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Dec com futures closed today at $5.76 and you buy three (3) $5.80 put options for $0.47. Because of your proximity to several large Ethanol plants, your basis has historically been $0.00, your local price is even with the board. a. Will the com market have to increase or decrease for you to profit from your option? b. What is the minimum price you will net for the bushels covered by the puts? c. Dec com closed at $6.75 on the day your options expired. What was the value of the options at expiration? d. You sold your corn to one of the ethanol plants on December 23rd for $6.35. What is the net price you received for the bushels covered by the puts?

Dec com futures closed today at $5.76 and you buy three (3) $5.80 put options for $0.47. Because of your proximity to several large Ethanol plants, your basis has historically been $0.00, your local price is even with the board. a. Will the com market have to increase or decrease for you to profit from your option? b. What is the minimum price you will net for the bushels covered by the puts? c. Dec com closed at $6.75 on the day your options expired. What was the value of the options at expiration? d. You sold your corn to one of the ethanol plants on December 23rd for $6.35. What is the net price you received for the bushels covered by the puts?

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Dec com futures closed today at $5.76 and you buy three (3) $5.80 put options for $0.47. Because of your proximity to several large Ethanol plants, your basis has historically been $0.00, your local price is even with the board. a. Will the com market have to increase or decrease for you to profit from your option? b. What is the minimum price you will net for the bushels covered by the puts? c. Dec com closed at $6.75 on the day your options expired. What was the value of the options at expiration? d. You sold your corn to one of the ethanol plants on December 23rd for $6.35. What is the net price you received for the bushels covered by the puts?
Transcribed Image Text:Dec com futures closed today at $5.76 and you buy three (3) $5.80 put options for $0.47. Because of your proximity to several large Ethanol plants, your basis has historically been $0.00, your local price is even with the board. a. Will the com market have to increase or decrease for you to profit from your option? b. What is the minimum price you will net for the bushels covered by the puts? c. Dec com closed at $6.75 on the day your options expired. What was the value of the options at expiration? d. You sold your corn to one of the ethanol plants on December 23rd for $6.35. What is the net price you received for the bushels covered by the puts?
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