Options Strategies 6/18/2013
Producers,
We have seen the corn market bounce back up from recent lows. Now might be a great time to purchase Put options to protect your un-priced corn that you have in the field from a sell-off due to very good growing conditions. Below are two examples of Put option strategies. Option #1 Example purchases a Dec 540 Put option…
|
Option Scenario #1 |
Orig. |
|
|
|
|
|
|
|
|
Prem. |
|
$4.00 |
$4.40 |
$4.80 |
$5.20 |
$5.60 |
$6.00 |
|
Buy Dec 540 Puts |
-0.38 |
Value => |
1.40 |
1.00 |
0.60 |
0.20 |
0.00 |
0.00 |
|
Cost... Cents/Bu |
-0.38 |
|
-0.38 |
-0.38 |
-0.38 |
-0.38 |
-0.38 |
-0.38 |
|
Net Gain/Loss on option |
|
|
1.02 |
0.62 |
0.22 |
(0.18) |
(0.38) |
(0.38) |
Option #2 example also allows you to remain unpriced on your corn in the field and protects you if the market sells off. This Put is a short-dated option that expires earlier making it less expensive or allow you to buy an option strike price closer to the market. In this example below we purchase a Sep 540 short-dated Put option…
|
Option Scenario #2 |
Orig. |
|
|
|
|
|
|
|
|
|
Prem. |
|
$4.00 |
$4.40 |
$4.80 |
$5.20 |
$5.60 |
$6.00 |
|
Buy Sep 540 S-D Puts |
-0.28 |
Value => |
1.40 |
1.00 |
0.60 |
0.20 |
0.00 |
0.00 |
|
Cost... Cents/Bu |
-0.28 |
|
-0.28 |
-0.28 |
-0.28 |
-0.28 |
-0.28 |
-0.28 |
|
Net Gain/Loss on option |
|
|
1.12 |
0.72 |
0.32 |
(0.08) |
(0.28) |
(0.28) |
Both of these option strategies protect you through the summer. The first example gives you a $5.00 floor through most of harvest but costs a little more. The second example gives you a $5.10 floor through most of August, but costs a 1/3 less. Give us a call if you'd like to visit more about these options.
Thanks, Reed
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