SPE vs options?

[charliep]

The program and the premium calculation are based on the concept of crop
insurance paying first and SPE on actual yield to insured level. As I have
indicated before, hopefully AFSC looks at the processes around CPIP (cattle
price insurance program) and uses this as a template. Then you purchase the
price insurance you want based on business needs.

[gjoost]

I bought the 390 put at around 20 dollars , sold the 350 put at 8 dollars. Cost of insurance equals 12 dollars (similar to spe cost). Advantage #1 for me is I can reverse out of it anytime instead of waiting for the trigger period.
#2 I don't need canola futures to drop 10% to trigger.
My profit potential is 390 (cost 20)
350 (rev. 8)
390-350= 40 - cost (12)= 28 dollars per tonne max profit potential.
If you think Canola is going way below 350 dollars per tonne, you should take the SPE.
Alot of the SPE premiums could get stranded this year by dropping less than 10%.

[vvalk]

Charlie
I think SPE pays out on total insurance coverage regardless of yield. I think you were thinking of revenue insurance portion which they have combined now. Could be wrong though.

[charliep]

AFSC works through a couple of examples in their documentation.

[URL="http://www.afsc.ca/doc.aspx?id=3447"]spe examples[/URL]