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central ohio | The Poet Ethanol Plant in Marion, Ohio has been offering minimum price contracts this fall, so I decided to look into them. Right now they are quoting +25 cent basis over the dec for dec delivery. They then say you can buy a $6.20 call against the July 12 futures for 17-18 cents through them to cover the upside. So at $5.97 futures this am plus the .25 minus the say .17 call you get a net of $6.05. Ok I can follow all that math fine, the question I have is why when I look on the cme site a $6.20 call is .55 to .56 and they are selling it for .17. I asked the commodities manager at Poet and he said they can just get us better option prices when we buy through them. Obviously I am missing something. Are they selling an option to offset? Or is something else going on? $.25 plus basis is already a pretty good bid in our area. The ethanol plants around us and the hfcs plant are bidding between $.15 to .35 over but the trucking is higher for me to the .35 so about equal to poet bid.
Any insight into what i am missing or how this works would be appreciated.
Thanks
Jeff
Edited by cnj4bucks 11/22/2011 09:02
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Minimum Price Contracts at POET in Marion Ohio
