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Disclaimer: An educational calculator with simplified assumptions. Check contract terms, margins and fees with your broker and Bursa Malaysia Derivatives. Use at your own risk. Not financial advice.

FCPO Hedging Calculator

For a mill, refiner or buyer with physical palm oil to sell or buy later: how many Bursa crude palm oil futures (FCPO) lots hedge it, the margin it ties up, the basis risk that is left, and how the hedged and unhedged outcomes compare if prices move.

25 tonnes per lotQuoted in RM per tonneRM1/t = RM25 per lot

Your position

A mill or exporter: falling prices hurt, so the hedge is to sell futures now (a short hedge).

Basis (physical minus futures)

Basis is your local physical price minus the futures price. A hedge removes most of the price risk but not the basis risk: if the basis moves, the hedge is imperfect.

Costs

Margins change; check Bursa Malaysia Derivatives or your broker for the current figure.

Futures to sell –
Tonnes hedged–
Initial margin–
Value per RM1/t move–
Price locked in–
Basis risk, this case–
Margin call if futures move 10% against you–

If the futures price moves by delivery

FCPO moveFCPO at deliveryPhysical priceUnhedged resultFutures gain or lossHedged result

Effective price per tonne, RM

UnhedgedHedged

How to read it

Short hedge (seller): sell futures now. If prices fall, the oil fetches less but the futures gain makes up for it; if prices rise, the futures loss gives back the extra. Either way the price is roughly locked at today's futures price plus the basis at delivery. Long hedge (buyer): buy futures now. Rising prices cost more in the physical market but the futures gain offsets it. Basis risk: what the hedge cannot remove. If the local discount to futures widens from RM50 to RM80, a fully hedged seller still gets RM30/t less. Cash, not just profit: futures are settled daily. A hedge that ends up fine can still need large margin top-ups along the way, which is why the margin call figure matters. Lots are whole numbers, so a hedge is rarely exactly 100%; the leftover tonnes stay unhedged.