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Any ideas on setting a floor with options
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Farmer Ed
Posted 3/11/2007 16:38 (#118299 - in reply to #116225)
Subject: Re: Any ideas on setting a floor with options


dogs nest ontario
Excellent info regarding the summer price of that short call. Those short positions can get mighty unpleasant.


Remember Pat doesn't need protection against the price going to zero, just a drop below COP.
Myself, I am kinda partial to a wedge hedge.
Try buying a CZ 380 put. and selling a 340 put against it. The spread should cost about 16 cents. Then sell a 'come and get me' 550 call for 12 cents. Net cost 4 cents, plus 3 commissions. If corn drops below 350 before harvest, buy back the short call for a few cents, and put on a 340/300 put spread. If corn goes north of 500 before harvest, buy back the short put, and double down the short call by buying it back and selling a couple of 700 calls. If you get chased on the 700 calls, sell all the corn you have, buy back the short calls and retire. [All the corn you have may not be much, as there will be a reason that corn is heading for 700]

I thing to keep in mind is that one side will likely go against you, When it does, cover the side that went your way.

Not perfect, but cheap and interesting

Later
Ed oout
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