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| I havn't use options a whole lot. Hardly at all. The options always look to be very expensive It seems to me the intrinsic value decreases as the option ages. What is the def of the delta that your talking about, A March 5.80 call is trading at 53 cents the Market price of corn is 583, was up 3 cents last night. The intrinsic value is 50 cents. Now as the option ages doesn't the intrinsic value erode so that at march experation of the call and the price of corn being 5.83 with the strike price of 5.80 wouldn't the option be worth about three cents at the time of expiration. Now where the delta comes in at has me confused. But I'm thinking the mechanics of the option I have right. On a short term fast market the call or put may make some money. For intance if the price went up 10 cents the option in creased 10 cents (call), time value stayed the same but as weeks go by the time value decreases. 80% of options expire worthless.
I go along with the thought of producers buying puts to make a hedge (sale) or endusers buying (calls) to guaranty inventort. A wide basis that the elevator charges for advance sale is about the same as the intrinsic value could be looked at in a option. I still prefer to call options insurance and the intrinsic value is your insurance premium.
Edited by No_Till 10/14/2010 09:51
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