Discussion
This graph shows daily settlement prices for Dec. 08 futures from
about fourteen months out through expiration. The blue and pink
lines show the premium value associated with 70-cent put and call
options, respectively. This year saw unprecedented price volatility, the inexplicable price spike in early March, and a dramatic price decline (in concert with all commodities) in the summer/fall. Major hedging opportunities were available provided the option markets were operating normally (which they weren't in early March). The post-spike volatility resulted in a large increase in option prices. Still, an inexpensive put option in mid-April would have paid huge dividends in teh event of the price decline (whihc NOBODY saw coming... that's why the put option was so inexpensive in mid-April).
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