Rapeseed put options give a buyer exposure to falling futures prices. Follow one contract from premium paid to its result at expiration.
How rapeseed options work
The examples use options on rapeseed futures. A call gives the right to enter a long futures position at the strike price. A put gives the right to enter a short futures position at that price.
A European crusher may buy rapeseed calls to help protect input costs. Canadian canola is a related but separate benchmark.
The cost of one option
One Euronext Paris contract represents 50 tonnes. At a premium of €20 per tonne, one option costs €1,000 (€20 × 50).
Assume the futures price and strike are both €450 per tonne. The call and put premiums are each €20 for comparison, not current quotes. Results below are at expiration, before fees, with any futures position from exercise immediately closed at the stated price.
Buying rapeseed puts
If you expect prices to fall instead, buying one €450 put costs €1,000 in this example.
At a futures price of €390 per tonne, selling at the strike gives an advantage of €60 per tonne. The option is worth €3,000 at expiration, leaving a €2,000 net profit after the premium.
At €450 or above, the put expires worthless. Breakeven is €430 per tonne. At €440, the price has fallen, but the put still loses €500: the move has not covered its premium.
Before expiration
An option can be sold to close before expiration when a market is available. Its price then includes the effect of remaining time and implied volatility, so an earlier trade need not break even at the expiration price calculated above.
The purchased option can lose its whole premium. Exercise can create a futures position requiring margin and exposing you to further gains or losses. An uncovered seller can lose more than the premium received.
Rapeseed price chart
EURONEXT rapeseed futures. A continuous futures chart joins contract months; it is not an individual expiry. Check the displayed quotation and timestamp.
