market options- questions

[mncowboy]

Looking for anyone with understanding or experience with market options, I was looking to maybe buy a "put" for January feeders and I'm looking for insight, worse case scenario, best case ect.
Thanks in advance

 

[Howdyjabo]

A put is just like buying an insurance policy. You hope that you will end up never making your money back(the put expires worthless).
The more you pay, the more coverage you have.
I don't try and protect my profit- I just try and have enough covered so if things tank I can survive to buy in again.

consider the Put as just another expense and write it off to the "peace of mind" account.

 

[mncowboy]

Thanks

 

[Taylorspruill2014]

Thanks for the info. I really apppreciate it.

 

[Stocker Steve]

Hard to understand the continuous run in feeder prices. I think some of the boys are hoping for $3 corn.

Talk to your insurance agent about LRP - - Livestock Risk Protection. Guardian in Perham, MN offers it.

Top Third Marketing sends out a "free" futures trading book, and offers a first trade commission discount.

 

[mncowboy]

thanks, ill look into that also. im not too far from Perham.

 

[Son of Butch]

I just try and have enough covered so if things tank I can survive to buy in again.
consider the Put as just another expense and write it off to the "peace of mind" account.

Good Advice, Howdyjabo.
Unless you carry a very high level of risk, it's best to stay far away from options.
It's just another expense like any other insurance.
IF you are thinking about it to make money...
You probably have better odds of turning a profit at a Blackjack table than with options.

 

[ibetyamissedme]

I just try and have enough covered so if things tank I can survive to buy in again.
consider the Put as just another expense and write it off to the "peace of mind" account.

Good Advice, Howdyjabo.
Unless you carry a very high level of risk, it's best to stay far away from options.
It's just another expense like any other insurance.
IF you are thinking about it to make money...
You probably have better odds of turning a profit at a Blackjack table than with options.

so are you a cash contract man? Or do you gamble without the option of have having a bottom?

 

[Banker729]

I just bought a LRP policy with a coverage price of $2.135/LB on 500# steers for $0.013/LB, end date of Novemeber 4, 2014. So essentially we are "guaranteed" $2.12 if we market our calves on 11/4/14. Hopefully LRP doesn't pay us and the market does! Like others said, I am not trying to lock in a huge profit but it sure is helping me sleep at night knowing that I have eliminated most of the "catastrophic outside risk" for pretty cheap. I don't think many of us are worried about a supply and demand price change in the short term, but a catostrophic or "black swan" price drop is only a newscast away at any given time. Now it is just a matter of keeping them alive and healthy and we will have pretty good year!

 

[HDRider]

I just bought a LRP policy with a coverage price of $2.135/LB on 500# steers for $0.013/LB, end date of November 4, 2014. So essentially we are "guaranteed" $2.12 if we market our calves on 11/4/14. Hopefully LRP doesn't pay us and the market does! Like others said, I am not trying to lock in a huge profit but it sure is helping me sleep at night knowing that I have eliminated most of the "catastrophic outside risk" for pretty cheap. I don't think many of us are worried about a supply and demand price change in the short term, but a catastrophic or "black swan" price drop is only a newscast away at any given time. Now it is just a matter of keeping them alive and healthy and we will have pretty good year!

Just sounds like good business..

 

[TennesseeTuxedo]

I just bought a LRP policy with a coverage price of $2.135/LB on 500# steers for $0.013/LB, end date of Novemeber 4, 2014. So essentially we are "guaranteed" $2.12 if we market our calves on 11/4/14. Hopefully LRP doesn't pay us and the market does! Like others said, I am not trying to lock in a huge profit but it sure is helping me sleep at night knowing that I have eliminated most of the "catastrophic outside risk" for pretty cheap. I don't think many of us are worried about a supply and demand price change in the short term, but a catostrophic or "black swan" price drop is only a newscast away at any given time. Now it is just a matter of keeping them alive and healthy and we will have pretty good year!

Check your PM Banker.

 

[Banker729]

I just bought a LRP policy with a coverage price of $2.135/LB on 500# steers for $0.013/LB, end date of Novemeber 4, 2014. So essentially we are "guaranteed" $2.12 if we market our calves on 11/4/14. Hopefully LRP doesn't pay us and the market does! Like others said, I am not trying to lock in a huge profit but it sure is helping me sleep at night knowing that I have eliminated most of the "catastrophic outside risk" for pretty cheap. I don't think many of us are worried about a supply and demand price change in the short term, but a catostrophic or "black swan" price drop is only a newscast away at any given time. Now it is just a matter of keeping them alive and healthy and we will have pretty good year!

