May 15 The Nov soybean price is $6.75/bu and a producer's expected basis is - $0.20....

 

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May 15 The Nov soybean price is $6.75/bu and a producer's expected basis is - $0.20. Put options for Nov beans are trading at 61 c/bu for the $6.45 strike price, and 63 c/bu for the $6.35 strike price. The producer is considering the following marketing strategies: 1) cash market only (no hedge), 2) hedge using futures. For each scenario below, find the net realized price. To simplify matters, assume the producer sells his beans to the local elevator in the 3rd week of October. Show calculations. Scenario 1: Oct 20: Nov futures @ $5.55/bu. Local basis is -$0.20/bu. (Use for 22 and 23) 22. What is the net price using strategy 1 - no hedge? 23. What is the net price using strategy 2 - futures? Scenario 2: Oct 20: Nov futures @ $4.75bu. Local basis is -$0.10/bu. (Use for 24 and 25) 24. What is the net price using strategy 1 - no hedge? 25. What is the net price using strategy 2 - futures? May 15 The Nov soybean price is $6.75/bu and a producer's expected basis is - $0.20. Put options for Nov beans are trading at 61 c/bu for the $6.45 strike price, and 63 c/bu for the $6.35 strike price. The producer is considering the following marketing strategies: 1) cash market only (no hedge), 2) hedge using futures. For each scenario below, find the net realized price. To simplify matters, assume the producer sells his beans to the local elevator in the 3rd week of October. Show calculations. Scenario 1: Oct 20: Nov futures @ $5.55/bu. Local basis is -$0.20/bu. (Use for 22 and 23) 22. What is the net price using strategy 1 - no hedge? 23. What is the net price using strategy 2 - futures? Scenario 2: Oct 20: Nov futures @ $4.75bu. Local basis is -$0.10/bu. (Use for 24 and 25) 24. What is the net price using strategy 1 - no hedge? 25. What is the net price using strategy 2 - futures?

Answer rating: 100% (QA)

Answer To calculate the net realized price for each scenario we need to consider the cash ... View the full answer