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  • Selling PTBF seller's call

     
     

    This is the easiest way to sell PTBF. With seller's call, an exporter does not need to have a futures trading account as they do not have to trade the futures. They can simply call the buyer and fix all or part of their contract as they cover the physical coffee for shipment. However, roasters almost always insist on purchasing basis buyer's call, so exporters who do not have access to the exchanges therefore often end up selling to trade houses or importers who can handle the hedging operations relatively easily. A number of large trade banks also provide risk solutions that enable producers and exporters to access price protection tools without necessarily having to deal directly with the futures exchanges.

    Example 

    • On 20 August the exporter sells short 2,000 bags of Prime Mexican October shipment of the same year PTBF against NYKC December, again of the same year, less 6 cts/lb, FOB Laredo.
    • On 20 September the exporter is able to buy the physicals at 50 cts/lb FOB equivalent and decides to buy or lock in at this price. NYKC December is trading at 59 cts/lb. The exporter calls their buyer and asks to fix the contract.
    • The buyer puts in the order to sell 8 lots December at 59 cts/lb with their futures commission merchant (FCM). There is a market uptick and the FCM is able to sell at 59.50. Thus the contract for the physicals is fixed at 59.50 less 6 = 53.50 cts/lb FOB Laredo. (In real life exporters should watch prices on the futures market, but should only expect to obtain the price they indicated for their fixing order.)

    A seller might want to delay price fixing beyond the time delivery is made or the documents are to be presented. Provided this has been stipulated in the contract, after shipment the coffee could be invoiced pro forma at a price ranging from perhaps 70% to 90% of the day's NYKC or LIFFE value plus or minus the differential. This would include a proviso that if the futures value fell, say 5 cents, the seller would have to put up margin or be closed out.

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