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Help me with Soybean Calls
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jonnybegood
Posted 1/1/2007 22:27 (#81581 - in reply to #81480)
Subject: Re: Help me with Soybean Calls



Lena Ill
Sorry I used corn in my examples, but the principles all still hold true. Useing the nov 07 beans (sx7) @ 7.40 fri close. The 7.40call is 63cents and the 840 call is 36 1/2 cents spread in a fence the cost on this is 26.5 cents. Held to expiration and a rally over 8.40 will net 73.5 cents or about 3:1 on your investment. If you think the market has more than that in it just buy the calls, it will cost more but yeild a better return. I think we should back up and ask specificly what risk do you want to hedge? Do you expect beans to gain relative to corn? Or rally outright? Have you priced the corn that will be grown in place of displaced bean acres?
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