Last time, I introduced readers to the resin cost control tools offered by Cargill ETM. IMO, the most advantageous of the tools are options - limited cost & low risk "insurance" against 1) higher resin prices before you lock in a purchase or 2) lower resin prices after you lock in purchase. The first involves price caps (call options); the second involves put options. Both are proven economically and strategically beneficial for buyers of commodities and equities. Thanks to Cargill ETM, resins buyers may now benefit from them.
Choices to match
Table 1 from my website shows a range of transactions for buyers or sellers consistent with a given market opinion or concern. Clearly, options provide several more cost and risk level choices than the buy/sell/do-nothing choices without them.
What's the upside and downside for resins buyers of executing one of the above transactions? Table 2 from my website is indicative. Most processors default to strategies A or B; strategies C, D, and E are available with options....