Options offer the right but not the obligation to buy or sell the underlying futures contract at a certain price (strike). There are two types of options: Calls and Puts. Calls are purchased with the hope the prices will rise, while puts are purchased when the buyer expects prices to fall.
Options can also be sold, the strategy behind selling options is the hope they will lose value or expire worthless and the premium they were sold for can be collected.
Maximum Futures/Options loss:
A successful risk manager will learn to manage their farm’s profitability and also fit within their capital limitations. In the AgYield simulator, each game has a maximum amount of money that can be lost on futures/options positions. This includes all open and all closed positions. This is meant to simulate the real-world situation of capital restraints on Hedging lines of credit that many operations get through their lending institution(s). This limit is set by the game’s Administrator as a total $ amount. This amount can be seen under the game settings icon at the top of the Dashboard tab. You will be notified if your futures/options losses start to approach the game’s limit. If your futures/options losses exceed this limit AT ANY TIME your open positions will be automatically closed out at the current market price and you will no longer be allowed to enter futures/options contracts for the remainder of the game.