3. As the planting season is finishing, a grain farmer is looking to use a put Premiums December option to hedge grain at harvest in October. On May 15, the farmer buys a Corn Put Options Dec Put with a strike price that was $.20/bu out-of-the money. The cost of (Oct. 29) the put was $.20/bu Dec. Futures S4.00/bu Put Option Oct. 29, right after harvesting and selling the grain, the December futures Strike Price Premium price was $4.00/bu $3.60 $.01 $3.80 $.03 a) Scenario 1: On May 15 the Dec Futures was $4.00/bu (when the put was bought) $4.00 $.11 Given the information above, what was the strike price? $4.20 $.23 Given your calculated strike price, how much is the option in-the-money or $4.40 $.41 out-of-the money on Oct. 29? How much is this option currently worth but per by and for the total contract? What is the time value of the option on Oct. 29? Would you close out the option or hold on to it? Remember that the farmer primarily used the option for hedging purposes so make sure you discuss hedging in your answer. 3. As the planting season is finishing, a grain farmer is looking to use a put Premiums December option to hedge grain at harvest in October. On May 15, the farmer buys a Corn Put Options Dec Put with a strike price that was $.20/bu out-of-the money. The cost of (Oct. 29) the put was $.20/bu Dec. Futures S4.00/bu Put Option Oct. 29, right after harvesting and selling the grain, the December futures Strike Price Premium price was $4.00/bu $3.60 $.01 $3.80 $.03 a) Scenario 1: On May 15 the Dec Futures was $4.00/bu (when the put was bought) $4.00 $.11 Given the information above, what was the strike price? $4.20 $.23 Given your calculated strike price, how much is the option in-the-money or $4.40 $.41 out-of-the money on Oct. 29? How much is this option currently worth but per by and for the total contract? What is the time value of the option on Oct. 29? Would you close out the option or hold on to it? Remember that the farmer primarily used the option for hedging purposes so make sure you discuss hedging in your