These are financial contracts that provide the seller of a commodity with the assurance of receiving a minimum selling price whereas the buyer is ensured a maximum purchase price to pay – therefore acting like insurance. Buying an option contract gives the holder or buyer of the option the right (not obligation) to buy or sell a specified quantity of a commodity (also called the underlying) for a specified price on or before a specified date in the future. It is common practice in grain trade calls and puts to refer to options on futures (i.e. the futures contracts are the underlying). There are two basic types of options: call options and put options.
