is unsurpassed. 

 

The course will provide the introductory knowledge required for students to participate in global derivatives markets such as the CME and an introduction to global verified, secured cash contract trading on the VCMx, Part 2 in the training series

 

English

306-539-3559 C
306-789-4164
Visit the program Web site
Darhl Vercaigne, President