premiums for puts that are the same Sellers of an option do not get the
Trading is thin, especially in amount out of the money. One day premium until the transaction is liq-
deep in-the-money strike prices and in May, corn futures were quoted at uidated or the option expires. Until
deferred delivery months. You may about $5.79. The $5.40 put, nearly then they are required to margin
not be able to buy a specific option 40¢ out of the money, was quoted at the position. That results in nearly
when you want even if you put in an 41¢. The $6.20 call, a little over 40¢ unlimited margin call risk.
order at the ask price quoted on the out of the money, was 47¢.
screen. For every buyer, there has to
be a seller. If there is no one to sell, These six factors don’t mean that
the transaction does not take place. options have no place in marketing
In general, strategies that involve plans. They do mean that it takes
spreads and other multiple trans- a long time to learn to use options
actions increase the commission profitably. They mean that the prof-
The price quotes you see on your costs without improving the itability of options is less than would
screen are set by committee. They profitability. appear to the inexperienced mar-
may or may not be the result of There are legitimate strategies that keter. Options offer almost unlimited
actual trades. involve buying one option and sell- possibilities.

Therefore, the price of a transac- ing another. However, each transac- These features of options mean tion may not be what is quoted to tion increases the complexity and that it is possible to be right in pre-the public and is showing up on an adds cost. Keep it simple, especially dicting price direction and still lose electronic monitor. when learning! money on an option transaction.

Premiums for out-of-the-money Here’s another potential problem calls are more expensive than the with some multiple transactions.

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*For commercial use only – not intended for personal, family or household use. This offer applies to purchases of $500 or more of genuine Case IH parts and related services made using the CNH Capital Commercial Revolving Account during a single visit to a participating Case IH dealership located in the United States now through February 28, 2009. If any payment when due is not made on other balances outstanding under the account, the promotional terms may be terminated and the promotional balance subject to the applicable default rate prior to the expiration of the promotional period. Once the promotional terms end, CNH Capital America LLC standard terms and conditions will apply. Customer participation subject to credit qualification, available credit and good standing on all CNH Capital America LLC accounts. Not all customers may qualify for this rate or term. Program subject to change or cancellation without notice. ©2008 CNH America LLC. All rights reserved. CNH and Case IH are registered trademarks of CNH America LLC.