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Dr. William I. Tierney, Jr.   E-mail: wtierney@agecon.ksu.edu
Copyright 1998. All rights reserved by author.
Disclaimer: This web page is designed to aid farmers with their marketing and risk management decisions. The risk of loss in trading futures, options, forward contracts, and hedge-to-arrive can be substantial and no warranty is given or implied by the author or any other party. Each farmer must consider whether such marketing strategies are appropriate for his or her situation. This web page does not represent the views of Kansas State University.

 

Analysis of Returns Tables
Current: Nov. 2, 1998

This page contains two tables: Analysis of Returns From Purchasing CBOT Soybean Call Options at Harvest and Analysis of Returns From Storing Soybeans in Kansas City From Harvest Until Mid-February and Mid-June.

Analysis of Returns From Purchasing CBOT Soybean Call Options at Harvest

Year Day CBOT
MARCH
Futures
Price		 CBOT
MARCH
At Money
Call
Option
Premium* 		CBOT
MARCH
Futures
Price
At Option
Expire 		CBOT
MARCH
Option
Profit
(Loss)		   CBOT
JULY
Futures
Price		 CBOT
JULY
At Money
Call
Option
Premium*		 CBOT
JULY
Futures
Price
At Option
Expire 		CBOT
JULY
Option
Profit
(Loss)		 Implied
Volatlity
of
MARCH
Call		 Implied
Volatlity
of
JULY
Call
1981 02-Nov $6.99 $0.25 $6.12 ($0.26)   $7.35 $0.37 $6.37 ($0.38) 16.60 17.69
1982 01-Nov $5.31 $0.19 $5.88 $0.37   $5.78 $0.30 $6.10 $0.00 16.60 17.69
1983 01-Nov $8.56 $0.31 $7.34 ($0.32)   $8.55 $0.45 $7.77 ($0.46) 16.60 17.69
1984 01-Nov $6.58 $0.30 $5.72 ($0.31)   $6.78 $0.36 $5.74 ($0.37) 21.20 18.03
1985 01-Nov $5.40 $0.16 $5.25 ($0.17)   $5.56 $0.22 $5.34 ($0.23) 13.55 13.30
1986 03-Nov $5.05 $0.16 $4.89 ($0.17)   $5.11 $0.24 $5.34 ($0.02) 14.85 15.75
1987 02-Nov $5.42 $0.24 $6.28 $0.61   $5.46 $0.37 $10.58 $4.74 20.19 22.61
1988 01-Nov $8.01 $0.43 $7.56 ($0.44)   $8.02 $0.67 $7.24 ($0.68) 25.14 28.16
1989 01-Nov $5.89 $0.22 $5.68 ($0.23)   $6.06 $0.33 $6.00 ($0.34) 17.30 18.20
1990 01-Nov $6.27 $0.20 $5.76 ($0.21)   $6.50 $0.32 $5.60 ($0.33) 15.05 16.42
1991 01-Nov $5.78 $0.21 $5.80 ($0.20)   $5.91 $0.33 $6.04 ($0.21) 16.95 18.10
1992 02-Nov $5.64 $0.15 $5.75 ($0.05)   $5.76 $0.28 $6.25 $0.20 12.25 15.70
1993 01-Nov $6.43 $0.18 $6.82 $0.20   $6.50 $0.30 $6.66 ($0.16) 12.90 15.09
1994 01-Nov $5.68 $0.16 $5.58 ($0.17)   $5.83 $0.26 $6.02 ($0.07) 12.90 14.49
1995 01-Nov $6.98 $0.25 $7.34 $0.10   $7.01 $0.36 $7.78 $0.40 16.45 17.06
1996 01-Nov $6.72 $0.25 $7.83 $0.85   $6.78 $0.35 $8.26 $1.12 17.12 17.05
1997 03-Nov $7.28 $0.30 $6.66 ($0.31)   $7.37 $0.45 $6.52 ($0.46) 19.50 20.15
                         
Average   $6.35 $0.23 $6.25 ($0.04)   $6.49 $0.35 $6.68 $0.16 16.81 17.86
                         
1998 02-Nov $5.71 $0.23 ______ ______   $5.88 $0.35 ______ ______ 18.60 19.70

* Since CBOT options didn't begin trading until 1984, premiums for 1981-1983 are based on an implied volatility of 16.05% for March and 17.69% for July options. Premiums were estimated for "synthetic" call options whose strike prices were equal to the futures prices on November 1.


