Boo ya

[charliep]

I will read my stuff more carefully but I that is what I tried to say. You would buy a call to offset a deferred delivery contract. I would like to see a pull back before I bought so could spend less money. Still some pain realizing that I could have locked in a ddc at $10 ish and the market is over $12 today.

If you have growing crop that you are comfortable you will be able to harvest, then you would consider a put.

[cottonpicken]

Well I've been a good boy lately but if if catch another deleted post or two i wont be.

[charliep]

Just reading your last post over and you are suggesting to sell cash canola/use some of the proceeds to buy a call. Nothing wrong other than to note you have to like the basis and realize you are locked into a delivery with a grain company. A put can accomplish the same thing except you are not locked into a grain company contract and your basis is open.

[cottonpicken]

I'll give you the basis angle and it may be the winner.

Believe I have explained myself sancro sanc.

If I had a naked position now well the marketed moved id hold off for a few days to re assess with the techs we are close to breaking out of the stuff from 2013 but far from convinced its here and now guess what I didnt forward sell.

My point being if you did sell and have nothing to deliver what was the best option which you seem to decline an answer but heh risk management?

[checking]

I believe he clearly answered with "if you have a growing crop that you are comfortable you will be able to harvest, you would consider a put.

[charliep]

jwab

I agree. Everyone has to pick the tool that is right for them. Lots of volatility. A dip in prices followed by a period of lower volatility would help both reduce the cost of options but also attract commercials to get covered. I suspect that would be the beginning of the next leg higher.

[cottonpicken]

Omg i dont know what to say here anymore GoINPUT

[Braveheart]

jwab, if you own a put and the market moves against you before the put expires or before you sell a put to offset your position, you could be exercised and find yourself with a short futures position. You would need to margin your futures position.

[cottonpicken]

If you forward sell you are already hedged to the downside.

If you cant deliver you are still In the money if the price goes down.

If you cant deliver and short you are in trouble.

If you have puts and no crop no income it's worse.

If you have a crop and the price goes up you win.

If you have a crop and the price goes down you still have income.

To stunned to write anymore.

[charliep]

I am still confused. No one is suggesting buying puts on the same crop volume you have already signed a deferred delivery contract. You have no down side price risk on this crop. Your strategy would be calls to position yourself if the market moves higher.

Options are rights , not obligations to take a futures position. Many times you will sell the option at some point to capture some of the time value and volatility versus letting expire worthless. Has to be looked in an individual circumstance.

They are just one tool in many. They are a cost and can be expensive. When you would like most (i.e. markets are volatile), they can be really expensive. For some, it is just as easy to sell futures/be prepared to use the money you would have spent on a option to make margin calls if things go against you.

I think we may be saying the same thing but not sure.

[Nudge]

too many people on this thread with thorough understandings of the markets using different nuances of trading terminology. I think those commenting on here get it. Just hope you all made money during the run-up. Whether through unpriced production, long futures, long calls, or even short puts. many ways to skin the cat.

[charliep]

There will be margin required if you exercise. You are in the money so the margin requirement are likely to be minimal. If you have a trading account, you likely have margin posted even if you are just using options. Another factor is to be aware if you are exercise at the option at or close to expiry is that you are getting close to the delivery period with a futures position. As happened with the July ICE canola futures, things can get pretty wild in terms of volatility. Your broker may want more protection in your margin account. Haven't traded options myself but would be a reason I would liquidate well ahead of expiry/not exercise (take the futures position).

[cottonpicken]

Eight out of ten options expire worthless?or something like that.

My arguement vs Charlie's is calls are the only option that makes sence for a farmer. After re reading some stuff maybe we are more on the same page. A few weeks or days ago I thought I remembered you suggesting puts on a forward sell which maybe I am wrong about so I'm sorry.



Commercials and specs whole other can of worms.