For example, you can choose strike prices so that the premium received from the put option totally offsets the cost of the call option, establishes a price ceiling that at least allows you to have a positive cash flow, or any other possible objective you may want to achieve with your window strategy. The window, or the range between the price ceiling and the floor price, is determined by these two strike prices. The price ceiling and floor price for a window strategy are detailed in Figure 2. Price Ceiling and Floor Price with a Window. A word of caution is needed at this point.
Option premiums fluctuate based on market conditions.
Margin calls are based on the change in the value of the call option premium. In this case, you would be required to make a margin call to cover the market move against your position. Call option sellers should also be aware of the possibility of being exercised upon. If the futures price is below the put strike price at expiration, the buyer of the put option has incentive to exercise the put option. Keep in mind that any loss on the put option, which is paid through margin calls, will be roughly offset later by a lower cash price paid when the commodity is bought.