The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1935-10-16
Trends
Bids and Offers
Trade Resumes
in Grains.
by VINCENT LYONS
Times Financial Editor

TODAY marked the resumption
Il of trading in bids and offers"
on the Chicago Board Of Trade,
the nations leading grain futures
market, after a lapse of more than
two years. The membership of the
institution by vote of $50 to 81
Monday decided to restore this &C
tivity which, throughout the long
history of the exchange, has been
alternately popular and suspect.
Bids and offers" in the grain
market are also identified as
indemnities, privileges and options
by various traders. They are
synonymous with the puts and
calls" that are dealt in rather eX-
tensively in stock market circles.
To the person who often finds
himself tripping over financial ter
minology the name "option" is the
best term for this function.
Any person with $3.50 can &C
quire an option on 5000 bushels of
wheat, corn, rye or oats. No con-
tract for less than the stipulated
5000 bushels can be entered into;
consequently two options would in
volve 10000 bushels and three OPP
tions $4,000 bushels.
THUS far the operation has
n given no consideration TO
whether the purchaser has an OPP
ton to buy or sell the 5000 bushels
of grain Therefore, he must de-
eide which way he believes the
market is going to move. If he
thinks prices are going higher he
buys an offer; if he thinks values
are pointing downward then he
buys a bid"
He is helped in arriving at the
decision by studying the quota
lions furnished by the various
houses which sell the options, We
shall assume that these houses are
selling wheat options cents up and
L L
the house selling the option is, in
effect, willing to wager that wheat
will not go up more than cents
nor go down more than l u cents in
the next "a hours, which is the
length of all option contracts.
Ii person buys an Offer from
this 1irm on the above basis he is
betting that wheat will advance
more than 4 cents in the next "a
hours. If at the end of 13 hours
wheat is selling cents higher, the
purchaser Of the option can call
the dealer and sell his contract
Thus, the purchaser will receive l
cent for each of the 5000 bushels,
or $50, profit of $3.50 However, if
if wheat fails to rise more than 4
cents the purchaser forfeits the
original $3.50 he put up to buy the
option.
4 THOUGH all members of the
L a Chicago Board of Trade are
eligible to trade in options, certain
firms make a speciality of this bust
ness. 1t is a risky operation which
demands financial responsibility of
the associates in the enterprise
and an uncanny aptitude for gaug-
ing the trend of the market. For,
after all, their monetary success
rests largely on the ability to ar
range quotations in such a manner
that they will lure business and yet
minimize the possibility of loss on
the transaction.
A number Of people are of the
opinion that the trading in options
is means of bringing the small
fry into the trading arena.
While it is true that options al
low the person of limited means to
enter the grain market, it is con-
tended that this business can act
also as a stabilizing influence on
the general market.
This sterilization would occur in
a case where a large individual
trader having $4,000 or 10000 BUSH
els of wheat futures insures himself
by buying several bids" Thus, if
the market slumps sharply in "a
hours the loss is compensated by
the exercising of the options. With
out option trading, it is held, such
a trader might be Inclined to dump
his holdings near the close of
session rather than take a chance
on some unforeseen overnight de-
velopment sending wheat sharply
lower early the next day.