Question
At the end of the article, the author discusses an example of buying puts with an HTA contract or forward contract. Let's say that you
At the end of the article, the author discusses an example of buying puts with an HTA contract or forward contract.
Let's say that you enter a forward contract with a local buyer in your cash market to sell some grain. So you establish a certain price in the forward contract for March 20223 delivery. Later you decide to buy a put on the futures contract for March 2023 delivery. The author says that in this case "you absolutely want those puts to make money" because the objective is to enhance the price of the forward contract. On the other hand, "if the puts expire worthless, the cost of the put is subtracted" from the price of the forward contract.
Explain how this strategy works and why one would choose to follow this strategy.
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