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| And that’s prbly why it’s best for farmers who like gambling to consistently buy puts, NOT CALLS, as a form of hedging. Because the math says we will produce a record crop. Hedge funds money managers market makers worth billions don’t wake up in the morning and trade based on their “gut feeling”. They do it based on their math.
But let’s say we get an outlier year like 2012 and the puts go 0. That’s ok because you have crop to sell.
Buying calls as a farmer, unless you’ve already sold all new crop, is literally. LITERALLY. Gambling on a 7% chance. Buying puts is insurance against the more likely , 93% chance, scenario | |
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Old crop corn!
