Typically, farmers buy options contracts, and sophisticated marketers sell options. The option buyer has limited risk. The most he can lose is the premium. The premium is the most he will ever deposit with the broker because he is not subject to margin calls. This is advantageous when the farmer considers the cost of monies to meet margin calls.
Premiums are much easier than margin calls to explain to both banker and housewife.
However, it must be clear that once an option is exercised, the farmer assumes a position in the futures market. He is now subject to margin calls. A writer of covered options has an underlying physical commodity to offset risk in the cash market. A writer of uncovered options is not backed by the physical commodity and speculates in the marketplace. For more applied uses of options contracts, and combined options and futures strategies, see other NebGuides in this series on grain options contracts.