Proof mathematically that marketing works

[tipsy]

charliep as of today conditions and tomorrow's weather forecast what are the benefits of put's??

[tweety]

Tipsy, since posts disappear down below ads, want to start this topic as a new one? Its a great q

[charliep]

The advantage of a put (or futures for that matter) is that you have locked in a price but have not committed to a grain company delivery. In the case of a put, you have locked in a minimum futures price for a premium but you have left the price upside open if prices go higher. Likely expensive know given the market volatility. Wouldn't use puts on the whole crop but would consider doing some with your financial situation the final deciding factor.

Again, everyone has to look at their own situation. From a market side soybean oil seems to be stalling out a bit. I recognize potential to be a small crop but I highlight your fate lies in the hands of China and the export demand they represent. They will change to other commodities if canola/canola oil get too expensive. They have to - not enough supplies to meet their needs. Demand destruction has been mentioned by at least a couple of others on this website.

[farmaholic]

If you feel the market won't fall, no need for a put/floor. But since I don't buy options and feel tipsy is correct, I will gamble.

Every day that goes by without precipitation in the dry areas yield is being lost. Reports of reseeded crops sitting in dry ground. Frost damaged crops that didn't get reseeded have had their potential reduced. At this point, this isn't shaping up to be a real pretty year. Not lost, but not as good as some past years.

Is doing nothing a marketing strategy, I think Charlie said it is.

A $490 Nov canola put is $22.20, a 50 cent/bu premium. So you have to see more than a 50 cent drop in the price in order for your put to pay off, otherwise keep your money in the bank. BUT NOBODY KNOWS.....

[farmaholic]

Maybe I should have said, if you can't afford a 50(plus)cent/bu drop BEFORE YOU NEED THE CASH CANOLA....maybe you should consider it.

[tweety]

I don't think anyone is arguing that a put is a bad thing.

[Hopperbin]

Do you have put and call mixed up? 490 put at 22.50 is really retarded when you can sell today at 490. A 490 call at 22.50 makes sense to gain upside.

[Hopperbin]

But price has to drop 50 cents per bushel before into money. Really bad risk scenario for today.

[Hopperbin]

But price has to drop 50 cents per bushel before into money. Really bad risk scenario for today.

[farmaholic]

Hey Zeus hopper you made me look. I may have been wrong but the $490 put was $25.

$24.90 for the call, am I reading this right (Nov).

[charliep]

Not unusual that an at the money put/call would have similar premiums. A put is insurance against lower prices. You could use it if you want to protect against lower prices (if they occur). A call is insurance that allows you to participate in higher prices. You could use it if you have forward priced canola already and maybe nervous about your production/a potential payout if you can't fill the contract and prices have rallied during the summer.

Likely know already but just a reminder what tools like options are meant to accomplish. Options are not an outcome - they are tool.

[farmaholic]

Thanks Charlie.