What are Ethanol Futures?
Ethanol futures give ethanol producers and marketers a useful tool to protect themselves against the risk of price fluctuations in the ethanol market.
An Ethanol future is a standardized contract that is traded on an exchange between two parties. The buyer of the contract agrees to take delivery of a specified amount of ethanol at an agreed upon contract price, with delivery and payment occurring at a future specified date. The seller agrees to supply such a quantity as per the contract.
Thanks to the drastic price fluctuations and delivery challenges of the physical ethanol market, ethanol futures have become tremendously important in recent times.