A Basic Description Of Call And Put Options
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- Category: Risk Management
- Published on Tuesday, 23 January 2018 05:41
- Written by Joe Schmidt
A Basic Description Of Call And Put Options.
1. A CALL OPTION is the right, but not the obligation, to establish a long futures position at a specific price. The definition is much more complicated than reality. If you buy a $3.50 December corn call, it means you have the right to establish a long position in December futures at $3.50. Of course, you pay for that right (the premium). If December futures rally to $3.80, it makes sense to establish the long position in futures at $3.50, so the call premium increases. If you paid 10¢ for the right to do so, your net entry is $3.60—the strike price plus the premium paid for the call. If you don’t want to be long futures, you can take profits and liquidate the position. In this example, the profit would be about 20¢.
The premium of the call option includes three variables:
Flour Pricing Components
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- Category: Flour
- Published on Wednesday, 20 June 2012 23:59
- Written by Joseph F. Schmidt
Flour prices are influenced each day by three rather independent and potentially volatile components.
- The first component, wheat future prices, forms the base from which actual wheat prices are derived. Futures are standardized, tradable contracts. Parties swap pieces of paper, obligating them to make or take delivery of wheat some time in the future.
Buying eggs—considerations and strategies
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- Category: Eggs and Egg Products
- Published on Thursday, 28 November 2013 10:57
- Written by Joseph F. Schmidt
Buying eggs—considerations and strategies—
There are two buying strategies used to buy eggs:
1. The traditional method contracts a set quantity of eggs for a set period of time (a month, a quarter, etc.) at a fixed price. Most egg requirements are contracted this way.
2. Grain Based—is considerably more complicated, but might make sense to a large industrial user under certain conditions. I’ll explain grain based egg strategy in more detail below.
Complexities of the cocoa powder and cocoa butter markets
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- Category: Cocoa
- Published on Sunday, 29 July 2012 20:27
- Written by Joseph F. Schmidt
Complexities of the cocoa powder and cocoa butter markets--
Price relationships between beans, butter, and powder are never as straightforward as buyers would like. A change in one component can change the price of the other component in a reverse direction, have no effect at all—or even change the price in the same direction. It is not a zero-sum ratio even when markets are behaving “normally”.
Read more: Complexities of the cocoa powder and cocoa butter markets
