|
NC | I might be able to contribute- AND learn more.
I have been trying to get a handle on protecting myself. I am too small to absorb big losses.
Here is what I THINK I have figured out.And what may have helped me if someone had said it.
The best strategy will always be to stay in the market running naked. What you loose on cattle you already have you make on the ones you are buying. Stay in long enough and your profit evens out.
I can't do that nor do I have the money to ride through the losses.
so I have two BASIC choices. I can buy a put(nothing more than a fancy insurance policy). Or I can hedge a profit(if the market will let me).
The puts are usually expensive(ie not affordable) to lock in a good profit. But, sometimes I can protect myself from a loss cost effectively. Puts are just like insurance- you buy it not to make money but to protect you from losses. What that insurance is going to cost changes with the market and with how much protection you want. Sometimes its a no-brainer to spend $10-$20 per calf to sleep good at night. Other times I just can't see spending more and cutting too deep into my profit.
I like hedges and always check to see if I can make one work. Most of the time I can't- because it locks me into a profit that is too low for my small operation. They can make you feel bad when the market takes off but you need to learn to think long term and that short term loss of cream is not worth worrying about.
I am still working on understanding the buy a put and sell a call strategy to try and make some money at the same time you buy protection.
Biggest thing I have learned is DO NOT SPECULATE get in with the cattle you buy and get out with the cattle you sell. Owning the cattle is what keeps the risk of playing in the markets at bay.
| |
|
Hedges/puts on feeder cattle?
