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question on insurance premiums - Volatility - corn chart
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jeremeyfrost
Posted 12/2/2012 13:59 (#2728660)
Subject: question on insurance premiums - Volatility - corn chart


onida, south dakota

i was at a meeting last week that indicated insurance premium cost came from volatility..................i also read something on twitter yesterday that ag volalitiy on options was at a 10 year low..............

does anyone think that it makes sense to buy put options now............ahead of insurance pricing period............with the idea of lifting the puts as insurance pricing period happens?

the futures market is volatile yes...........but if you pull up a chart and add a study of volatility it is rather low...........and if you look at studies for implied vol you will see will see that we are are on the low end of the last 5 year range

 

my thoughts are that perhaps one add's a play that is long volatility versus paying more for premium later...........

 

types of plays that are long volatility include buying an option........or you could sell futures and buy calls.........delta neutral............you could buy both calls and puts.................i don't think i like idea of just buying puts because if you look at charts and from my experience grain options volatiliy seems to greatly increase when the board goes up............

 

bottom line just curious if anyone else thinks a neutral type play that is long volatility makes sense here heading into insurance..............and if anyone has a good idea of how insurance premiums are calaculated............

 

here are the couple charts with vol study on them and a snap shot of option vol over past 5 years

 







Edited by jeremeyfrost 12/2/2012 15:50
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