The Redwood gazette. [volume] (Redwood Falls, Minn.) 1873-1940, 1878-05-09

and it will now be our province to At
temPtat least to make clear the detail
incident to privilege" trading. A
put" means that the seller thereof
sells to the buyer thereof the privilege
OF having delivered to himself (the
seller) by the buyer 5000 bushels of
any named grain, at any stated price,
and for any stated time of delivery.
10 make this more clear we will illus
trate by supposing that A sells to B a
"put, that is A sells to b the privilege
OF putting or delivering to him (A)
5000 bushels of May wheat on the sue
ceeding day for $40, at 81. 90 per BUSH
Ell. If the price did not go below S1.O9
the next day B would not "put" the
wheat as there would be no profit in so
doing, but he (B) would lose the $40
he paid A for the ''put." If, however,
the market should decline to $1.O7 the
next day, B could then buy 5000 BUSH
els of May wheat of G. or any other
party at $1.O7 and deliver it to A on
his put" at $1.O9, and would there
fore secure profit of &c per bushel, or
800. making a clear gain of $50, $40
having been paid for the put. The life
of "put p" extends only until the close
of Change hours on the day succeed
ing the one on which the purchase of
the privilege or "put" is made, unless
more extended time is agreed upon
between the contracting parties. A
"call" is quite similar in results. We
will suppose that to-day A sells TO B a
"call" on May wheat for tomorrow
for the usual $40 at say $1.1O4. The
morrow comes and wheat advances TO
SLIP. At any time during the day B
can sell 5000 bushels of wheat at $1.12
and "call" A to deliver at the 81. 1Ol,
the agreed "call" price. The moment
B "calls" the wheat he becomes the
buyer of it at the "call ;" price, and if
he can sell it at Slip he can secure q
profit of 1!c per bushel, or $75 less
the $40 he has paid for the " CALI
The 'put" or ''call " is secured SIM
ply by the buyer notifying the seller
verbally or by proxy any time before
the bell strikes the $3.50 p. m. hour.
The difference between ''put'' or q
''calr' and regular trade in Futures
is simply this: In buying for future
delivery an absolute CONTRACT is made
to deliver or secure a certain amount
of specified property at stipulated
price. If, however, you buy a .'put''
or a ''calr' you simply buy the privi-
lege of delivering or receiving the
property. 1t being entirely optional
with the purchaser of the privilege
whether he makes positive trade or
not, and while it is clearly a misnomer
to apply the word ''option'' to the con-
tract for future delivery, it is quite as
clearly the proper title to apply to a
trade in privilege" !. e., "put'' or
''call." These privileges are largely
dealt in by operators in futures, who
use them as ''insurance'' on their legit-
innate trades, !. C.. protection against
loss beyond the figure named on the
''put' or ''calr' trade. This we will
illustrate by supposing that A having
bought $4,000 bushels of wheat during
the day at say $1.1O for MAY" and
being little nervous about his margin
drafts not being paid, or if on his own
account, desires not to lose over 1c
per bushel in the event of decline, he
would insure himself against more than
|
after regular Change hours put on
$4,000 May wheat from B, C and ID, at
S1.O9, he could then in the event of a
decline below $1.O9 deliver the wheat
on the puts he has on b, C and d,
and thus prevent loss beyond that
amount plus the amount he may have
paid for the ''puts," and on the other
hand, if A should be short $4,000 BUSH
els of wheat at S1.1O, he could protect
himself from loss of more than 1c
q bushel by purchasing from B, C and
ID $4,000 bushels of 'calls'' on May
wheat at say Sill for the next day,
and in the event of the market advance
ing to Slip, or over, he would be Elm
sured'' against more than 1c per
bushel loss by calling on b, C and
ID to deliver to him the $4,000 bushels
on the "calls'' bought of them which
he could in turn deliver to the parties
/ he might sell to at Slip or over.
The Supreme Court has never decided
against the validity of option contracts.
The decisions have been against
"puts'' and "calls," and the Chicago
Board of Trade, like the Supreme
Court, disclaims these latter rs ille-
gitimate transactions. Thus it will be
seen that the idea apparently so long
prevalent among home as we'll as out
side dealers, that all contracts for the
purchase and sale for future delivery
were held illegal by the Supreme Court
of Illinois, was errOneOus-the Court
merely said that puts and ''calls''
are gambling operations.
The usual difference in price on
s'puts'' and '.calls," on wheat on a
steady market is usually from ]. to 1c
per bushel from the closing price on the
Board. Thus if MAY wheat" closes
at 81. 10, the price of "calls'' on the
ordinary quiet market would be from
| 81. 1O3 to Sill, and the price of puts
from $1.O94 to $1.O9. In seasons Of
violent fluctuations, however, a wider
range of prices obtains, and the ''put"
or ''call'' value will be 1c, &c. &c or even
SC per bushel above or below the
closing prices on Change. Our illus
trations are based upon the average
ruling difference on steady market.
These privileges are often bought
and sold for much longer terms than
the succeeding day, and occasionally
extend fifteen, thirty, and even sixty
days. The prices at which these ea-
tended privileges, are made, vary
largely, and in proportion to the time
comprised a ''cal'' for buyer 1.-THE
month usually commands premium
of SC to 1Oc per bushel from the ruling
value on the day the ''call" is sold, and
about the same difference on ''put''
for the same period-Natio"al Board
Of Trade.
"A sick man in Newport, r. l., in q
sudden outburst of gratitude, told his
female nurse that he would marry her
if she would send for minister. She
sent forthwith, but before the clergy
man got there the sick man had
changed his mind and was very obsti-
nate. t-tH
"A man recently knocked down an
elephant, lion and q rhinocerOs. He