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Northern Illinois | as buck said you will need to margin a short option position. if Dec corn is above $7.40 at expiration you will be assigned a short Dec position (assuming the other side exercised their side) with your short price at $7.40. It is also possible that the person who purchased the $7.40 call which you sold may want to exercise the option before expiration which again would mean you are short the market at $7.40.
so while there is downside to this option spread the good news for a producer is that IF the above happens you have your physical inventory to sell at a price much higher then the market today. if that is the case then you would sell your corn and buy back your position on the board. so this may require cash to fund your account you would have your grain gaining in value. | |
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Beginner trading question on spread trades
