A call option can be used by buyers of commodities to secure the price of ingredients, feed stuffs, or other inputs necessary to their business. We are often bombarded with the idea that the cost of everything goes up. While that possibility exists, it is not always true.
Market values for varying products go up and down. Call options act as insurance against rising prices, while allowing lower prices to still be realized. With that in mind, the use of call options to protect future input costs is a helpful tool when constructing budgets, business plans, or forecasts that are otherwise built on assumptions.
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