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Lancaster County, Pa. | I will start with this disclaimer, I know just enough to be dangerous. So take this FWIW. I have played with some options the last two years as a risk management tool. If you do get into options, learn what "time value" means. Option proponets will lead you to believe that options are a no lose proposition. Say you buys "puts" as a hedge against unpriced corn. If corn price goes down the value of the "put" goes up. If the value of the corn goes up you make more on your corn, but the "put" probably expires worthless. The scenerio that is seldom mentioned is when prices stay fairly flat. You gain nothing on your corn and your "put" devalues as you get closer to expiration. Now you've lost the money you spent on the put and have gained nothing on the corn. You have, however, insured yourself that if the price drops substantially you will be able to recoup some of the loss with the puts. | |
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Can you use options instead of building more tanks?
