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| Probably need a little more info to give a good answer however a few things to consider:
What % of the 07 (assume) crop is sold at 2.71?
Futures Price or Cash price?
If futures price, is it a futures short or a HTA?
Bottom line, like billybob said, only if you think it will go up, but that is the $64 Billion question. Risk on buying it back would be a $1.00 loss on the contract and futures prices go down to $3.30 (as an example) Now you sell $3.30 and take the $1.00 loss and you net $2.30. In other words you make a "poor" contract even worse. At the time $2.71 was sold it was a good price, if it is only a % of production I would not monkey with it, since if you buy it back, your bias is bullish, which means if prices go lower you loose on the contract bought back, and the rest of the unsold bushels.
If you really hate delivering this contract, you could possibly roll it to CZ8 if they will let you. In a way, it is taking todays problem and putting it off to next year, but you should get the almost 50 cent carry minus any fees. Not a great sale for 2008, but then you are free to deliver $3.70 corn this year and use $$ from the $3.70 07 sale now versus the $2.70 sale. Again, not perfect and it only works if I sell corn for this year when and if I can roll it out. If I dont, then I have an OK sale for 08 and a lower price on 07. If you can do this, then I would buy a march or may call against the new sale to keep the upside open.
If all of this is too much to do then just deliver and take a higher price on the over-run.
As a foot note, (an I am not bashing you Istumped) but this is why I like to use put options. I have some $3.10 CZ7 futures we are delivering against as well as some $4 and some in between, but the bulk was with dec puts that at this point are worthless however I am not upset. | |
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Buy back $ 2.71 contract
