Derivative Markets Explained To The Layman

[tyrius.]

I know how it all works but still have problems figuring out where the losing side is.

It looks like you're buying both call and put options on the price of your commodity.  You'll make money as long as the price fluctuates enough, either up or down, to cover the costs of your options.  The losing side is if the price of grain remains the same or only fluctuates slightly.  Then you're out the cost of both your put and your call.  

This is an expensive strategy but it ensures a defined income from the sale of the grain.

[Root beer]

Tyrius and Rolo beat me to it. I've spent everyday for 2 weeks reading options before I decided do my own option trading. It very risky trading.

This is what I learn: Option is a zero-sum game. When one wins, another lose. Wealth is simply exchanging hands.

Stock market is NOT a zero-sum game. Wealth can be created. In option wealth is already created, it just changing hands. You are just hoping it stays in your hand.

The only thing I do not know about option is some of the calculation. But I'll soon learn that in school.

I do not know if I'm allow to speak on this, but I'll leave the information broad. The company that my dad works for got screwed over on price of wheat last year when they predict a rising cost. They locked in on a call option then exercised it, few weeks later suffered a loss when price of wheat dropped. :