Compared to doing nothing, purchasing a Put Option appears to offer better downside protection but possibly less upside potential. Compared to contracting, the Put offers a higher price if the market continues ti improve but less if prices decline. But Put Options can be useful to non-irrigated producers who want price protection but don't want to worry about guaranteed delivery. However, one advantage this alternative might have that is not reflected in the table is one of timing . The Option could be sold and a net gain realized and if prices then fell into harvest, the cotton would still get a possible POP payment.
Options offer flexibility.
The grower is under no obligation to deliver a specified number of bales. Growers should make their decision based on the odds of where the market will move from this point. Any rainfall in the Southeast or west Texas will likely depress price. Any weak signal on exports and foreign consumption will depress price.