BASIC & RECENT MARKET INFO

In this series of put lessons, we have four example farmers using different combinations of marketing tools to price their 2022 wheat: Dan contracted 5,000 bushels of wheat at $11.00 on a HTA and bought the $9 and $10 puts for 29¢ each. Joe contracted 5,000 bushels of wheat at $11.00 on a HTA and bought the $10 and $11 puts for 59¢ each. Don did not sell the futures or HTA, but bought a $9 put for 29¢ and then, when the futures gained a dollar, he bought a $10 put for 29¢. Ju

CBOT September 2022 wheat was up 45½¢ the week ending July 8th. Since the futures price was up, the puts with strike prices within a few dollars of the futures price decreased in value. Why? The higher the futures price moves, the less value a put has because a put gives its owner the right to sell something and if the price of that something increases, the value of selling it at fixed strike price diminishes. For example, on July 1st, September wheat settled at $8.46. The $9

Last week’s comments compared put option value changes with the price change of the underlying futures contract over a four-week period. The obvious conclusion was a futures hedge position would make or lose money faster than an option, but an option would never require a farmer to make a margin call. We recommend the HTA or Forward contract as the primary pricing tool and the puts as a secondary marketing tool to add value to the HTA. The week ending last, Friday (July 1st),

Very few people understand the relationship between the price change of a futures contract and the resulting price change of its options. For the past ten weeks, we explained how the daily price change of the 2022 September CBOT wheat futures contract impacted the value of its $9.00 and $10.00 put options. Now that we have explained the option vocabulary, the concept of options on futures contracts and a detailed day by day explanation of price action, now we will accelerate