Minimum Price Canola Prices

[TOM4CWB]

Charlie,

I just asked on Canola today about a minimum price contract:

Nov 2010 Strike Price for Put= $460. Premium cost: $19/t. $441 with basis for (sept-Oct)fall delivery Neg 10. Minimum price $431. Upside risk covered if higher than $460 at delivery... get the higher price added to the $431.

Put Premium blended into the contract.

This looks like a fair deal... and makes wheat PPO Contracts silly!

Why can't the CWB offer similar real marketing options... that actually reduce our risk... !!!!!!??

[btjadenlepp]

you'd be way better off doing this
through a broker than this cash
contract. according to your explanation,
the market has to move another $30/t on
top of the $60/t it's already rallied,
and stay there until the day you deliver
- in the middle of harvest. with an
exchange-traded option you can sell it
back and capture the market gain
whenever you like. some grain companies
offer contracts where you can re-price
them before delivery, although admin
costs are atrocious compared to
brokerage fees.

www.farmlinksolutions.ca

[TOM4CWB]

btjadenlepp,

The futures was $455/t, the Put strike $460/t.

After $5/t up I participate in higher price. Not too Bad.

I do not pay for the option, up front;... it is part of the contract. Bonus.

The writer of the option is offering this 'after trading hours'. Bonus.


I need to find out if this can become an 'Act of God' clause. This would reduce basis risk.

Trade of the Put option itself needs to be written down and understood.

It is good to see at least offers!