Analysis of Returns From Storing Soybeans in Kansas City From Harvest Until Mid-February and Mid-June

Store Until Mid-February Store Until Mid-June
Year Change in Price* Total Commrcl. Storage Costs@ Total On-Farm Storage Costs# Commrcl. Storage Profit (loss) On-Farm Storage Profit (loss) Change in Price* Total Commrcl. Storage Costs@ Total On-Farm Storage Costs# Commrcl. Storage Profit (loss) On-Farm Storage Profit (loss)
1981 ($0.14) $0.41 $0.41 ($0.55) ($0.55) $0.19 $0.84 $0.75 ($0.65) ($0.56)
1982 $0.74 $0.28 $0.28 $0.46 $0.46 $0.93 $0.58 $0.48 $0.35 $0.45
1983 ($1.18) $0.39 $0.39 ($1.57) ($1.57) ($0.62) $0.80 $0.70 ($1.42) ($1.32)
1984 ($0.39) $0.33 $0.32 ($0.72) ($0.71) ($0.44) $0.67 $0.57 ($1.11) ($1.01)
1985 $0.34 $0.24 $0.24 $0.10 $0.10 $0.56 $0.49 $0.39 $0.07 $0.17
1986 ($0.13) $0.21 $0.20 ($0.34) ($0.33) $0.87 $0.43 $0.32 $0.44 $0.55
1987 $1.10 $0.24 $0.23 $0.86 $0.87 $5.03 $0.49 $0.38 $4.54 $4.65
1988 ($0.18) $0.34 $0.34 ($0.52) ($0.52) ($0.57) $0.71 $0.59 ($1.28) ($1.16)
1989 $0.06 $0.28 $0.28 ($0.22) ($0.22) $0.31 $0.58 $0.47 ($0.27) ($0.16)
1990 ($0.19) $0.28 $0.28 ($0.47) ($0.47) ($0.11) $0.57 $0.47 ($0.68) ($0.58)
1991 $0.17 $0.23 $0.22 ($0.06) ($0.05) $0.42 $0.47 $0.36 ($0.05) $0.06
1992 $0.40 $0.19 $0.19 $0.21 $0.21 $0.55 $0.39 $0.29 $0.16 $0.26
1993 $0.76 $0.21 $0.21 $0.55 $0.55 $0.58 $0.42 $0.33 $0.16 $0.25
1994 $0.21 $0.23 $0.23 ($0.02) ($0.02) $0.68 $0.48 $0.37 $0.20 $0.31
1995 $0.52 $0.28 $0.28 $0.24 $0.24 $0.95 $0.58 $0.47 $0.37 $0.48
1996 $1.26 $0.27 $0.26 $0.99 $1.00 $1.79 $0.54 $0.44 $1.25 $1.35
1997 ($0.40) $0.28 $0.28 ($0.68) ($0.68) ($0.51) $0.58 $0.47 ($1.09) ($0.98)
Average $0.17 $0.28 $0.27 ($0.10) ($0.10) $0.62 $0.57 $0.46 $0.06 $0.16
1998 ____ $0.23 $0.22 ____ ____ ____ $0.47 $0.37 ____ ____

* Change in price is based on Kansas City soybean prices November 1, February 22 and June 22.
@ Storage costs are based on (1) an elevator charge based on UGSA rates for KS country elevators; and (2) bank prime rate for June 1998 analysis based on futures and cash prices as of Fri May 22, '98
# On-Farm storage costs are based on a single, one-time, in-out cost of $.09; and (2) bank prime rate for November x the November 1 soybean price x time in storage.

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