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Palouser
Senior Advisor

Re: toppy??

How would you figure buying calls to 'cover sales' on a break? Just curious.

 

It is true that I don't make it a practice because I see covering 'risk' as a cost that detracts from my selling price. Otherwise I would wait for the higher price I expect - which is always a risk element, and I feel I can accept the risk w/o insurance. I'm not criticizing, I'm just wondering about how you'd set it up.

Hobbyfarmer
Honored Advisor

Re: toppy??

First tinges of green at Chattenooga, Tenn

 

 

Maybe there is hope for the rest of us?

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425Cat
Advisor

Re: toppy??

Lets take beans. Got em hedged in the nov. I would probably buy july calls on the next break. Dont like paying a lot of time premium. Sometimes beans stage a good rally in sept so I may want to roll the july calls out to nov.
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c-x-1
Veteran Advisor

Re: toppy??

Cat,

are you as confused as I am about why Palousers entry is highlighted ???

 

does this mean someone actually wants knowledge they don't have or ????

 

sorry, just perplexed - if someone could explain. Is there a disconnect on the producer side about how a strategy makes a business $$$ -- just plain see it as unnecessary, think basis contracts would work better - honest - I really am not sure here.

 

thanks,

 

 

c-x-1  

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425Cat
Advisor

Re: toppy??

Cx not sure I understand your post or your question.
Highlighted???
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c-x-1
Veteran Advisor

Re: toppy??

so let me give her a whirl, Cat--you paper sold some Novie, which is called locking in a price (on some bushels-not all of your anticipated prod) in the event prices are lower when it's time to sell physical come autumn- yes?

 

then all yer saying is if there is a big enough pullback -- you will own (add) some old paper to INCREASE your net-net-net length- paper + physical --- is it that simple?

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425Cat
Advisor

Re: toppy??

Yes exactly.The only other thing I need to do is set basis before delivery. So I will be short the physical paper , long the paper calls and short basis before delivery.
Some guys will buy deep in the money puts say like now on this run and wait until delivery to price the physical however I feel that gets to be a little pricey if youre wrong.
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c-x-1
Veteran Advisor

Re: toppy??

OK thanks,

 

that is what I thought.

 

so Palouser is just saying he prefers to not play the swings as much - or that there could be added cost to the operation's bottom line -- unforseen, perhaps - by doing the extra trading you are talkin' 'bout?

thx

 

edit: or that he's confident enough about prices being higher and/or has enough expenses covered ahead both from the longer term,

that this is more of a micro-strategy that's for some  --  not all?  

 

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425Cat
Advisor

Re: toppy??

Yes if calls expire worthless then your net is lowered by the price of the calls.
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c-x-1
Veteran Advisor

Re: toppy??

but in a stronger mkt, one would want have more length, right?

 

edit: I know about worthless expiry...what N strike or how far outta $ r u looking?

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