ou are a dairy producer and you have been watching the corn market. The market has been coming down for the last couple of months but you think it might increase this winter. You would like to get some price protection in place either with a hedge or by using the option market. Using the market information below evaluate your expected purchase price for corn in February using a hedge and evaluate the expected maximum price you would pay if you used the options. Then tell me what strategy you would use and why. Show your work!

Mar Corn $3.25 /bushel Expected Basis $.40 over in February

Options Market

Strike	Premiums Call
$3.20	$.28
$3.30	$.23
$3.40	$.20