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western iowa,by Denison | you want to put a floor underneath your fats,so say you have enough coverage that you can live another day to feed the next pen,I can take the -200 to-$300 loss,i can not take a $1000 loss
same as any insurance,just depends how many dollars you want to spend on premiums,with not knowing where the market is going would be a good time to at least put a cheap floor underneath them,I like spending about $1 a 100wt on puts about 6 months out to give me time to see where the market is going,using puts off the cme gives you more options to lift hedges then a straight out lrp you can buy a $160 put for Oct for $1 tomorrow-seems like that is not enough but if you have 100 head ready in Oct and the market tanks you have some protection on the board to buy the board
Fat cattle today $192
Fat cattle plunge to $120 Oct 1s having put maybe picks up $30 per 100wt
We buy 2 puts per 40 head or basicly 2 puts instead of 1 on same cattle
when the market can guarantee a $50 a head profit, I start selling ahead otherwise I continue to put a cheap put floor underneath-if the market tanks usually feeders follow and can replace for less dollars | |
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Livestock insurance
