What are cocoa futures?
Cocoa futures are exchange-traded contracts on the Intercontinental Exchange (ICE). Cocoa contracts price the physical delivery of exchange-grade cocoa from a variety of African, Asian and Central and South American origins to delivery ports in the U.S. Cocoa is a popular agricultural commodity (softs) that's strictly grown in hot, rainy climates, with cultivation generally confined to areas not more than 20 degrees north or south of the equator. However, because many of these regions are in politically unstable areas, cocoa futures can be very volatile, as the price of cocoa is heavily influenced by political factors.
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Cocoa futures trade at the ICE, with a contract size of 10 metric tons. An account approved to trade futures is required in order to trade cocoa futures.
Cocoa futures contract specifications
Considering trading cocoa futures? Here are the cocoa futures contract specifications.
|Exchange||Intercontinental Exchange, CC|
|Contract Size||10 metric tons|
|Minimum Tick Size and Value||1.00, worth $10.00 per contract.|
|Trading Times||Cocoa futures trade electronically on the ICE platform from 4:45 a.m. U.S. ET to 1:30 p.m. U.S. ET.|
|Principal Trading Months||Primary trading months for cocoa futures and options are March, May, July, September, and December.|
At Schwab, you also get access to advanced trading platforms and education, where you can take advantage of market research, real-time cocoa futures quotes, and other specialized tools.
Investors can use softs like cocoa futures or diversify their portfolio using investments that have a low correlation with their financial assets.
Traders can use cocoa futures to speculate on the price of cocoa, which can be very volatile due to where it's produced. With most production occurring in Western Africa, both political issues and weather events can result in short-term bottlenecks on cocoa supply. As a luxury food item, cocoa is also subject to fluctuations in demand based on consumer trends like a growth in incomes of emerging market countries, or interest in dark chocolate as a health food.
It is important to understand the benefits and risks involved with cocoa futures before placing a futures trade. Compared to traditional investments, with cocoa futures you can trade outside of the traditional market hours associated with equities and take advantage of trading opportunities regardless of market direction. Cocoa futures also provide the ability to trade with greater leverage and allow a more efficient use of trading capital. However, trading leveraged products like cocoa futures also involves the risk that losses can exceed the amount originally invested and may not be suitable for all investors.
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