This graph shows daily settlement prices for Dec’05 futures from about fourteen months out through expiration. The blue and pink lines show the premium value associated with 55-cent put and call options, respectively. This was a year when there were split opinions on the outlook. Prices seesawed back and forth within the 50s. This sort of price pattern is more difficult to plan for since there is little market opportunity for setting a meaningful price floor with upside flexibility. One strategy here would be to pay more put option premium for a higher, more meaningful price floor, and finance this by selling either out of the money puts or out of the money calls.
Welcome to the educational website of Dr. John Robinson in the Department of Agricultural Economics at Texas A&M University.
The website focuses on farm-level implementation of strategies for Texas cotton growers to deal with yield and price risk. Contact me to receive a weekly e-mail notice of when the latest edition is posted on-line. In addition, we provide daily crop market news and commentary on Twitter (@aggie_prof) and also on the Master Marketer facebook page. We welcome your feedback and interaction in these social media.