Contract specification of CRUDE PALM OIL FUTURES (FCPO)

Dear Readers,

Alright, I think it is only appropriate that we begin by introducing the contract specification of the contracts that we will be focusing on for the benefit of new traders.

One of the most active futures contracts traded on the Bursa Malaysia Derivative Berhad is the Crude Palm Oil Futures. 

The crude palm oil is extracted from the oil palm which is a tree grown extensively in South-East Asia. According to wikipedia, the oil palm produces 3 types of edible oils namely palm oil, coconut oil and palm kernel oil. This tree originated from West Africa and the tree was introduced to Malaysia in 1870 and was grown on a commercial basis from 1917.

The oil palm yields more oil than any other oil-bearing plant. A hectare of oil palm plantation yields oil production of about 5 times greater than that of groundnut and nine times greater than that of soybean, which makes palm oil a major part of the world market for all fats and oils.

The oil are being used for purposes such as cooking oil and shortening, in the manufacture of soap, margarine, vegetable ghee and a wide range of other products.

Daily volume traded for the 3rd month (active month) of the FCPO futures contract average about 10,000 to 15,000 and with a total open interest of between 30,000 to 45,000.

Total open interest can vary and the current open interest for all the months combined average at about 125,000.

I will write more about how we can trade the FCPO with examples of how we can use the FCPO for outright position trading, hedging and also spread trading in the future.

Till then, adios! :)

Sincerely,

Tech Trader

Here are the contract specification taken from Bursa Malaysia's website:

Crude Palm Oil Futures (FCPO)

Contract Code	FCPO
Underlying Instrument	Crude Palm Oil
Contract Size	25 metric tons
Minimum Price Fluctuation	RM1 per metric ton
Daily Price Limits	With the exception of trades in the spot month, trades for future delivery of Crude Palm Oil in any month shall not be made, during any one Business Day, at prices varying more than 10% above or below the settlement prices of the preceding Business Day (“the 10% Limit”) except as provided below. When at least 3 non-spot month contracts are trading at the 10% Limit, the Exchange shall announce a 10-minute cooling off period (“the Cooling Off Period”) for all contract months (except the spot month) during which trading shall only take place within the 10% Limit. Following the Cooling Off Period, all contract months shall be specified as interrupted for a period of 5 minutes, after which the prices traded for all contract months (except the spot month) shall not vary more than 15% above or below the settlement prices of the preceding Business Day (“the 15% Limit”). If the 10% Limit is triggered less than 30 minutes before the end of the first trading session, the following shall apply:- the contract months shall not be specified as interrupted; the 10% Limit shall be applied to all contract months (except the spot month) for the rest of the first trading session; and the 15% Limit shall be applied for all contract months (except the spot month) during the second trading session. If the 10% Limit is triggered less than 30 minutes before the end of the second trading session, the 10% Limit shall be applied to all contract months (except the spot month) for the rest of the Business Day.
Contract Months	Spot month and the next 5 succeeding months, and thereafter, alternate months up to 24 months ahead
Trading Hours	First trading session: Malaysian time: 10:30 a.m. to 12:30 p.m. Second trading session: Malaysian time: 3:00 p.m. to 6:00 p.m.
Speculative Position Limits	Maximum number of net long or net short positions to be held: 500 contracts for the spot month 5,000 contracts for any single delivery month except for the spot month 8,000 contracts for all contract months combined
Final Trading Day and Maturity Date	Contract expires at noon on the 15th day of the delivery month, or if the 15th is a non-market day, the preceding Business Day.
Tender Period	1st Business Day to the 20th Business Day of the delivery month, or if the 20th is a non-market day, the preceding Business Day.
Contract Grade and Delivery Points	Crude Palm Oil of good merchantable quality, in bulk, unbleached, in Port Tank Installations approved by the Exchange located at the option of the seller at Port Kelang, Penang/Butterworth and Pasir Gudang (Johor). Free Fatty Acids (FFA) of palm oil delivered into Port Tank Installations shall not exceed 4% and from Port Tank Installations shall not exceed 5%. Moisture and impurities shall not exceed 0.25%. Deterioration of Bleachability Index (DOBI) value of palm oil delivered into Port Tank Installations shall be at a minimum of 2.5 and of palm oil delivered from Port Tank Installations shall be at a minimum of 2.31.
Deliverable Unit	25 metric tons, plus or minus not more than 2%. Settlement of weight differences shall be based on the simple average of the daily Settlement Prices of the delivery month from: the 1st Business Day of the delivery month to the day of tender, if the tender is made before the last trading day of the delivery month; or the 1st Business Day of the delivery month to the Business Day immediately preceding the last day of trading, if the tender is made on the last trading day or thereafter.