Managing commodity price risk through physical contracts
StoneX’s award-winning risk management consultants combine deep market intelligence and global commodity market access to provide clients with effective hedging strategies that mitigate risk and protect from financial loss.
Three reasons to have physical commodities as part of your risk management hedge strategy
- Hedging establishes an equal and opposite position relative to the cash market so that volatility’s impact on margins can be minimized.
- A properly designed hedging strategy not only protects your company from the financial consequences of commodity volatility, but also provides management with vital decision-making information.
- A hedging strategy is the overarching solution to procuring the materials you need to protect your company’s supply chain against fluctuating commodity prices.
The StoneX approach to risk management via physical contract
A strong hedging strategy to counteract commodity price volatility will help maintain consistent revenue forecasts, anticipate accurate operating costs and profit margins, execute cost-efficient expansion plans, and deliver premium-quality customer service. Explore why customers choose StoneX for their hedging needs.
Hedging with futures
The StoneX price-risk management team helps clients lessen the risk of a loss in the cash market by taking an opposite position in the futures market.
The short hedge
We help our commodity producers and users utilize a short hedge to lock in a known selling price so that future price fluctuations will not matter for their operations.
The long hedge
We help our commodity clients utilize a long hedge to protect against rising prices so that input requirements are met regardless of commodity price volatility.
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FAQ
What are common hedging strategies?
Common hedging strategies include diversification, future and options trading, and pairs trading. Diversification involves investing in multiple different assets, spreading risk across investments in order to help protect against market volatility. Future and options trading involves buying or selling an option on a security or commodity. The holder can then buy or sell the underlying asset at a certain price within a certain period of time. Pairs trading involves opening a long position in an undervalued asset while shorting on its overpriced counterpart. The trader stands to make a profit when the assets return to their original correlation rate.
StoneX: We open markets
Our market expertise, advanced platforms, global reach, culture of full transparency and commitment to our clients’ success all set us apart in the financial marketplace.
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GlobalityWith access to 40+ derivatives exchanges, 180+ foreign exchange markets, nearly every global securities marketplace and numerous bi-lateral liquidity venues, StoneX’s digital network and deep relationships can take clients anywhere they want to go.
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TransparencyAs a publicly traded company meeting the highest standards of regulatory compliance in the markets we serve; our financials and record of accomplishment are matters of public record. StoneX’s commitment to “doing the right thing over the easy thing” sets us apart in the industry and helps us build respect, client trust and new partnerships.
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ExpertiseFrom our proprietary Market Intelligence platform, to “boots on the ground” expertise from award-winning traders and professionals, we connect our clients directly to actionable insights they can use to make more informed decisions and achieve their goals in the global markets.
© 2024 StoneX Group Inc. all rights reserved.
The subsidiaries of StoneX Group Inc. provide financial products and services, including, but not limited to, physical commodities, securities, clearing, global payments, risk management, asset management, foreign exchange, and exchange-traded and over-the-counter derivatives. These financial products and services are offered in accordance with the applicable laws in the jurisdictions in which they are provided and are subject to specific terms, conditions, and restrictions contained in the terms of business applicable to each such offering. Not all products and services are available in all countries. The products and services offered by the StoneX Group of companies involve risk of loss and may not be suitable for all investors. Full Disclaimer.
This website is not intended for residents of any particular country, and the information herein is not advice nor a recommendation to trade nor does it constitute an offer or solicitation to buy or sell any financial product or service, by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. Please refer to the Regulatory Disclosure section for entity-specific disclosures.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc. The information herein is provided for informational purposes only. This information is provided on an ‘as-is’ basis and may contain statements and opinions of the StoneX Group of companies as well as excerpts and/or information from public sources and third parties and no warranty, whether express or implied, is given as to its completeness or accuracy. Each company within the StoneX Group of companies (on its own behalf and on behalf of its directors, employees and agents) disclaims any and all liability as well as any third-party claim that may arise from the accuracy and/or completeness of the information detailed herein, as well as the use of or reliance on this information by the recipient, any member of its group or any third party.
StoneX Commodity Solutions, LLC (“SXCS”), a subsidiary of StoneX Group Inc., trades in a variety of physical commodities, and offers customers services to help manage the risks associated with their physical product. Trading over-the-counter and exchange-traded derivatives is not suitable for all investors and involves substantial risk. This material does not constitute investment research and does not take into account the particular investment objectives, financial situations, or needs of individual clients or recipients of this material. You are directed to seek independent investment and tax advice in connection with derivatives trading.
© 2023 StoneX Group Inc. All Rights Reserved.
StoneX Financial Pte. Ltd. ("SFP") (Co. Reg. No 201130598R) is regulated by Monetary Authority of Singapore and holds a Capital Markets Services Licence (CMS100476) for Dealing in Securities, Collective Investment Schemes, Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading, is an Exempt Financial Advisor under the Financial Advisors Act 2001, and is a Major Payments Institution (PS20200625) under the Payment Services Act 2019 for Cross Border Money Transfers.
StoneX Financial (HK) Limited ("SHK") (CE No.: BCQ152) is regulated by the Hong Kong Securities and Futures Commission for Dealing in Securities and Dealing in Futures Contracts.
StoneX APAC Pte. Ltd. (“SAP”) (Co. Reg. No 200616676W) is regulated as a Dealer (PS20190001002) under the Precious Stones and Precious Metals (Prevention of Money Laundering and Terrorism Financing) Act 2019 for purposes of anti-money laundering and countering the financing of terrorism. SAP is an “Approved International Trading Company” authorized to act as a “Spot Commodity Broker” under the Commodity Trading Act.
SFP acts as an appointed agent for SFL's payment services business.