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SW Ont | You can think of options as an insurance policy.
Did I sell to soon?
Buy an call to replace, and if price goes up the call will protect you.
If it doesn't go up, you've paid an insurance premium.
I think it's gonna go higher but I'm not positive. I've decided not to sell.
Buy a put to cover what isn't sold and protect the profit.
If price goes down, put will gain value, offsetting the futures decrease.
If price goes up, you've paid an insurance premium against the chance that it might have fallen.
If you buy a call, but haven't yet sold, it's speculation (texas hedge) rather than price protection.
Similar if you sell, and buy a put. It's speculation -- not price protection.
Yes, options can be used to speculate.
But they exist for price protection.
If you really want to speculate, might as well just buy (or sell) futures contracts. | |
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Buying a corn option.
