Hedging a corn contract

Discussion in 'Commodity Futures' started by kickout, Sep 29, 2011.

  1. kickout

    kickout

    Thank arbtigae...


    Could you please PM your info...also you'd you like you can explain some of these more advanced hedges (synthetic puts, collars, etc.)

    Also, are you familiar with hedge-to-arrive contracts?
     
    #21     Oct 12, 2011
  2. A synthetic put is the process of selling the futures and buying a call to protect your upside exposure. This can be effective if the curve is skewed to the puts, thereby allowing a hedger to lock in a lower cost hedge than buying an outright atm put. This also eliminates the potential for excessive margin calls should the futures price go against you (rise).

    A collar/fence in your case would consist of purchasing a put and simultaneously selling a call to finance the purchase of the put. This is typically done at costless, however I advice against costless fences, or fences of any nature from a hedging perspective. By selling the call you are not afforded any upside gains should prices rally. You are also subject to margin calls if prices rally, despite having a cash position - if cash flow is a potential problem, stay well clear of fences.

    I have no direct experience with hedge-to-arrive contracts. I think you would have to custom negotiate a swap like that with ADM, Cargill, Bunge, etc.

    The best advice I can give is to not look at hedging as a speculation on price. Hedge when you can, not when you have to.
     
    #22     Oct 13, 2011
  3. kickout

    kickout

    To ressurect this thread:


    I am looking at buying a put. Do i have to do this through a brokerage or will an elevator deal with this? If i go through a brokerage, how would that work actually?
     
    #23     Nov 17, 2011
  4. emg

    emg

    please do not tell me u are a farmer
     
    #24     Nov 17, 2011
  5. =================
    Mr heech;
    Probably because most farmers already have plenty enough to do ;
    and many dont study trends, but they tend to respect risk .

    With plenty of crop insurance programs;
    they seem to be more common.

    DEC Corn is in a nice uptrend, most/many measures;
    hi moving average[50 week] is $7.06
    low moving average[200] week is $4.80.Those are averages, not predictions.

    Remington Arms is selling 40LBS of deer corn @ Walmart, for $8;
    thats simply dried corn in a colorful bag.LOL Thay sold out last year, early. Now some are selling ''squirrel corn'';
    simply bagged corn on cob ,dried=sky hi price.

    Progressive Farmer mag does mention options somewhat regular;
    I am not a farmer, but enjoy farming communities, hunting....
     
    #25     Nov 17, 2011