About ASX Wool Futures & Options
What are Wool Futures?
ASX Wool Futures are standardised exchange-traded and centrally cleared forward contracts that specify a fixed quantity of wool for delivery or cash settlement at an established point in the future at an agreed price. ASX offers one deliverable and one cash settled Wool Futures contract. ASX wool futures contracts specify size, possible delivery location (s) and other terms and conditions.
What are Wool Options?
An Option is a contract between two parties giving the buyer of the option the right, but not the obligation, either to buy (call options) or sell (put options) the underlying Wool Futures contract at a set price, on or before a predetermined date. Options are financial products that, for the buyer of the option, effectively provide a form of price protection. Options are available over the Greasy Wool 21 micron contract.
History of ASX Wool Futures & Options
The Australian Securities Exchange (ASX) has had a long association with Australia's wool industry. In fact, ASX 24 (formerly SFE) commenced operations in 1960 as the Sydney Greasy Wool Futures Exchange.
The Wool Futures and Options contracts available through ASX provide participants in the wool industry with a way to manage price risk and a market to facilitate price discovery. They are important tools that can be used to protect businesses against adverse price movements in the often volatile physical wool market.
The ASX Group of companies, known as the Australian Securities Exchange (ASX), includes the combined operations of ASX (formerly the Australian Stock Exchange) and ASX 24 (formerly the Sydney Futures Exchange) which merged in July 2006.
The ASX 24 Wool Futures & Options products were listed in March 1995. The most actively traded contract is the deliverable Greasy Wool Futures 21 micron contract. The ASX 24 contracts are traded on ASX Trade24 and cleared through the ASX Clearing Corporation, in accordance with the governing ASX 24 Operating Rules and ASX Clear (Futures) Operating Rules.
The ASX Wool Futures contract is a deliverable contract traded on the ASX Trade and cleared through the ASX Clearing Corporation, in accordance with the governing ASX Operating Rules and ASX Clear Operating Rules.
Types of ASX Wool Futures & Options
There are six different wool futures contracts and one wool options contract listed and available to trade through ASX.
Benefits of using ASX Wool Futures & Options
There are a number of benefits that can be realised through ASX Wool Futures & Options, including:
- Price transparency: traded prices on ASX are public information and are available in realtime through market data vendors, this website (20 minute delay)
- Payment security: all trades are centrally cleared by the ASX Clearing Corporation which manages the financial integrity of the market
- Reduced production risk: ASX Wool Options provide wool producers with the flexibility to hedge price risk without having a production obligation
Who uses ASX Wool Futures & Options?
ASX Wool Futures and Options provide all industry participants with the ability to manage risk and discover price. Anyone with an interest in wool could potentially have an interest in the market. This includes;
International and domestic wool traders
International and domestic end-users
How can the market be applied?
There are a number of reasons why participation occurs in a futures and options market. The participant may be interested to:Hedge their particular market exposure or financing risk
Market their commodity by making or taking physical delivery
Speculate on the price direction or price correlation of a commodity/commodities
Arbitrage markets and thereby effect convergence with the physical market
Trade 'Grade Spreads' such as Fine Wool (19 micron) versus Greasy Wool (21 micron).
Trade 'Time Spreads' such as February versus April.
Trading and placing orders (to buy or sell) in ASX Wool Futures & Options
ASX operates two electronic markets, ASX Trade and ASX Trade24. Orders placed in the ASX Wool Futures & Options markets are matched on a strict time-price priority. This means orders that are matched (executed) will be executed at the price level of the order placed first.
When trading ASX Wool Futures & Options, your order is entered directly via a Participant into either the ASX Trade central market order book or ASX Trade24 (the ASX 24 trading platform) - these order books are available for the market to see. All orders are executed on a strict price/time priority. This means that the first order with the best bid or offer price is always executed first. To start trading, please contact an ASX Wool Futures & Options broker.
Risks of trading ASX Wool Futures & Options
ASX Wool Futures and Options are not suitable for all traders and investors. Before trading ASX Wool Futures and Options you should carefully assess your experience, investment objectives, financial resources and all other relevant considerations and consult your licensed financial services adviser. In particular, you should understand the implications of leverage, additional margin calls and unlimited losses on your investments.