The option strategy consists of two parts. First, we are looking at purchasing a December put option at the $4.00 strike price. This can be done for about $0.34. The second part is selling two December call options at the $4.50 strike price. These can be sold for about $0.15 1/2. By performing this strategy, your account is credited $0.31 and debited the $0.34. The net debit (or amount paid) is $0.03. Pretty cheap to protect $4.00 December corn.
Worst case scenario the market rallies above $4.50 and stays there until expiration. The short calls would be in a marginal situation. Your account would then be short two December corn futures at $4.50, a better price than anytime this last year by over $0.30. Most likely, the market will be lower in December, in which case, your protection kicks in at $3.97. That is a price above last year's insurance price by about $0.12.
Feel free to contact Blackmore Commodities at 844-684-9199 or customerservice@blackmoregroupLLC.com with questions. Visit our website for more information at www.blackmorecommodities.com
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