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north central Oklahoma | 'Cept the call option prices would not rise at the same rate as your margin requests would come in. Options don't have very much intrinsic value this far out, only time value. If your July prices moved higher on your hedge, the call option would likely only move 1/2 the value. I would think your broker is still gonna want some more pennies. One solution would be to buy two July calls for each hedge position, believe that might cover margin calls completely.
I understand your logic in trying to utilize your option bought in the opposite direction as your hedge to cover margin requests, but Put options are normally used to set floor prices, not Calls. I see that you are trying to use one to finance the other, but you will net the same thing by just margining the hedge position. I don't really see that you have left your topside "unlimited". If prices head south, your Calls will be worthless, but you will pick it back up on your hedge buying the short back cheap, but if prices go up, unless you own twice the "calls" as positions hedged, you are gonna be in the tank on your short wheat position.
Wife and I just got back from Garfields, where I embibed twice so I may have destroyed my last two brain cells, (but I did drink wheat beer to help the cause), so if I err, someone please 'splain it to me. | |
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Using Options as Margin??
