When I ask people what they want to better understand about grain marketing, they often respond, “Options. I want to understand how to use options.”
Let’s dig into that a bit more.
Let’s say I’m new to accounting and I’m just starting to get comfortable filing tax returns for clients.
At this point, I’ve filed only a handful of simple, personal tax returns.
My manager walks in and says, “Ok, you have a bit of experience under your belt now, what questions do you have or what do you want to learn about tax returns?”
I reply, “I want to know how to file complex returns for corporations.”
Doesn’t that feel a bit like I’ve gotten ahead of myself?
If I were the manager, I’d assume that this employee must know everything there is to know about basic returns, personal returns with a few more complexities, and returns for small companies of various structures.
I know you know where I’m headed with this…
If you’re asking about options, I’m assuming you understand all there is to know about cash grain marketing — what basis is, how to read a bid sheet, what your cash contract options are, how to create a grain marketing plan, etc.
Why would I assume that?
Because options are a stepping stone that should come after you feel very comfortable with the cash market first.
If you don’t take the time to build your foundation of understanding in the cash grain market, getting into options is likely going to cause unnecessary confusion and heartache.
There are so many ways to improve your cash grain marketing and bottom line that should be examined and implemented before you dive into options trading.
For example, here are some things you should focus time and energy on understanding first before jumping into options.
- How to utilize different cash contract options
- How to manage futures and basis separately from one another
- How to forward contract more effectively and stick to a plan
- How to sell incrementally based on your breakeven and target profit goals
- How to compare discount schedules at different buyers
- How to best manage commercial storage and avoid drowning in storage costs
Additionally, many people want to understand options because they think they can use them to salvage bad marketing decisions.
That’s definitely the most dangerous reason to want to learn about options. If you’re in that mindset, you’re likely thinking based upon an ‘intuition’ or ‘hope’ that prices will improve and you’re thinking about taking a gamble.
I can’t say I’ve ever heard the word ‘gamble’ be used when talking about a solid risk management/grain marketing plan… 😉
All in all, don’t worry if you don’t understand options. You don’t need to right now.
The best next step is to focus on getting more comfortable with a cash grain marketing topic you’re struggling to understand.
Improving that will impact your bottom line more than you may realize.
Send me an email at nefarmgirlnextdoor@gmail.com with a cash grain marketing topic you want me to cover in a following article. That way, I can help you take the next step in building your foundational knowledge (before we get to options :))!