Prepping for the Prepping for the 2019 Grain Markets 2019 Grain - - PDF document

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Oct 18, 2023 472 likes •591 views

Elaine Kub 605.644.6KUB elaine@masteringthegrainmarkets.com @elainekub Prepping for the Prepping for the 2019 Grain Markets 2019 Grain Markets THE BASICS Nebraska Women in Agriculture Kearney, NE February 22, 2019 $3.77 $0.50 $3.27

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Elaine Kub 605.644.6KUB elaine@masteringthegrainmarkets.com @elainekub 1

Prepping for the Prepping for the 2019 Grain Markets 2019 Grain Markets

Nebraska Women in Agriculture Kearney, NE February 22, 2019

THE BASICS

$3.77 ‐$0.50 $3.27

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Elaine Kub 605.644.6KUB elaine@masteringthegrainmarkets.com @elainekub 2

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Elaine Kub 605.644.6KUB elaine@masteringthegrainmarkets.com @elainekub 3

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Elaine Kub 605.644.6KUB elaine@masteringthegrainmarkets.com @elainekub 4

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Elaine Kub 605.644.6KUB elaine@masteringthegrainmarkets.com @elainekub 5

CASH GRAIN CONTRACTS

Spot contracts
Forward contracts
Hedge‐to‐Arrive contracts
Basis‐only contracts

FUTURES CONTRACTS OPTIONS CONTRACTS ‘DESIGNER’ CONTRACTS

Hedging

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Elaine Kub 605.644.6KUB elaine@masteringthegrainmarkets.com @elainekub 6 HEDGE: A substitute transaction that will offset future market movements.

Lock in $4 per bushel January October Mathematical Result Cash Position Sell 100,000 bushels at $3 per bushel +$300,000 Futures Position Sell @ $4.00 per bushel x 100,000 bushels (Write a margin check for $20,000) $3.00 per bushel x 100,000 bushels (Receive a check for $120,000 from your trading gains) +$100,000 Net $400,000 ($4 per bushel)

Example: Corn prices fall from $4 to $3 HEDGE: A substitute transaction that will offset future market movements. Example: Corn prices rise from $5 to $4

Lock in $4 per bushel January October Mathematical Result Cash Position Sell 100,000 bushels at $5 per bushel +$500,000 Futures Position Sell @ $4.00 per bushel x 100,000 bushels (Write a margin check for $20,000) $5.00 per bushel x 100,000 bushels (Send in another $80,000 to cover the trading loss) ‐$100,000 Net $400,000 ($4 per bushel)

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Elaine Kub 605.644.6KUB elaine@masteringthegrainmarkets.com @elainekub 7 A “put” option: Gives its owner the right but not the obligation to sell an asset at a certain strike price if, at a certain time, the market’s price is lower than that strike price. A “call” option: Gives its owner the right but not the obligation to buy an asset at a certain strike price if, at a certain time, the market’s price is higher than that strike price.

Soybean Options (1/15/2019) Put Price Call Price ‘Put‐Call Parity’ Disparity

March ATM ($9.00) 14¢ 16¢ 2¢ September ATM ($9.40) 44.1¢ 42.5¢ ‐1.6¢

Corn Options (1/15/2019) Put Price Call Price ‘Put‐Call Parity’ Disparity

March ATM ($3.80) 7.4¢ 7.4¢ 0¢ September ATM ($4.00) 23.4¢ 21.6¢ ‐1.8¢

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Elaine Kub 605.644.6KUB elaine@masteringthegrainmarkets.com @elainekub 8

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Elaine Kub 605.644.6KUB elaine@masteringthegrainmarkets.com @elainekub 9

Is it a good price? Is it highly likely to go up in the future? Sell the grain anyway. You have my limited permission to procrastinate. Will the grain exist

r be covered by

insurance? SELL THE GRAIN!

Should you sell some grain today?

Yes Yes No No

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Elaine Kub 605.644.6KUB elaine@masteringthegrainmarkets.com @elainekub 10

8¢

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Elaine Kub 605.644.6KUB elaine@masteringthegrainmarkets.com @elainekub 11