AREC 435: Commodity Futures and Options Markets Course Syllabus
Spring Semester, 2013 Tuesdays and Thursdays, 12:30-1:45 PM MMH
0108
The economics and institutional features of commodity futures and options markets. Students
will develop a basic understan

Homework 6 The Costs of Drying, Shrinkage, and Storing Grain
1.
Corn is harvested at 22% moisture (field moisture). The harvest time price is
$4.95 which is quoted at 15.5% moisture. The price of propane equals $3.00/gallon.
What is the net harvest time p

The Basis and Cash Contracts
Basis The difference between the current cash price and the futures price. Principal
measure for linking cash and futures contract for a specific location and commodity. In
this class, it is calculated as the cash price
the f

Homework 12 Selling Options
Calculate the profit/loss for selling (short) puts and calls under the following
scenarios. Enter your answers in the worksheets. Fill in all boxes.
You are the seller of a Put option. On May 25, 2014, the 2014 December corn fu

HOMEWORK #16 Open Interest and Supply and Use Tables
1. Calculate, open longs, open shorts, daily volume and open-interest for the following trading
days.
Day
Number
1
Buyer
Seller
None
None
2
A (2)
C (2)
3
B (1)
D (1)
4
C (1)
B (1)
5
D (1)
E (1)
6
E (1)

Homework 14 Pre-harvest hedge with a Bull spread
1. You are grain producer who grows and sells corn and soybeans. On May 25, 2014, the 2014
December corn futures contract was trading for $6.44/bushel. You are offered a forward
contract price of $6.50.bu.

HW 13. Pre-harvest and storage hedges with call options
Pre-harvest hedges: Forward contract and buy calls
1. You are grain producer who grows and sells corn and soybeans. On May 25, 2014, the 2014
December corn futures contract was trading for $6.44/bush

AREC 435 Homework 3 Basis Calculations
Using the Maryland Grain and Hay Reports at:
http:/www.nass.usda.gov/Statistics_by_State/Maryland/Publications/MD_Grain_
&_Livestock_Report/index.asp
1. Calculate the average monthly basis for wheat, June 2011 for Ce

Homework 14 Pre-harvest hedge with a Bull spread
1. You are grain producer who grows and sells corn and soybeans. On May 25, 2014, the 2014
December corn futures contract was trading for $6.44/bushel. You are offered a forward
contract price of $6.50.bu.

Homework 6 The Costs of Drying, Shrinkage, and Storing Grain
1.
Corn is harvested at 22% moisture (field moisture). The harvest time price is $4.95 which is
quoted at 15.5% moisture. The price of propane equals $3.00/gallon. What is the net harvest time
p

AREC 435 Homework 4 Cash Price Estimation (Due Thursday, March 6)
The futures contracts for soybeans are trading for:
May 2014
$13.97
July 2014
$13.73
Nov 2014
$11.69
January 2015$11.72
March 2015 $11.75
Using the correct basis table from 2012 Maryland So

AREC 435 Homework 4 Cash Price Estimation
The futures contracts for soybeans are trading for:
May 2014
$13.97
July 2014
$13.73
Nov 2014
$11.69
January 2015$11.72
March 2015 $11.75
Using the correct basis table from 2012 Maryland Soybean Basis and Price
In

HW 13 Pre-harvest and storage hedges with call options
Pre-harvest hedges: Forward contract and buy calls
1. You are grain producer who grows and sells corn and soybeans. On May 25, 2014, the 2014
December corn futures contract was trading for $6.44/bushe

Homework 12 Selling Options
Calculate the profit/loss for selling (short) puts and calls under the following
scenarios. Enter your answers in the worksheets. Fill in all boxes.
You are the seller of a Put option. On May 25, 2014, the 2014 December corn fu

HOMEWORK 9 Time value of options
1. For the following seven strike prices associated with the December call
option when the December futures contract is trading for $5.61,
complete the following table.
Strike Price
Premium
Intrinsic Value Time Value
$5.30

HOMEWORK 7:
Post-Harvest Hedging (Due April 1)
Using the attached basis data, calculate the effective selling price
minus the cost of storage for the following three storage hedges. Enter
your answer on the attached Post-Harvest Grain Hedging Worksheet.
F

Homework 15 Hedging with a Bear Fence
Example: Set a bear fence on the soybean crop on April 28 for December delivery. The following is
the January soybean futures price and associated Put and Call strike prices and premiums. Use the
most recent soybean f

Homework 15 Hedging with a Bear Fence
Example: Set a bear fence on the soybean crop on April 28 for December delivery. The following is
the January soybean futures price and associated Put and Call strike prices and premiums. Use the
most recent soybean f

HOMEWORK 9 Time value of options
1. For the following seven strike prices associated with the December call
option when the December futures contract is trading for $5.61,
complete the following table.
Strike Price
Premium
$5.30
$5.40
$5.50
$5.60
$5.70
$5

HOMEWORK 11 Call Options
Using the basis data below, calculate the effective selling price for the following two hedges using
Call options. Enter your answer on the Purchase price hedge with call options worksheets. Fill in
all boxes.
1. You are livestock

HOMEWORK 11 Call Options
Using the basis data below, calculate the effective selling price for the following two hedges using
Call options. Enter your answer on the Purchase price hedge with call options worksheets. Fill in
all boxes.
1. You are livestock

HOMEWORK 10 Put Options
Using the basis data below, calculate the net price for the following two hedges using options.
Enter your answer on the attached Options: Pre-Harvest Grain Hedging Worksheet. Fill in all
boxes.
1. On May 25, 2014, the 2014 Decembe

HOMEWORK 10 Put Options
Using the basis data below, calculate the net price for the following two hedges using options.
Enter your answer on the attached Options: Pre-Harvest Grain Hedging Worksheet. Fill in all
boxes.
1. On May 25, 2014, the 2014 Decembe

HOMEWORK #7
Table 5. Average Marylands Lower Eastern Shore Soybean Basis, 2004 2011.
Calendar Month
September avg
SD
October
avg
SD
November avg
SD
December avg
SD
January
avg
SD
February avg
SD
March
avg
SD
April
avg
SD
May
avg
SD
June
avg
SD
July
avg
SD

HOMEWORK #16
Open Interest and Supply and Use Tables
1. Calculate, open longs, open shorts, open-interest and daily volume for the following
trading days.
Day
Number
1
Buyer
Seller
None
Open
Longs
None
Open
Shorts
None
Daily
Volume
0
Open
Interest
0
None

AREC 435 Homework 5: Pre-Harvest Hedging (Dues Tuesday March 11)
Using the basis data below, calculate the effective selling price for the following three preharvest corn hedges. Enter your answer on the attached Pre-Harvest Grain Hedging
Worksheet. Fill