A guide to Trading Cocoa Futures
Cocoa Futures are an ideal way to speculate on cocoa prices. Most of us are familiar with cocoa and it's uses in chocolate and other foods. It is a powder made from cacao seeds, after they have been roasted and stripped of most of their fat.
Cocoa Chart/
As you can see from the cocoa chart above, cocoa prices have not really shown any clear trend over the last two decades. However, despite this, prices have been very volatile on occasions.
Cocoa traders have the option of two Cocoa contracts that are commonly traded:
NYBOT CocoaThere is one on the NYBOT exchange. This contract represents 10 metric tons of cocoa. These contracts are priced US Dollars per ton. Each one dollar fluctuation in price is worth $10 on an open position.
LIFFE CocoaThis cocoa contract is traded on the LIFFE exchange. This contract represents 10 tonnes of cocoa. They are priced in British Pounds per ton. Each single pound fluctuation is worth £10 on an open contract.
Clearly, the NYBOT contract is for US traders who do not want any currency exchange risk and LIFFE contracts for British traders.
As with all futures, Cocoa trading can be extremely rewarding. However, although there hasn't been a clear long term trend in recent times, this item has been extremely volatile at times making it a high risk to trade.
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