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| Jon - Are you talking options or basis?
I am talking about forward selling 60% or so APH on cash contracts. Yeah - the basis could flip positive and you will have to pay-up to deliver that corn, but I cannot remember having $2 positive basis on corn in our area. (If that is what you are talking about).
I have bought out-of-the money calls to protect the upside, but am basically of the opinion that is not a good way to go for myself b/c most years I just do not pay close enough attention to them and they more or less expire worthless. Again - in MOST years as the weather premium comes out of the market it just takes the value of the options away as the crop becomes more certain, so they have proven to counter production for me.
In the vast majority of the years I would strongly content selling the weather premium is much more worthwhile than the ones it does not. You will make a lot more selling that premium over time than the downsides of not participating over the years.
If one of those years does happen and let's say it is 2019, I would pay for the grain, deliver it (eat the basis), but would then forward sell 2020 with a contract or talk to the local grain exchanges to see if they will let you do on it a contract. I saw one guy make such a sale with a Coop for 3 years post 2012. Great move.
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Help me understand “futures market”
