Problem: How to sell this year's soybean crop. It's November, the crop is safely in the bin, and you

don't need the money until March.

Strategies: $,1.$ Store until March and sell for whatever the cash price is then.

Forward cash contract for March delivery, at $$10\mathrm{.}20$ per bushel

Hedge by selling a March futures contract at $$10\mathrm{.}75.$ Buy back the contract in

March, then sell the soybeans for cash.

Buy PUT options at a $$11\mathrm{.}70$ strike price for March futures, for a premium of

$$\mathrm{.}20$ per bushel. Sell the PUTs in March, then sell the soybeans for cash.

a$.$ Fill in the Table $(18$ pts$.)$

Results in March

b$.$ Which strategy has the highest net price

for each Scenario? $(4$ pts$.)$

c$.$ Which strategy has the lowest net price?

$(4$ Pts$.)$

d$.$ Which strategy is most risky? $(1$ pt$.)$

$\_($widest range of results$)$

e$.$ Which strategy is least risky? $(1$ pt$.)$

$($narrowest range of results$)$