You are a cow-calf operator and typically sell your calves after the first of the year in January. You like to lock in profit when you can by pricing the cattle ahead of time if possible, especially when prices are good. The futures markets look good right now at $179/cwt.

A. Objectives:

What type of outlook would cause this producer to buy a Put?

Do you need a Performance Bond _____?

(yes/no)

B. Strategy:

Buy a __Jan_ __ 179___ Put for __$3.40/cwt_

(month) (strike) (premium)

Floor Or Ceiling (Highlight)

Calculate your minimum Price

Strike Price __________

- Premium __________

+/- Basis _+10.00___

= Minimum

Price _________

C. Results: (assume basis ends at +$10 over, as predicted)

Find the cash prices, the gain or loss from purchasing the put at each price level, and what the producer's net prices would be at each level.

If Cash/Futures Put Net

Expire at: Gain or Loss = Price

______/160___

______/179___

______/200___

Feeder Cattle Call Option Scenario

You are a feed lot operator. You are looking to fill a lot in January. Based of the futures prices for finished cattle, feed costs you can lock in, and a standard yardage fee, purchasing feeder cattle at the current price would ensure profit based on your historic rates of gain.

A. Objectives:

What type of outlook would cause this producer to buy a Call?

Do you need a Performance Bond _____?

(yes/no)

B. Strategy:

Buy a _Jan____ _179____ Call for _$3.75/cwt__

(month) (strike) (premium)

Floor: Ceiling:

Strike Price _________

+ Premium _________

+/- Basis _+10.00___

= Maximum

Price _________

C. Results: (assume basis ends at +$10 over, as predicted)

Find the cash prices, the gain or loss from purchasing the put at each price level, and what the producer's net prices would be at each level.

If Cash/Futures Call Strike Net

Expire at: Gain or Loss = Price

____/160___

____/179___

____/200___