The market for trading commodity options is simply a venue where producers of goods are given the chance to buy or sell a commodity at predetermined and fixed rate. Much like a farmer who is given by an insurance firm the right to collect on a particular plan in the event that his properties catch fire, traders of commodity options may also sell their options at a particular price if prevailing market rates go lower.
There are two kinds of commodity options. One takes the task of insuring products in case their current market price drops, while the other insures products that are bought against price increases.
