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Ontario's middle east | They are selling 430 call options and collecting premium. If the market runs up above the 430 at expiration they will end up getting exercised on and have an extra short futures in there account. They now need some extra physical so that it is a hedge on inventory/contract. Couple reasons I'm not keen on this. Right now, volatility is low so not a lot of premium collected. (Haven't been paying much attention lately, will study that a bit) You are limited on how much you can forward sell if you have the potential of being doubled up on. I'm an aggressive forward seller so I want to hit rallies hard, how do I do that with out getting way over sold in drought type situation and then you are short at 4.30 and likely looking at a huge inversion to roll into. Guys generally really don't exactly understand what they are getting into with these sorts of deals and eventually that will bite my @$$ too. This set up works good in sideways markets IMO You collect premium but no discount on unhedged bushels. You are right to not look at it for a big chunk IMO I really like to keep things simpler. It seems some think marketing is hard and hard means complicated so we have to use complicated strategies. I see some great marketers that are the polar opposite of that but to each their own. Saying deploying some sort of risk management has been prudent the last few years seems like a Mr Obvious thing to say .... | |
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