A Review and Evaluation of Cotton Futures Options Trading

Carl G. Anderson


 
ABSTRACT

Commodity options for cotton are now available. This article defines the basic terms used in trading options and discusses the application and use of options. With yield uncertainty, a larger part of expected production can be protected with less risk exposure than with futures contracts. Options give the cotton industry another pricing tool with a great amount of flexibility to assist in price risk management. They offer a type of insurance against adverse price turns that requires no margin deposits and allows buyers to participate in favorable rice moves.



Reprinted from 1985 Proceedings: Beltwide Cotton Production Research Conferences pp. 259 - 261
©National Cotton Council, Memphis TN

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Document last modified Sunday, Dec 6 1998