Fifth Third Bank’s Commodity group offers a line of financial hedging products and techniques to help you effectively manage your company’s risk exposure. Our team will work with your company to identify your commodity exposures and help you create custom strategies to mitigate the impact these risks can have on your company. In turn, you will be able to do what you do best: run your business.
Commodity Risk Management Solutions
As a business owner, you might have an exposure in a commodity such as energy and metals. Like all assets, their values can fluctuate drastically, causing increased operational costs and margin concerns.
Fifth Third Bank offers commodity risk management products and solutions to help mitigate the risk and manage volatility for:
- Crude Oil
- Natural Gas
- Heating Oil
- Diesel Fuel
- Jet Fuel
- Fuel Oil
- Bunker Fuel
Financial Hedging Instruments
Fixed Price Swap. The fixed price commodity swap is an agreement to buy or sell at a fixed price in the future versus the floating price index.
Consumers have full upside protection from price increases and a known price for budget purposes. Producers conversely have full protection from downside price movement and can lock in margins to production costs.
Options. Due to high volatility in commodities, options are often used as frequently as fixed price swaps. Options are simply the right but not the obligation to buy (or sell) at a fixed price on a specific future date.
- Call options—Consumers typically look to cap their price exposure to a specific commodity for a period of time.
- Put options—Used by producers to limit or create a floor to downward price movements on their commodity selling price. Put options can also be used to limit the downside on the value of inventory that a producer or recycler may hold for a period of time.
- Collars—Can be created by using both a call and a put to create a range of prices that the user will experience over the length of the hedge. Collars are most often set to a zero cost.
Find out more about our Commodity Risk Management solutions. Contact our Fifth Third Bank Commodities team.