We often hear that farming is a risky game, due to a massive amount of variables. When you have risk, you need to do what you can to make sure that you’re limiting the potential downside. It’s not realistic to make a farm business risk-neutral, but we can limit the exposure to losses through risk management tools.
When it comes to commodity marketing, there are options, literally.
Options are a product that allow investors to take a position on — or hedge — against the volatility of the underlying stock or future. Options are divided into call options, which allow buyers to profit as the price of the stock increases, and put options in which the buyer profits if the price of the stock declines.
Knowing how to use options is the topic for this Mind Your Farm Business podcast. Guest Jon Driedger, of Leftfield Commodity Research, joins host Shaun Haney to help steer through this minefield of risk management tools for commodity marketing.
Driedger and Haney get specific on when to use calls and puts, what factors to consider when building a hedging plan, and why it’s OK to walk before you run on using grain marketing tools.
Disclaimer: Royal Bank of Canada and its subsidiaries are not responsible for the information provided in this podcast, and this information does not necessarily reflect the views of Royal Bank of Canada or any of its subsidiaries. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its subsidiaries.
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