Discussion
This graph shows daily settlement prices for Dec’06 futures from about fourteen months out through expiration (uppermost line). The thick black and thin black lines show the premium value associated with 55-cent put and call options, respectively. This was a year much like the previous one. 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.