Release:              #4220-98
For Release:          December 22, 1998


Washington, D.C. -- The Commodity Futures Trading Commission (CFTC) today released its educational brochure on agricultural trade options. The brochure is entitled "Agricultural Trade Options--What Agricultural Producers Need To Know." In June 1998, the CFTC began a three-year pilot program to permit the purchase and sale of agricultural trade options. An agricultural trade option is an agreement giving an agricultural producer the right to deliver a commodity in the future for a set price. However, the producer is not obligated to deliver, and may simply choose to "walk away" from the option contract. In return for this right, the producer pays a fee, usually called the option premium to the option's seller. Agricultural trade options may also be used by agricultural processors, commercial users of, or merchants handling, the commodity or its products or by-products.

Agricultural trade options are not traded on a commodity futures exchange. Rather, they are traded directly between commercial parties. Prior to the adoption of the CFTC's pilot program, such options were not permitted to be offered or sold in the United States. The CFTC's pilot program is intended to permit the offer and sale of this risk management tool to agricultural producers and other agricultural enterprises with appropriate safeguards.

The pamphlet provides an overview of agricultural trade options and the pilot rules for trading them. Under the pilot program rules, firms in the business of offering or selling agricultural trade options must register as Agricultural Trade Option Merchants and their sales representatives must register as Associated Persons. The CFTC is making this informational brochure available to acquaint producers with the possible uses of this risk-management tool.

A copy of the brochure may be obtained by contacting the Commission's Office of Public Affairs, Three Lafayette Centre, 1155 21st Street, N.W., Washington, D.C., 20581, (202) 418-5080 or by accessing the Commission's web site, at (Reports and Publications--Popular Brochures On-line).