Managing Price Risk
A Tutorial in Dairy Futures and Options
The material contained in these pages provide an introduction in the use of dairy-based futures and options for managing price risk. This material will be useful for dairy farm operators, dairy processors and users of dairy-based ingrediants who want to reduce their price risk.
Throughout this workbook, you can choose from a number of interactive tutorials to hopefully provide a better understanding of the concepts. If after working through these exercises, you continue to have questions, feel free to contact Prof. Brian W. Gould of the Department of Agricultural and Applied Economics for further information.
Throughout the tutorial there are graphical representations of important concepts. You will need an Adobe Acrobat Reader to view these images. If you do not have a PDF reader, you can download a free reader/from Adobe by clicking on the following:
In several sections of this tutorial you have the opportunity to work through examples illustrating the principles behind the use of futures and options. There are several rules which must be followed when inputting values:
- Cells with downward pointing arrows require you to select from pre-defined choices if you wish to override the default values.
- A cell where the number 0 is displayed identifies a calculated cell and does not require user input. These values will change automatically as you through the worksheet.
- Cells that are blank require you to input values.
- Within a worksheet you must enter values in the user-supplied cells in the order they appear in the worksheet. You are not allowed to skip around. If you do, you may obtain incorrect answers.