Back To School Quiz #6.0

I like to tell producers about the “11^th Commandment” of grain marketing, “Thou shall not hold unpriced corn or soybeans in storage after July 1.” What is the driving force behind this commandment?

Most options strategies used by producers involve the purchase of options, but there is a strategy that involves the sale of call options against ownership (unpriced grain in storage, or growing in the field). This is called selling a covered call because, in a rising market, your losses on the call option are covered by the increasing value of your unpriced grain. Let’s assume that you do it – with December futures trading at $3.72 per bushel, you sell a 380 December corn call for 28 cents per bushel to enhance the price of your crop developing in the field. Between now and harvest, which way would you like to see prices trend?

If you pay a premium of 59 cents per bushel for a 940 November soybean put, what is the most money you can lose?

When a put option is exercised, the seller of the put...

Let’s assume that December corn futures are trading at $3.70 per bushel. You pay a premium of 25 cents per bushel for a 360 December put. What is the time value of this option?

Over the past two decades, how often have November soybean futures had a lower price on October 1 than on the previous May 1?