Oats Trading Guide: How to Start + Brokers by Country

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In this guide to trading oats, we’ll explain how and where you can trade this popular commodity with a list of regulated brokers that are available in your country.

We also discuss why some traders choose to trade oats and what experts say about trading them.

How Can I Trade in Oats?

Traders have a limited number of ways to speculate on the price of oats:

Method of InvestingComplexity Rating (1 = easy, 5 = hard)Storage Costs?Security Costs?Expiration Dates?Mgmt. Costs?Leverage?Regulated Exchange?
Oats Futures5
Oats Options5
Oats CFDs3

Oats Futures

The Chicago Mercantile Exchange (CME) offers a contract on oats that settles into 5,000 bushels or about 86 metric tons of oats.

The contract trades globally on the CME Globex electronic trading platform and has expiration months of March, May, July, September and December.

Futures are a derivative instrument through which traders make leveraged bets on commodity prices. If prices decline, traders must deposit additional margin in order to maintain their positions.

At expiration, the contracts are physically settled by delivery of oats.

Trading in oats futures requires a high level of sophistication since factors such as storage costs and interest rates affect pricing.

Oats Options on Futures

The CME offers an options contract on oats futures. Options are a derivative instrument that employs leverage to trade in commodities.

As with futures, options have an expiration date. However, options also have a strike price, which is the price above which the option finishes in the money.

Options buyers pay a price known as a premium to purchase contracts.

An options bet succeeds only if the price of oats futures rises above the strike price by an amount greater than the premium paid for the contract. Therefore, options traders must be right about the size and timing of the move in oats futures to profit from their trades.

Oats ETFs

These financial instruments trade as shares on exchanges in the same way that stocks do. There is no ETF that offers pure-play exposure to oat prices. However, several ETFs trade generally in the grains sector:

iPath Dow Jones –UBS Grains ETNMLCX Grains ETNiPath Pure Beta Grains ETN

Other ETFs such as PowerShares DB Agriculture Fund (NYSEARCA: DBA) and UBS ETRACS CMCI Agriculture Total Return ETN (NYSEARCA: UAG) trade generally in agricultural commodities.

Shares of Oats Companies

There are no public companies that are a pure-play trade in oats. However, traders that want exposure to oats prices may want to consider buying shares in large agribusinesses that provide seeds, fertilizers and pesticides to farmers:

CompanyCurrent PriceDescriptionExchangeInteresting Fact
Monsanto
Global agricultural company that provides seeds, genomic and other products to farmers.New York (NYSE)In 1983, Monsanto was one of four organizations who introduced genes to plants.
The Mosaic Company
Global agricultural company that sells crop nutrients to farmers.New York (NYSE)Mosaic is the United States' largest producer of phosphate fertilizer and potash.
Nutrien
Nutrien Ltd Logo
Global agricultural company that sells fertilizer and feed products.New York (NYSE)Nutrien was formed in January 2018 after the Potash Corporation of Saskatchewan and Agrium merged.

Contracts for Difference (CFDs)

A popular way to trade in oats is through the use of a contract for difference (CFD) derivative instrument. CFDs allow traders to speculate on the price of oats. The value of a CFD is the difference between the price of oats at the time of purchase and its current price.

Some regulated brokers worldwide offer CFDs on oats. Customers deposit funds with the broker, which serve as margin.

The advantage of CFDs is that trader can have exposure to oats prices without having to purchase shares, ETFs, futures or options.

IMPORTANT: CFDs are not available in the USA due to local regulation, and regulated brokers do not accept US citizens or US residents as clients.

Regulated Brokers: Where Can I Trade Oats?

Start your research with reviews of these regulated brokers available in .

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. <b>Between 71.00%-89.00% of retail investor accounts lose money when trading CFDs.</b> You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Reasons to Trade Oats

Traders purchase agricultural commodities such as oats for many reasons, but the most important ones include:

  1. Inflation Hedge
  2. Speculate on Demand Growth
  3. Portfolio Diversification

Important: This is not investment advice. We present a number of common arguments for and against investing in this commodity. Please seek professional advice before making investment decisions.

Inflation Hedge

Speculating on oats is a way to bet on higher inflation.

The US Federal Reserve Bank and central banks around the world have kept interest rates low for a long time. These policies are likely to continue since they support consumer borrowing and spending.

Low interest rates have produced speculative bubbles in many assets classes, but not yet in agricultural commodities.

Yet food remains the most basic and fundamental necessity. Food commodity prices could see the largest increases if the economy experiences higher inflation. Oat prices could benefit from these conditions.

Speculate on Demand Growth

Oat prices may benefit from strong global economic growth.

The demand for oats in livestock feed could grow as the global population gets wealthier and consumes more meat. As corn and other ‘fuel’ grains get siphoned into biofuel production, farmers will need grains for producing livestock. Oat consumption could benefit from this development.

Oat demand may also benefit from the population seeking healthier foods to consume.

Portfolio Diversification

Most traders have the vast majority of their assets in stocks and bonds. Commodities such as oats provide traders with a way to diversify and reduce the overall risk of their portfolios.

Risks of Trading in Oats

However, traders should also consider the risks of trading in oats:

  1. A global economic slowdown could reduce demand for oats.
  2. A sustained drop in the price of other grains could siphon demand away from oats. While, usually, such price drops are temporary, there is no guarantee that this will be the case in the future.
  3. Overproduction of oats could cause prices to slump.

Important: This is not investment advice. We present a number of common arguments for and against investing in this commodity. Please seek professional advice before making investment decisions.

Further Reading

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