Introduction to Options, RM 2-2.0, Risk Management Education Curriculum Guide. Texas Agricultural Extension Service. The Basics of a Put Put options provide producers a flexible forward pricing tool that protects against a price decline. For the cost of a premium, a put option requires no margin deposits. Buyers of put options can benefit from higher prices.
Put options are like an insurance policy.
The buyer has no further obligation after the premium is paid. Options are for a specific underlying futures contract delivery month. It has an expiration date and a selected strike price. The option buyer may allow the option to expire, make an offsetting transaction, or exercise it at the strike price selected. Commodity Clearing Corporation guarantees performance of each contract.