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Arable Farming
Cropping
who s bullish or whos bearish
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<blockquote data-quote="shakerator" data-source="post: 4685486" data-attributes="member: 955"><p>Options can never be "good value" , but volatility was low in 2017 so these premiums are at the low end ...</p><p></p><p>You are paying a premium for the "time value of money" and of course you don't have to commit to your put unlike a futures, ....it's a "right but not obligation"....say if wheat went to £200...yes your option would be worthless but small loss compared to opportunity cost of NOT selling at £200.</p><p>If wheat fell hard to £120 by you will be "in the money" and can either cash out early (buy wheat back) or sell the futures at expiry.</p><p></p><p>If wheat stays flat, or rises / falls marginally you lose out</p><p></p><p>Personally as a farmer producing physical i keep it simple ...short wheat sell...long wheat hold... and control risk by tonnages committed</p><p></p><p>If you expect volatility to increase these could be seen to be good value, however that is a paradox as they are priced themselves by a mathematical formulae taking all the above into account.</p></blockquote><p></p>
[QUOTE="shakerator, post: 4685486, member: 955"] Options can never be "good value" , but volatility was low in 2017 so these premiums are at the low end ... You are paying a premium for the "time value of money" and of course you don't have to commit to your put unlike a futures, ....it's a "right but not obligation"....say if wheat went to £200...yes your option would be worthless but small loss compared to opportunity cost of NOT selling at £200. If wheat fell hard to £120 by you will be "in the money" and can either cash out early (buy wheat back) or sell the futures at expiry. If wheat stays flat, or rises / falls marginally you lose out Personally as a farmer producing physical i keep it simple ...short wheat sell...long wheat hold... and control risk by tonnages committed If you expect volatility to increase these could be seen to be good value, however that is a paradox as they are priced themselves by a mathematical formulae taking all the above into account. [/QUOTE]
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who s bullish or whos bearish
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