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Strategies Summary

Net Grower Price/lb, Assuming 7-Cent Local Basis and including LDP value

Dec 05 Futures:	1. Put Hedge	2. Put Spread	3. Put-Call Spread	4. Synthetic Put	5. Synthetic Put-Call
44	61.55	59.60	64.05	62.46	64.96
45	60.55	59.60	63.05	61.46	63.96
46	59.55	59.60	62.05	60.46	62.96
47	58.55	59.60	61.05	59.46	61.96
48	57.55	58.60	60.05	58.46	60.96
49	56.55	57.60	59.05	57.46	59.96
50	55.55	56.60	58.05	56.46	58.96
51	54.55	55.60	57.05	55.46	57.96
52	53.55	54.60	56.05	54.46	56.96
53	52.55	53.60	55.05	53.46	55.96
54	51.55	52.60	54.05	52.46	54.96
55	50.55	51.60	53.05	51.46	53.96
56	49.55	50.60	52.05	50.46	52.96
57	48.55	49.60	51.05	49.46	51.96
58	48.55	49.60	51.05	48.46	50.96
59	48.55	49.60	51.05	47.46	49.96
60	48.55	49.60	51.05	47.46	49.96
61	49.55	50.60	52.05	48.46	50.96
62	50.55	51.60	53.05	49.46	51.96
63	51.55	52.60	54.05	50.46	52.96
64	52.55	53.60	55.05	51.46	53.96
65	53.55	54.60	56.05	52.46	54.96
66	54.55	55.60	56.05	53.46	54.96
67	55.55	56.60	56.05	54.46	54.96
68	56.55	57.60	56.05	55.46	54.96
69	57.55	58.60	56.05	56.46	54.96

These examples are based on 4/22/05 settlement prices for Dec. 05 futures (56.22), put options, and call options.

Strategies

Strategy 1

Purchase Put Option
If prices were to drop below 52 cents, hedgers using Strategy 1 benefit from an increasing LDP value and increasing put option value. View a more detailed break-out of grower net price under this strategy.

Strategy 2

Finance Put by Selling Out-Of-Money Put
Returns to the purchased put option bottom out at the strike price of the sold put option, though LDP still grows as prices decline. View a more detailed break-out of grower net price under this strategy.

Strategy 3

Finance Put By Selling Out-Of-Money Call
Returns level off above the strike price of the sold call option. View a more detailed break-out of grower net price under this strategy.

Strategy 4

Synthetic Put
If prices were to drop below 52 cents, hedgers using Strategy 4 benefit from an increasing LDP value and increasing value of short futures position. View a more detailed break-out of grower net price under this strategy.

Strategy 5

Finance Synthetic Put by Selling Out-Of-Money Call
Returns level off above the strike price of the sold call option. View a more detailed break-out of grower net price under this strategy.

The Cotton Marketing Planner
http://agecon2.tamu.edu/people/faculty/robinson-john/

Dr. John R. C. Robinson
Associate Professor
Extension Economist-Cotton Marketing
Department of Agricultural Economics
Texas A&M University
2124 TAMU
College Station, TX 77843-2124
Phone: (979) 845-8011
Fax: (979) 845-4906
Email: jrcr@tamu.edu