Below is an excerpt from a weekly column called “A Scientific View” written by Hedge Plus owner Patrick Hayes. In this column dated October 15, 2018 Patrick how farm marketing is not a one size fits all business.
We need your input to be able to achieve what “fits you”. Our Hedge Plus Complete Program is set up with greatly reduced transaction fees, so that you are comfortable with our intentions. Hedge Plus Complete Advisors do not get a single dollar unless you renew. They work with you a whole year before your renewal is due and they make zero dollars off Hedge Plus Complete commissions. Their desire to become the best is the only reason I can challenge them like I am today.
My challenge is simply this: I want each Hedge Plus Complete client to receive hedge recommendations totally tailored to each client’s risk tolerance and the client’s need. I know my staff is already the best in the business at individualizing recommendations; I want to be even better. The reason, an involved client correlates with a happy client!
One size doesn’t fit all!
I believe that market advisors get trapped in “one position fits all” modus operandi. For example, I have read our specific buyback recommendations and many of our competitors’ specific buyback recommendations for re-owning 2018 corn. Of course everyone wants to add value on the bushels that have to be sold at harvest and are currently fetching a poor price. Each individual advisor seems to have their own pet trade. I do not see anyone that varies the buyback based on your goals and risk tolerance.
I want Hedge Plus advisors to do buybacks that fit your needs. I can come up with a million different ways to buyback 2018 corn, and I will outline a couple of those strategies in today’s report. I will explain why each strategy has advantages based off different elements of purpose/goals and risk tolerance needed for each buyback.
The job of an advisor should never be to tell you what fits you. The job of an advisor should always be to take your information and ‘fit’ their recommendations to your goals and risk tolerance!
I would be remiss if I did not first let you in on how you can get your advisor to do a buyback that fits what you want to accomplish! You need to make sure that your advisor knows what your purpose/goal is. For example, the purpose of a buyback could be to capture a $.20 profit on a rally, with the goal of adding the $.20 of buyback profit to make an unprofitable sale, profitable!
In the above example, the goal might be to achieve a $.20 profit by August 1st. The market advisor also needs to hear what your risk tolerance is. For the example above, you may be willing to hold the position without regards to margin because your belief is that at some point between now and August you expect corn futures to move at least $.20 higher. In this example, buying a simple futures in September would fit the bill. The ability to hold the position with the client’s committed to make margin allows the advisor to keep it simple, and buy a futures position.
If the client had a stated limited margin capacity, then buying a put under the long futures would be smart. If the client wanted to “box in” profit, then adding a sold call would help pay for the put, but limit profit. I could go on and on.
There truly are a million ways to use a hedge account. The best way to implement an appropriate plan is to individualize it with your input!
Staff, make sure you know what your client wants!
Clients, make sure your advisor is tailoring your plan to your goals and risk tolerance! One size doesn’t fit all!