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| I googled courage call..
What is the best pricing tool to take advantage of preharvest pricing opportunities? Your choices fall into two categories: fixed-price tools and options-based minimum-price tools.
Fixed-price tools include a simple forward contract, or a hedge-to-arrive (HTA) contract, for harvest delivery. One more way to establish a price at harvest is to sell new-crop futures contracts.
Each of these fixed-price tools has weaknesses. Forward contracting often involves locking in a less-than-favorable basis. HTA contracts often involve a fee. Selling futures exposes you to margin calls. Their common challenge: Once a price is established before harvest, you say goodbye to the upside potential of a weather-driven market during the growing season.
Options are costly, but they are the only pricing tools that allow us to establish a minimum price while retaining upside potential.
I want to introduce you to Peter and Paul Paperfarmer, twin brothers and celebrity farmers who use options to price grain before harvest. Together, they shed light on the value of put and call options in preharvest marketing.
Peter Paperfarmer prices 25% new-crop increments in March, April and May, using a HTA contract for harvest delivery. He re-owns each sale with an at-the-money call option.
These calls are often referred to as “courage calls” because purchasing call options gives Peter the courage to do what he should do: price grain for new-crop delivery during the spring...
You are being a little early with courage call but if you are right it will give you even more courage kind of a double shot of old crow courage
Edited by wsnhmr 12/31/2016 15:13
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Pricing 2017 crop
