Rolling Up to Puts Problem 4 2pts. Assume the same scenario as in problem...
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Rolling Up to Puts Problem 4 2pts.
Assume the same scenario as in problem 3 above. We Grow-Em-Heavy feedlot has a number of steers that will be ready for sale in late March or Early April. As the marketing manager, you decide to purchase April 106 Live Cattle puts for $2.15/bu. You also decide to buy Puts with a higher strike price if a trigger price of $112 is reached in the underlying futures. Assume the trigger price is reached, and you are able to get into April 112 Live Cattle puts at a premium of $1.75/cwt. Come late March you sell your cattle to a buyer for $104/cwt and April Live Cattle are trading at $106/cwt at which time you take the appropriate market actions. Calculate the realized price We-Grow-Em feedlot got for the cattle not including interest and broker fees. (Show all of your work).
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