| Date: | Jan 12, 2011 | ||
Futures Market
The Short Hedge
Creating a fixed price by selling Fed Cattle futures
| Market | Sale | Historical | Expected | |
| Contract | Close | Month | Basis | Net Price |
| Feb | $121.25 | Jan | -$2.95 | $118.30 |
| Apr | $125.25 | Mar | -$0.73 | $124.52 |
| Jun | $124.50 | May | $2.08 | $126.58 |
Options Market
| Live Cattle Option Quotes | |||||||||||
| Strike | Put | Feb | Call | Strike | Put | Apr | Call | Strike | Put | Jun | Call |
| $118.00 | $0.45 | $122.00 | $1.95 | $120.00 | $2.28 | ||||||
| $120.00 | $1.00 | $124.00 | $2.73 | $122.00 | $3.00 | ||||||
| $121.00 | $1.45 | $125.00 | $3.18 | $124.00 | $3.88 | ||||||
| $122.00 | $1.25 | $126.00 | $2.90 | $126.00 | $3.43 | ||||||
| $124.00 | $0.58 | $128.00 | $2.10 | $128.00 | $2.63 | ||||||
Buying a Put
Creating a minimum price by buying Fed Cattle Put Options
| Put | Jan | Expected | Put | Mar | Expected | Put | May | Expected | |||
| Strike | Premium | Basis | Min. Price | Strike | Premium | Basis | Min. Price | Strike | Premium | Basis | Min. Price |
| $118.00 | $0.45 | -$2.95 | $114.60 | $122.00 | $1.95 | -$0.73 | $119.32 | $120.00 | $2.28 | $2.08 | $119.80 |
| $120.00 | $1.00 | -$2.95 | $116.05 | $124.00 | $2.73 | -$0.73 | $120.54 | $122.00 | $3.00 | $2.08 | $121.08 |
| $121.00 | $1.45 | -$2.95 | $116.60 | $125.00 | $3.18 | -$0.73 | $121.09 | $124.00 | $3.88 | $2.08 | $122.20 |
The Fence
Creating a minimum price at a cheaper cost
by Buying Fed Cattle Put Options
and Selling Call Options
| Put | Call | Put | Call | Jan | Expected | Expected |
| Strike | Strike | Premium | Premium | Basis | Min. Price | Max Price |
| $120.00 | $122.00 | $1.00 | $1.25 | -$2.95 | $117.30 | $119.30 |
| $118.00 | $124.00 | $0.45 | $0.58 | -$2.95 | $115.18 | $121.18 |
| Put | Call | Put | Call | Mar | Expected | Expected |
| Strike | Strike | Premium | Premium | Basis | Min. Price | Max Price |
| $124.00 | $126.00 | $2.73 | $2.90 | -$0.73 | $123.44 | $125.44 |
| $122.00 | $128.00 | $1.95 | $2.10 | -$0.73 | $121.42 | $127.42 |
| Put | Call | Put | Call | May | Expected | Expected |
| Strike | Strike | Premium | Premium | Basis | Min. Price | Max Price |
| $122.00 | $126.00 | $3.00 | $3.43 | $2.08 | $124.51 | $128.51 |
| $120.00 | $128.00 | $2.28 | $2.63 | $2.08 | $122.43 | $130.43 |
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Dillon M Feuz