Texas/New Mexico Stateline | Olly4 - 9/17/2016 20:21
I am looking into buying a group of heifers to background with my calves this winter. I am looking at ways to hedge my risk, one option I am considering is to Buy a March Put (at the money) then Sell a March Call to off set some premium. Has anyone used this strategy before? What are pros and cons? I realize I will have a floor and ceiling on my cattle then, any other options to consider? Thanks
As others have said you are paying for A LOT for time. But having said that is it worth about $60 a head to protect roughly $850 gross dollars?
I've done well using options to hedge risk on stocker cattle. I know what the basis is going to be, and I know what they should weigh. Taking out the price risk I can focus on other things like health.
I have to strongly advise either buying the puts at the money, or a straight futures hedge. The only times options have not worked for me is when I cheaped out and did not lock in a high enough strike price.
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Feeder Cattle Options
