Heil Harvesting, Ulysses KS/Limon CO | Again I am a fan of fee based advisory--not a news letter, true advisory.
I always like incrementally (based on seasonals, desires, technicals, production costs, etc.) buying a put and selling a call to minimize cash outlay. This takes margin and sets a ceiling, but if you ride it out they work. Rolling options should only be done when it makes sense to the producer and the advisor. I am a fan of reowning sold options when it makes sense and reselling options at a later date IF it makes sense.
I think if done properly you can achieve BOTH goals, managing risk and increasing profit.
I am not in favor of just buying puts. Better than nothing but not much. 90% of options expire worthless why would you not want to sell some options? Not suggesting to do so wrecklessly but with a laid out plan and rational reasoning in a true hedging manor. It is a good way to offset some of the cost of buying options...
Just for clarity--I would rarly sell options on a ratio where I sold more than I bought (e.g. buy a call and sell two calls) or sell options for months farther out than I had bought options. For certain circumstances this works/makes sense, but doing this JUST to reduce cash outlay is STUPID.... |
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