Use the information in the table below to answer questions 1-5

Date	CASH MARKET	FUTURES MARKET
March	Feeding hogs for finish to sell in September.	October short hog contracts trading at $81/cwt.
September	Sell finished hogs. The basis is $2 under.	October hog contracts are now trading at $92/cwt.

Suppose the hog producer buys a $80/cwt put option for a $7.95/cwt premium.

1. In September is this option in, out or at the money in September?

2. Would this producer exercise their put option?

3. What is the intrinsic value of this option in September?

4. What is the cash price for these hogs in September? Answer is in $/cwt (answer numerically only).

5. What is the net price (per cwt) for this hog sale, assuming the option was purchased? (Answer to 2 decimal places if necessary).

Use the information in the table below to answer questions 6-10.

Date	CASH MARKET	FUTURES MARKET
July	A cattle feeder needs to buy feed corn later this fall.	December corn futures currently trading at $5.81 per bushel.
November	Take delivery of the corn. The basis is $0.06 under.	December corn contracts are now trading at $7.10 per bushel.

Suppose this cattle producer purchased a $5.80/bu call option for $0.28/bu premium.

6. In November, is this option in, out or at the money?

7. Would this producer exercise this call option?

8. What is the intrinsic value of this option in November?

9. What is the cash price for the corn in November?

10. What is the net price (per bushel) for this corn purchase?

Use the information below to answer questions 11-14.

A canola crusher needs to buy 1200 tonnes of canola this winter for their plant to keep it at full capacity. The November futures are currently at $980 per tonne, with a $20 under basis. Suppose a canola call option with a $975/tonne strike price is purchased for $52/tonne premium. In October you buy cash market canola for your plant. November canola futures are now trading at $900 per tonne and the basis has remained at $20 under.

11. Will this option be exercised?

12. What is the cash price for canola when it is purchased?

13. What is this canola's net purchase price (per tonne)?

14. What would the net price be if the canola buyer had combined this call option with a basis contract, which locked in the basis at $25 under?

Use the information below to answer questions 15-20.

In July, a farmer estimates that they will harvest 400 tonnes of canola this fall. The November futures are currently at $995/tonne, with a $30 under basis. They want to manage price risk and so they purchase a November canola put option with a $990/tonne strike price for a premium of $36/tonne. In the fall, they harvest and deliver those 1000 tonnes of canola. November canola futures are now trading at $910 per tonne and the basis has narrowed to $20 under.

15. What is the cash price for this canola sale in the fall?

16. Would this producer exercise their canola put option when they deliver their canola?

17. What is the intrinsic value of this option in the fall when the crop is delivered?

18. What is the net price for this canola sale (per tonne)?

19. If the producer had entered a basis contract that locked basis in at $30 under, and combined it with this put option, what would the net price for their have been?

20. What are two potential risks or problems associated with combining a put option with a basis contract for this producer?