- Published on
KembaraXtra – Islamic Derivatives: Call & Put Options Using Palm Oil (Malaysia Example)
🔹 Call Option (Palm Oil Example 🌴)
👉 A call option gives the right to buy palm oil at a fixed price.
🔸 Scenario
👉 If market price rises to RM4,500:
👉 If market price falls to RM3,800:
🔹 Put Option (Palm Oil Example 🌴)
👉 A put option gives the right to sell palm oil at a fixed price.
🔸 Scenario
👉 If market price falls to RM3,500:
👉 If market price rises to RM4,300:
🔹 Why This Example Is Important
🔹 Simple Summary
🔹 Call Option (Palm Oil Example 🌴)
👉 A call option gives the right to buy palm oil at a fixed price.
🔸 Scenario
- You pay a premium of RM50
- You get the right to buy 1 ton of palm oil at RM4,000 (strike price) in 1 month
👉 If market price rises to RM4,500:
- You buy at RM4,000
- Market value = RM4,500
- Profit = RM500 − RM50 = RM450 ✅
👉 If market price falls to RM3,800:
- You do not use the option
- Loss = RM50 (premium) ❌
🔹 Put Option (Palm Oil Example 🌴)
👉 A put option gives the right to sell palm oil at a fixed price.
🔸 Scenario
- You pay a premium of RM50
- You get the right to sell 1 ton of palm oil at RM4,000 (strike price) in 1 month
👉 If market price falls to RM3,500:
- You buy at RM3,500
- Sell at RM4,000
- Profit = RM500 − RM50 = RM450 ✅
👉 If market price rises to RM4,300:
- You do not use the option
- Loss = RM50 (premium) ❌
🔹 Why This Example Is Important
- Palm oil is a real commodity widely traded in Malaysia
- These examples show how options are used for:
- Hedging risk (protecting prices)
- Speculation (seeking profit)
🔹 Simple Summary
- Call option (palm oil) → profit when price goes up 📈
- Put option (palm oil) → profit when price goes down 📉
- Premium = small cost for flexibility
0 Comments