• Sellers need to finance margins and possibly AA transactions!

    It is much more complex for exporters to sell buyer's call as they will need access to a futures account, either directly or indirectly.

    An exporter without access to futures trading is entirely exposed, not only to the buyer's whims but also to the risk that the market may collapse without them being able to cover themselves. Some trade banks provide all-in credit packages that include hedging and provision for margin calls. This is discussed further in Chapter 10.

    In the United States most buyers fix their purchases by AA (against actuals) transfers, or on a 'give up' basis, so a seller needs the financial ability to handle the margin requirements when accepting the buyer's longs on the exchange when the buyer gives them up.

    An AA transfer is an open outcry transaction allowed by the exchange that can be executed at any price, without others able to participate. AA transfers were developed only for trading against cash market coffee. If the market is volatile, payment of variation margins might become a factor. While most AA transfers are priced within the daily trading range, some buyers may want to give up futures lots at prices that are well out of the day's trading range. A seller who has previously agreed to this will have to come up with the variation margin on such high-priced longs. They will recoup this when the coffee is delivered but the cost of financing that variation margin will be lost.

    In each strategy - straight futures hedging, PTBF or AA - the common goal is to lock in a price and thereby manage risk exposure.
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