How Options Puts and Calls Work - RMB Group - Futures and

Puts and calls grain marketing

Puts and calls grain marketing


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Options Basics: Puts And Calls

After your introduction , you may be asking, so, what are these option things, and why would anyone consider using them?

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If you exercised the right and bought the stock at $95 you'd immediately be at a loss of $95 since the stock is trading for $55 on the open market.

The Basics of Futures Options

Now can you see why Put option contracts go "up in value" as the underlying stock goes "down in price"?

Using Futures Options In Grain Marketing | Cash Cow Farmer

If you buy an option to buy futures, you own a call option. If you buy an option to sell futures, you own a put option. Call and put options are separate and distinct options. Calls and puts are not opposite sides of the same transaction.

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Technically speaking, Puts and Calls expire the 8rd Saturday of the month of expiration. For example if I bought a December option, it will cease to exist (expire worthless) after the 8rd Saturday of December.

An option is the right, but not the obligation, to buy or sell a futures contract. The buyer of an option acquires this right. The option seller (writer) must take the opposite side of the option buyer&rsquo s futures position. For example, if you buy an option with the right to buy futures, the option seller (writer) must sell futures to you if you exercise the option.  Option contracts are traded in a similar manner as their underlying futures contracts. All buying and selling occurs by open outcry of competitive bids and offers in the trading pit.

Options aren't terribly difficult to understand. Calls are the right to buy, and puts are the right to sell. For every buyer of an option, there's a corresponding seller. Different option users may be employing different strategies, or perhaps they're flat-out gambling. But you probably don't really care -- all you're interested in is how to use them appropriately in your own portfolio.

The basic concepts of grain price options are discussed below. Methods of using grain price options to market grain are presented in:

A Put option "increases in value" when the underlying stock it's attached to "declines in price", and "decreases in value" when the stock goes "up in price".

An option expires if it is not exercised within the time period allowed. The expiration date is the last day on which the option can be exercised. Options expire in the month prior to contract delivery. For example, a July corn option expires in June.


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