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Buxton ND | No my views have not changes, I see no reason to make any 2016 new crop sales at this time.
My starting part will be different.
One wants to buy calls in a down market. One wants to buy them when no else wants them,,, in a DOWN market.
Volatility/prices of options are at level not seen since pre E-Boom, simply put there cheap compared to anything we have seen for many years.
ZCU16 calls
4.50 - .085
4.20 - .135
4.00 - .185 this one is only .24 cent OTM (out of the market) this is CHEAP
ALL 3 of these options have OI - open interest of 11,597 with the least being in the 4.20 This is not much for OI (goes with no one wants them) So it will take some time to get an order filled. "Target orders" to BUY these say 3 to 5 cent under the prices above if this market goes lower to contract lows.
September will cost you more money because you have more time. July well be cheaper yes,,, but time is very short for a drought market to develop by the time they expire. In 2012 drought a July option would have expired by the time the drought rally really kicked into high gear. 1988 the drought was earlier and the July's would have worked fairly well.
No drought, no weather scare market this year these will most likely expire worthless.
Kinda like your crop insurance expires worthless with a good crop.
No weather scare what so ever IMO would be very UN-likely thru the August 25thish when these expire.
Give us a scare and the volatility will increase sharply***** this will increase prices of ALL options quickly*****
These well keep one long on paper and could be called "re-owning" your 2015 bushels sold. Or just call them "courage calls" giving you the courage to make sales in a upward market, BIG TIME in 2012***** In 2012 these worked very well covering margin calls as the market went from $6.50 to $8.50
You pay for these UP FRONT, like paying for your crop insurance in the fall.
There is NO MARGIN calls with buying options.
Figuring this out on a per acres basis on the 4.00 for say .14 is $28 an acres on a 200 bushel corn crop. This not not alot different then buying crop insurance. YES is a kinda spendie per acre,,, tho many buy crop insurance to protect the down side of a poor crop think of this as protecting the upside of a poor crop or weather
This is MY idea and mine alone I'm not making one red cent by tossing this out there.
This idea is BUYING a call only, selling call or puts to help off-set the cost opens one up to margin calls.
The last 3 years these would have expired WORTHLESS in the falling markets.
Will they expire worthless for the 4th year ? ? ?
Because of this I feel this is a good risk/reward trade idea.
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Starting to Market 2016
