Back Prairie Grains is the official publication of the Minnesota Association of Wheat Growers, North Dakota Grain Growers Association, South Dakota Wheat, Inc. and the Minnesota Barley Growers Assocation. It is a marketing tool that will work better under certain market conditions, and we re going to discuss how to recognize those conditions. Before we go too far, I want to make sure everyone understands how puts work. A put is the right, but not the obligation to sell grain at a specified price. Remember that a put is the right to sell, but you are not obligated to sell at that price.
Time is also a factor in determining premium value.
December puts will be more expensive than September puts because there is more time, more risk and more uncertainty. Puts are nothing more than price insurance. When you buy a put, you are setting a price floor. Well the bad news is you probably cannot lock in a profit this year. If wheat rallies sharply, you might have the opportunity, but based on current market conditions, put options will only help to minimize losses, instead of guaranteeing a profit.