Marketing Tool Analysis
Fourteen weeks ago, we proposed several marketing tool alternatives to leaving corn in the bin. It was more for educational purposes than anything, but for those of you who felt you had to do something in January, we proposed these alternative tools. The maximum risk was set at 20¢ a bushel, meaning, if any of these tools lost 20¢, the position would be liquidated.
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May options were two of the alternative options to leaving corn in the bin. The expiration of the May options would be the end of the education exercise. May option expired yesterday, so we will now summarize the results.
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To set the table, May corn futures traded at $4.55 every day during the week of January 16th and the $4.50 May call option and the May $4.60 put option both traded at 20¢. The May/December corn spread traded at a 20¢ premium to the December corn. CG&B at Gladstone Bluff was paying $4.25 for corn. Corn in the bin was costing 3¢ per bushel per month (7% interest times $4.25 divided by 12 months plus insurance, electricity, etc., at six-tenths per bu. per month).
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If the corn was sold for $4.25 and replaced with: