The Amazing Coffee Bean

Trading Coffee in global markets

Coffee – one of the most loved and drank brewed beverage in the world, has always been a part of the morning routine of most adults around the world. Judging from the amount of Starbucks locations in the United States alone, which currently has 7,049 stores, it is no wonder that a lot of people love their caffeine.

The Origin

The all-famous brewed drink is prepared from roasted coffee beans, which are seeds of berries from the Coffee plant. Coffee was discovered in Ethiopia around A.D. 850. Beans were shipped to India, Java and eventually Europe in 1515. By 1675, England had more than 3,000 coffee houses.

An estimated amount of 3.5 billion cups of coffee are consumed worldwide every day. Around 70 countries produce coffee, with the majority of supply coming from the countries Brazil, Vietnam, Colombia, Indonesia and Ethiopia. In the commercial coffee industry, there are two important coffee species – Arabica and Robusta.

Health Benefits

The health effects of coffee are quite controversial. But despite what you may have heard, there are actually plenty of good things about coffee.

  • Drinking a cup of caffeinated coffee significantly improves blood flow.
  • It has been found to reverse liver damage caused by alcohol.
  • It can improve energy levels and make you smarter.
  • It helps you burn fat.
  • It may lower your risk of Type II Diabetes.
  • Coffee drinkers have a lower risk of liver and colorectal cancer.
  • It may protect you from Alzheimer’s disease and Dementia.
  • It can fight depression and make it happier.
  • It could lessen the symptoms of Parkinson’s disease.

Trading the Black Bean

Second only to oil, coffee is the world’s second most traded commodity, with about half a trillion cups drank per year. It’s not only used for brewing a cup, it also provides caffeine for other beverages (cola), pharmaceuticals and cosmetics.

Coffee is one of the most interesting commodities to trade; it is also one of the most volatile. As a member of the soft complex, it is also subjected to wild swings in the market. The coffee traded on the ICE futures contract in the U.S. is Arabica. The Robusta coffee beans are considered to have more bitterness and it also contains more caffeine while the Arabica is considered a higher quality bean and is used at Starbucks and for premium coffees.

One of the best ways to trade coffee is to sell options instead of using future contracts. Coffee options typically have a large amount of premium in them. Options can work well in this market because they give you the cushion to withstand the volatility. For example, you can sell a put option instead of buying futures contract. It is important to realize that selling options also carries risk similar to a futures contract.

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