Minimum Price Contract

Risk- Minimal, as the producer knows the cost up front to enter into the contract.

Reward- Moderate, as options bought will not follow futures prices tic-for-tic.

Use when:

1. Producers need to sell grain for cash flow needs, but the market shows upside potential.
2. Basis is relatively good.
3. Calculated price is above loan rate.
4. Futures prices are good. 

Calculations Example

The cost will be deducted from the producers grain check at the time of writing. In the event a producer wishes to “Minimum Price” a prior grain sale, they will be required to pay the total cost upon entry in to the option position.