Our new Matrix Review blog was developed to show producers how Silveus Financial and our nCompassTM software helps producers visualize risk and scenario plan.  We will show hypothetical examples based on real risk management strategies we have developed with our clients.

A hypothetical corn farmer with 1,500 acres has already priced 50,000 bushels of new crop corn. If he makes his expected yield, he will have another 235,000 bushels at risk of lower prices by harvest. Executing an options risk reversal, buying the 390-330 put spread and selling a 440 call against 125,000 bushels will add a significant layer of downside protection on another 40% of expected production with the uncertainty of the USDA planting intentions report looming at the end of March.

Standard Matrix: Note the big swing in profitability from +20 to -74 if futures prices fall to $3.38.

The matrix + test: Note the new worst case scenario of -35, the put spread effectively gaining back almost $40 an acre with futures at $3.38.

The trade itself: Buying 25 CZ17 3.90-3.30 put spreads, selling 25 CZ17 4.40 calls for a net cost of 5 cents a bushel.

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