Check your PM Banker.

Replied

 

[TennesseeTuxedo]

Got it.

 

[mncowboy]

Purchased a "put" at $2.04 for January for feeders (Anything from 600-900lbs). They've usually averaged around 700 lbs but now that I know my selling price has a floor, a guy can push them a little harder while already knowing what the minimum price will be.

 

[Jake]

I just bought a LRP policy with a coverage price of $2.135/LB on 500# steers for $0.013/LB, end date of Novemeber 4, 2014. So essentially we are "guaranteed" $2.12 if we market our calves on 11/4/14. Hopefully LRP doesn't pay us and the market does! Like others said, I am not trying to lock in a huge profit but it sure is helping me sleep at night knowing that I have eliminated most of the "catastrophic outside risk" for pretty cheap. I don't think many of us are worried about a supply and demand price change in the short term, but a catostrophic or "black swan" price drop is only a newscast away at any given time. Now it is just a matter of keeping them alive and healthy and we will have pretty good year!

What % coverage is that LRP for only .13 cents? That's an awful cheap put

 

[Banker729]

I just bought a LRP policy with a coverage price of $2.135/LB on 500# steers for $0.013/LB, end date of Novemeber 4, 2014. So essentially we are "guaranteed" $2.12 if we market our calves on 11/4/14. Hopefully LRP doesn't pay us and the market does! Like others said, I am not trying to lock in a huge profit but it sure is helping me sleep at night knowing that I have eliminated most of the "catastrophic outside risk" for pretty cheap. I don't think many of us are worried about a supply and demand price change in the short term, but a catostrophic or "black swan" price drop is only a newscast away at any given time. Now it is just a matter of keeping them alive and healthy and we will have pretty good year!

What % coverage is that LRP for only .13 cents? That's an awful cheap put

It was approximately 89% coverage at $2.40, hence the coverage price of $2.135/lb. The cost was 1.3 cents per pound. So at the end of the day, the price protection is at $2.12/lb. A buddy of mine just bought a 92% policy at $2.40 which gave a coverage price of $2.22 for 1.8 cents per pound. Yes I agree, it is a cheap put, that is why i bought it...

 

[Jake]

I just bought a LRP policy with a coverage price of $2.135/LB on 500# steers for $0.013/LB, end date of Novemeber 4, 2014. So essentially we are "guaranteed" $2.12 if we market our calves on 11/4/14. Hopefully LRP doesn't pay us and the market does! Like others said, I am not trying to lock in a huge profit but it sure is helping me sleep at night knowing that I have eliminated most of the "catastrophic outside risk" for pretty cheap. I don't think many of us are worried about a supply and demand price change in the short term, but a catostrophic or "black swan" price drop is only a newscast away at any given time. Now it is just a matter of keeping them alive and healthy and we will have pretty good year!

What % coverage is that LRP for only .13 cents? That's an awful cheap put

It was approximately 89% coverage at $2.40, hence the coverage price of $2.135/lb. The cost was 1.3 cents per pound. So at the end of the day, the price protection is at $2.12/lb. A buddy of mine just bought a 92% policy at $2.40 which gave a coverage price of $2.22 for 1.8 cents per pound. Yes I agree, it is a cheap put, that is why i bought it...

:clap: :clap:

That one is a winner

 

[Banker729]

It was approximately 89% coverage at $2.40, hence the coverage price of $2.135/lb. The cost was 1.3 cents per pound. So at the end of the day, the price protection is at $2.12/lb. A buddy of mine just bought a 92% policy at $2.40 which gave a coverage price of $2.22 for 1.8 cents per pound. Yes I agree, it is a cheap put, that is why i bought it... [/quote]

:clap: :clap:

That one is a winner[/quote]

Either one of those LRP policies would help a guy sleep at night. This market is too hot to take a chance at missing out on what may be once in a lifetime prices... I ran into an economist the other night and we got to talking about the big picture of the world and national economy; that was a conversation I wish I wouldn't have had. Haha. :hide:

 

[mncowboy]

I found the LRP's priced differently for steers and heifers, where as the "put" was a single price for all calves. I was looking for January so maybe that's why it didn't appear as appealing, not sure.

 

[Banker729]

I have noticed that the LRP policies vary wildly from day to day as to what the cost is and what coverages are available. And they post them for the day AFTER the board closes and you have to buy your policy between 4PM-8PM or something like that... very strange.