What is Crude Palm Oil Futures (FCPO)?
FCPO, or Crude Palm Oil Futures, is a tradable financial instrument that allows traders to speculate on the future price of crude palm oil without physically owning the commodity. It involves entering into a contract that specifies the buying or selling of a certain amount of crude palm oil at a predetermined price at a future date.
When traders engage in FCPO futures trading, they commit to buying or selling (going long or short) at a predetermined price on a specified future date. For example, if a trader predicts that the FCPO will increase in value, they can take a long position by purchasing FCPO futures contracts. Conversely, if they foresee a decrease in the crude palm oil price, they can take a short position by selling FCPO futures contracts.
Here are some basic and important terminologies of FCPO, explained;
Margin Requirements
A margin requirement of RM7,000 would mean the trader needs to maintain RM7,000 in their Webull Derivatives account to open a position.
Note: The required margin for FCPO is subject to change over time.
Contract Size
The contract size for FCPO is 25 Metric Tons (MT).
Trading Hours
Monday to Friday (Malaysia time)
- Morning trading session:10.30 a.m. to 12:30 p.m
- Afternoon trading session: 2:30 p.m. to 6:00 p.m.
Monday to Thursday (Malaysia time)
- After-hours (T+1) trading session: 9.00 p.m. to 11.30 p.m.
Contract Months
Contract months refer to the specific months in which Futures contracts for crude palm oil are available for trading.
These contract months are predetermined and typically follow a standardized schedule set by Bursa Malaysia Derivatives. Traders can choose to trade FCPO futures contracts that expire in different contract months, allowing them to take positions based on their outlook for the future price of crude palm oil.
For traders, the most active trading month usually will be the 3rd contract month of the contract which refers to the futures contract that is three months away from the current month. For instance, in May 2024, traders would actively trade the July 2024 FCPO contracts. Traders do not trade current month contract due to low liquidity.
Settlement: Physical Settlement
Physical settlement for FCPO refers to the obligation for traders to either deliver or receive the actual physical commodity, which in this case is crude palm oil, at a specified location and time as per the terms of the futures contract.
Traders may avoid trading near the contract expiry dateto prevent the physical settlement process because not all traders are equipped or interested in handling the actual physical delivery of the commodity. By closing out their positions before the deadline, traders do not have to worry about having to manage the logistics and costs associated with the physical delivery process.