Have you ever thought about trading sugar futures? Have you ever considered learning more about futures trading in general?
If you answered yes to either of the above questions, then the tastytrade program Splash Into Futures with Pete Mulmat might be just the ticket for you!
Pete Mulmat has extensive experience trading a wide range of futures products and started at tastytrade by sharing some best practices in the field as a guest on various programs. Pete received such a warm reception that he is now hosting Splash Into Futures as well as Meet With Pete, the latter being an interactive show in which Pete answers futures-related questions from viewers.
In one of Pete's recent episodes of Splash Into Futures, he takes his audience on a deep dive through the realm of sugar futures. This session can serve as a perfect introduction to the futures product in general or as another key building block in your broader futures trading education.
Pete starts out the show by detailing some foundational aspects of the sugar industry as well as an overview of the typical market participants in this product. Pete explains that traders of sugar futures can range across a wide group of interested parties, including: sugar millers, sugar refiners, end users, managed funds, institutional investors, and shorter-term traders.
The Sugar No.11 (/SB) contract is the world benchmark for raw sugar trading and prices the physical delivery of raw cane sugar, whereas the White Sugar futures contract (W) is used as the global benchmark for the pricing of physical white sugar.
The graphic below details the key differences between raw cane sugar and physical white sugar:
Sugar No.11 futures are traded on the ICE exchange in the US under ticker symbol /SB and are priced in cents and hundredths of a cent per pound. The "Number 11" in the contract refers to the way shipping costs are handled between the buyer and the seller.
Pete explains that Sugar No.11 is sold "Free On Board (FOB)" which means the seller pays to ship the sugar to a port and is responsible for the loading costs. The buyer, on the other hand, is responsible for the unloading costs.
The trading particulars of Sugar No.11 and recent price action in the product are illustrated below:
While Pete provides numerous insights into trading sugar futures throughout the episode, he also explains some very interesting correlations between sugar and other futures products. Interestingly, Pete guides viewers through the introduction of sugar to the ethanol trade and why the correlation between the prices of sugar, corn, ethanol, and gasoline has been rising.
Pete notes in particular that the elimination of US tariffs on Brazilian ethanol at the end of 2011 made "the link between the sugar in your food and the gasoline blend in your car tighter than ever."
Whether you want to trade sugar futures, or merely want to better understand how this product relates to another commodity futures product that you already trade, we can't emphasize enough how useful this particular episode is for building up your arsenal of knowledge.
An added bonus is that you can follow up directly with our team on Twitter @tastytrade. Your question or comment may even be featured on a future episode of Meet With Pete!
If you have any immediate questions or suggestions, we encourage you to leave them in the "comments" section located below.
As always, we thank you for being a part of the tastytrade community!