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South Central Iowa | You guys are correct, the option would not be worth $15,000. Senodak was calculating a penny for penny gain in put value for the $3 it would take us to get there, but the option would not gain full value like that. Honestly, if it were September and it were not under $8, a $7 Nov Put might only be worth 3-4 cents. In order for an option to expire with value it would have to cross through the strike value, so a $7 put would be worth 18-20 cents if the futures were trading $6.80 in early October. So if Richard Brock is correct, that option would yield you $1,000 per contract. If you were wanting an option for actual price protection, you would want something nearer the money. But Nov options premiums are wicked expensive and not worth the money in my opinion. For example, if you wanted to buy a $9.60 Nov Bean option, the premium is currently 50 cents. That means you need to price to fall to at least $9.10 nearer expiration to recoup your money. So your effective protected price is $9.10 minus your basis. If the fall price is $10.00, that option will expire worthless and you would be out 50 cents. Basically, in my opinion, don't buy options this far out.
Edited by Conan the Farmer 1/4/2017 09:09
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Richard Brock says $6 cash Soybeans....
