A put or call option can be purchased thru a licensed commodity broker. Infinitytrading.com has many tutorials as well as a good commodity menu. In simple example Today you could buy a December $4.00 put for about $.28/bu all paid upfront. These are ussually 5,000 bushell contracts. Your put will increase in value if the market falls to say $3.25. You then would sell your corn for the $3.25 at the local market. You then can sell your put option for hopefully $.75. Still grossing your $4.00 minus your cost of the option purchase. Sure it cost the 28 cents but it beat the 75 you would have lost with out protection. On the otherside Corn went to $4.50 your put would probably expire without value. You just sell your cash crop for the $4.50 and will lose most all value of the put option. Still you netted $4.22 on your corn. The other part to consider that the weather goes against you and don't have enough crop to cover a cash contract, in a option situation there is no delivery so you are not left holding the bag to cover a short crop. In essence you can lock in a floor on 100% of your crop today and still gain from any market up turns tommorrow. Calls are used in reverse. We use them primarily for commodities that we intend to purchase such as feed or feeder cattle. I'm not an expert or broker so take time to research and visit with a local broker. My first time I asked my banker for a reference of a commodity broker. After meeting with him he gave me some great education materials. We only use the options are price insurance not as a speculation.
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Today's Featured Article - A Question for Dads This recent topic from the Tractor Talk discussion board is being highlighted because it is an awesome display of the caliber of individuals that have made this site their own. The young person asking questions received positive feedback and advice from total strangers who "told it like it is" with the care many reserve for their own kids. The advice is timeless... so although it isn't necessarily antique tractor related, it will be prominently displayed in our archives to honor those who have the courage to ask and those who have the courage to respond in an honest, positive manner.
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