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WNW Illinois, Henry Co | right now today, that 8 dollar call will cost 66.5 cents per bushel to give you the right to 'sell' a contract for 8 dollars per bushel, so you would net only 733.5. the market for july currently is 722 so you would be risking 66 cents to gain 11 cents if it ended up in july at 8 even. BUT, more than likely, sometime betweeen now and July if wheat moves up some, the value of that call will rise just as a 7 dollar july call is worth 101 today as the likelyhood of it being 7 is more than the likely hood of 8 so the 7 call is worth 35 cents more today.
options do limit the amount of loss as someone else looks at it from the other side of the options thinking he can make 66 cents off of you and is betting the market will not make 8 in july. VEGAS anyone.
do the paper trade as suggested first, chart it on a spreadsheet to see how it affects your bottom line with different senarios
good trading | |
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buying calls as insurance
