10.7.1-RISK AND THE RELATION TO TRADE CREDIT-TRADE CREDIT TERMINOLOGY AND DEFINITIONS
Trade credit terminology and definitions
This list recaps some of the terminology and definitions in coffee trade.
- green coffee.
- coffee sold from/by origin.
- coffee subsequently sold on by overseas traders.
- coffee bought in expectation of later sale.
- coffee sold against expected future purchases or arrivals.
- immediately available coffee.
- coffee sold for later shipment, sometimes months ahead.
- trades standard qualities and quantities of coffee for future delivery at pre-determined ports during specific months or trading positions.
Paper trade or paper coffee
- trade in futures and other contracts that are offset against each other, i.e. do not result in physical delivery of coffee.
- premium or discount of 'our coffee' with respect to futures market.
Outright sale or fixed price sale
- the full selling price is set at the time of sale.
- price to be fixed: selling now at a known differential against the futures market with the futures price being determined later.
- the action to determine the futures price that, combined with the differential, will become the contract price for the physical coffee.
PTBF seller's call
- futures price to be called or fixed by the seller.
PTBF buyer's call
- futures price to be called or fixed by the buyer.
- the risk that the coffee price generally moves against us.
Basis risk or differential risk
- the risk that the differential moves against us.
- underlying security for advances, for example stocks.
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