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| I suppose you could sell calls and collect. But I don’t think farmers, or bankers really, have the stomach for margin calls when the trade goes against you.
My dad didn’t know statistics or calculus. But he understood what selling a call meant. And he wanted to sell a bunch of calls on his cotton crop one year. Couple million I think. And he had to sit down in front of the board of the bank and explain his plan and how much margin he thought he would need and yadda yadda. It did go against him for awhile and he had to put up margin, or the bank loaned him the margin I think?, and it got to the point where the bank was like,”any more of this and we are going to have to pull out”
Which defeats the WHOLE purpose. But you can’t blame the bank, all they see is money going down is bad, I mean if they were any good at those things, they wouldn’t be working at rural bank. Right?
I can’t remember how the story ended but it worked out in the end.
My point being that’s a lot of stress and it can look like the end of the world. And we aren’t market makers. We aren’t insurance salesman. We are RETAIL farmers. Hoping our house doesn’t burn down. In the case of a house burning down you buy home insurance every year (puts). You don’t go out and sell home insurance to people, even tho that can be lucrative as evident by big insurance companies, but like I said. We aren’t market makers—we are farmers who know basic math. Selling insurance is a different game
IN MY OPINION
That’s more than you asked for but one thought led to another…
Edited by Deltamudd 5/5/2025 14:52
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Old crop corn!
