Description
A soybean farmer is hedging production using a fence
A soybean farmer is hedging production using a fence composed of the two following options positions on Nov 18 soybean futures: Holding a put with a $10.00 strike price and a premium of $0.39 Writing a call with a $11.20 strike price and a premium of $0.29 (Note: Assume an expected basis of -$0.55, and a current futures price of $10.30)
a) Calculate both the minimum expected selling price and maximum net selling price of the fence.
b) Draw the pay-off diagram for the fence described above.
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A soybean farmer is hedging production using a fence
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