Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The short-dated options are another way to defend your position. They work well if the producer is comfortable making sales by June/July for new crop.

The short-dated options are another way to defend your position. They work well if the producer is comfortable making sales by June/July for new crop. If we get a rally this spring or summer, we'll have calls protecting those early sales we made on old crop bushels. Those calls will then help finance our new crop puts as we increase their protection level to a higher price." Essentially, following up from the last questions, we can buy SDNC calls as we start selling grain after harvest. As we keep selling grain during winter and spring of 2025, we keep buying SDNC calls. Since we are in 2025 at this point, we are also buying puts to hedge our new crop that we will harvest in the fall of 2025 (which was the initial strategy suggested by the author). If there is a price rally during spring/summer of 2025, he suggests that we buy new puts with higher strikes such that we can increase our MSPs, and "those calls will then help finance our new crop puts as we increase their protection level to a higher price". Why would we want to buy puts with higher strikes if

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

China's Water Pollution Problems

Authors: Claudio O Delang

1st Edition

1317209257, 9781317209256

More Books

Students also viewed these Economics questions

Question

Which of our faculty members would you like to work with?

Answered: 1 week ago