The Problem With Options
By Ed Usset
Farm Futures
Since their re-introduction three decades ago, options have been touted as a great pricing alternative for grain and livestock producers. Buying put options offers a price hedge while retaining the opportunity to benefit from a rising market. The cost of the hedge is known and no margin calls. Better yet, there are countless pricing strategies based on the myriad of combinations of buying and selling options.
It sounds good, but I have a question. If options are such a great alternative, how come I meet so few producers who have had a positive (i.e. profitable) experience using them?