Commodity option contracts are decaying assets. Unlike futures contracts from which they are a derivative, option contract values are lost each day to time decay. Therefore, it is prudent to liquidate long option positions even if the target price is not yet realized before time value diminishes the premium.
Many believe that we are in a golden age of farming in this country. Since the summer of 2006, we have seen grain prices move in a big range, both up and down. These price fluctuations combined with below trend yields, new markets (such as China) becoming more willing buyers, and other policy factors have… Read more.
New option traders tend to overlook the strategy of combining two options to form spreads, which allow different degrees of market optimism or pessimism. Option spreading is different than futures because a straight futures play only portrays one degree of bullishness/bearishness. If one is long the futures, he better be very sure the market is… Read more.