Henry, whose south-central Nebraska operation also includes custom farming and a seed dealership, tries to sell about half of his corn or soybeans before harvest. “That can give me a 24-month window to spread out sales,” he says.

He prefers to market most of his crops through forward contracts at the co-op. High prices through 2009 and into 2010 make him want to get some early sales in. But with the massive margin requirements forcing him and other grain handlers to limit sales to the current year's crop, he's in a bind.

Options or futures are the alternatives. Options spreads may provide him the best coverage. “I'm looking at a fence,” says Henry, “buying puts and selling calls.”

In a corn options strategy he was considering, Henry would buy out-of-the-money puts in the $5.50 range and sell in-the-money $8.50 calls. Cost of the puts was about 26¢/bu. The calls could be sold for about 20¢.

For only 6¢/bu., he would have a marketing window of $5.50 and $8.50. His risk was limited for very little money.

Henry was bullish in his strategy, in that he anticipated tighter corn acres due to slow planting in the central Corn Belt. Any Corn Belt weather during pollination would have kept him bullish. He refers to it as “gut-check” marketing.

“If it's dry in the rest of the Corn Belt and raining here and basis tightens here, that tells me it's time to sell, either through forward contracts or using futures or options,” he says.

Soybean marketing hopefully will involve forward contracting most of his beans with a new biodiesel plant in his hometown or traditionally with the co-op. “It's a new market for us,” says Henry, noting that he normally doesn't use options on soybeans. However, volatility this year has him thinking twice about them.

“Some options trades may be valid with what we're seeing in these markets,” he says.

Again, at-the-money put options are virtually off the table for Henry and many others. But a spread is a consideration.

For example, with November futures at about $13.60, a $12.60 put could be bought for about 92¢/bu., about 50¢ below the at-the-money put cost of $1.43. To offset the premium charge, a $17.40 call could be sold for about 50¢.

That example provides a marketing window from $12.60 to $17.40. The cost would be about 40¢/bu. That's about $2,000 for the 5,000-bu. contract.

If Henry used this strategy, and the market blew through the $17.40 range, he'd face margin calls, as he would for the $8.50 corn call if that price was surpassed.