Options?

[Hopperbin]

Just wondering if anyone has any experiences with the actual selling of options. Have you been making money? What is your views of the risks? Any experiences with Paragrin Financial?

[charliep]

Will let others who have used answer but the theoretical
answer would be you are accepting full risk for market
changes for a set dollar amount. You have to access the
level of risk you are taking (strike price, volatility, amount
of time) relative to what you are being paid. To highlight
however, you are taking on risk (with the caveats that it
can work with a hedging strategy as highlighted below).

A couple of ways I see being used.

To offset the cost of a risk management strategy using
options. To keep simple, pay for buying a $400 Nov.
canola put by selling a $500 Nov. canola call. You have
guaranteed $400/tonne but also put yourself at risk if
prices go over $500/tonne (actually be prepared to live
with $500/tonne short futures position which may convert
to a hedge which I will describe below but then you would
have to evaluate whether this is your strategy).

Another way I see used sometime is to effectively use a
short call position as a type of grain pricing order. In the
example, your plan is to sell Nov. futures if prices ever go
over $500/tonne. Go short a Nov. canola call and then
allow to be exercised on if the market rallied over the next
6 months.

Never heard of the company. Checked for head office on
their website and could not find. I like to deal with a
Canadian office in case there are issues with a trade etc.
Easier having a Canadian office/access to our legal system
than having to fight with someone in the USA/off shore in
their court system.

What have others done in selling options?

[Hopperbin]

PFG Canada Inc.
1290 Central Parkway West
Suite 200
Mississauga, Ontario
L5C 4R3

I spelled it wrong its Peregrine Financial Group Inc.

Basically they asked what crops I grow.
I answered Soft Wheat, Canola, and Yellow peas.
They suggested getting into wheat options only as they say they are very liquid. They will advise on the price and watch the market for you, basically do everything for you, just it is all my money that would be on the line lots of margin that would be put up. I am not really want to get into this sort of thing. They actually claim you can get out of sold option easily if the market is really going the wrong way. I don't believe that part. They said they want actual farmers for this because they are backed by actual product. But they are claiming profits.
So there must be someone with experience with this company. They have booths at the crop shows.

[charliep]

Again, don't know the company. Only thing that causes me angst is the thought they are trading on your behalf and perhaps not direct control.

[charliep]

Also seems they are proposing an investment strategy for your financial portfolio so needs to be evaluated that way versus a risk management one on your crops.

I always treat marketing tools as means rather than an end. What is it you want to accomplish in your marketing plan and once you know that, what is the marketing tool to make this happen?