- Location
- S.E
If the market falls £12/t then you dont get any value from your option....You also lose £12/t on any un-sold grain.
If the market falls £20/t you are limited to a £12/t loss...With your unsold grain you lose £20/t + storage/pool charges.
If the market rises £12/t you dont see any of that gain...With your unsold grain you gain £12/t.
If the market rises £20/t you will see £8/t gain...With your unsold grain you get £20/t. Again you have to price in your storage charges AND the fact that you were exposed to the market, and bare in mind you have not had the cash either.
Basically its an insurance premium against falling(or rising) prices.
If the market falls £20/t you are limited to a £12/t loss...With your unsold grain you lose £20/t + storage/pool charges.
If the market rises £12/t you dont see any of that gain...With your unsold grain you gain £12/t.
If the market rises £20/t you will see £8/t gain...With your unsold grain you get £20/t. Again you have to price in your storage charges AND the fact that you were exposed to the market, and bare in mind you have not had the cash either.
Basically its an insurance premium against falling(or rising) prices.