Oats prices at new record high prices?

[TOM4CWB]

CP;

Put option: The right, but not the obligation... to be short the futures at the Strike Price the Put Option is purchased at.

The most that can be lost... is the premium cost.

Obviously very different than being short the futures... if an early frost or big drought/heat hit US Beans; spikeing the futures up to some high value like $18/bu in 2008.

I would be surprised if you didn't know this.

I can't believe the CWB won't offer minimum price contracts using options!

Much less risk... for the grower and the CWB!

But I must assume mitigating risk and best serving grain farmers is not the CWB's objective... it is to save the monopoly and provide cheap feed grains for livestock in Canada.

[btjadenlepp]

tom, the early payment option (epo) is a
minimum price contract using puts.

[btjadenlepp]

'it's just a matter of time until oats
prices rocket higher'.

don't lose sight of the fact it's
already taken off pretty impressively.
lots of good, profitable pricing
opportunities out there, for all
positions.

not arguing with the outlook, just think
it's risky to expect too much in an
uncertain world.

www.farmlinksolutions.ca

[tmyrfield]

cotton
as soon as you plant a crop you already have a long position, a hedge means you are offsetting that long with a short.
if canola goes up your production increases in value but your futures contract drops in value and vice versa. hence your crop is hedged at the price you select.

[Choice2U]

I am a small farmer, not a broker. I used Pool Commodity Trading Services about 10 years ago and lost money on a Soybean oil option when a rain showed up in US within about 2 weeks of it expiring....until then I was ahead of the game. This tweeked my interest in the concept. I play with puts and calls in the $800 - $1K range and have lost more times than have won but on actual dollars, I am up significantly because with a volatile market, one mistake selling too soon or late with no fall back can cost big bucks and hedging with options has been a counter balance at times when there are big market moves that I misread. Made (profit after options cost and commissions) about $5K in 2008 with a couple puts. Sold too soon or would have made about $15K. Lost about 2.7K in 2009 and am up in 2010 about $8K. Why is it so hard for people to get a grip on using options along with holding or selling the physical property. ITS ONE TOOL IN A TOOL BOX that has worked for me and I'm no genius. Cotton mentioned that 80% of options expire worthless a year or so ago. He's probably right because I have lost more times (about 8 times) than won (4 times) but with not risking big $ each time, when I won, I won much bigger than I have ever lost.

[TOM4CWB]

btjadenlepp;

How on earth could you call an EPO a put option.

1. It is not tradeable;

2. It has no market comparison... since it is NOT an option the CWB is open to charge whatever they wish... NOT market value.

3. EPO PPO contracts are not avaliable now. They require a delivery of wheat after they are 'purchased'.

I am very surprised at your comment.

[btjadenlepp]

they lock in a minimum cash price and i
happen to know they underwrite the program
with puts. it's not as good as doing it
yourself with a broker, but the
construction of the contract is similar to
the mpc's grain companies offer for other
crops.