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Abstract

Farmers and other buyers and sellers of commodities use options in their marketing strategies. A cost of buying put and call options is the decay in option premium that occurs from the time an option position is established until the time the option position is closed out. This article finds that the average option premium decay cost associated with buying December corn and November soybean put and call options is relatively small if the option position is closed out before mid-to-late June. After this date the average option premium decay cost begins to accelerate, resulting in and increasing cost of using options to market corn and soybeans.

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