Six Step Plan™
Our time-tested Six Step Plan is a written and systematic approach to marketing agricultural commodities. Since 1995, producers across the United States and Canada have employed the Six Step Plan to take the guesswork out of marketing decisions.
Overview of Six Step Plan
|Step 1 -- Buy Put Options on 100% of your expected production.|
|Step 2 -- Make cash sales on market rallies.|
|Step 3 -- Offset (sell) Put Options equal to quantity of cash sales.|
|Step 4 -- Roll Put Options up or down to manage equity and opportunity.|
|Step 5 -- If Option roll up is allowed, bring cash sales to a minimum of 25% of expected production.|
|Step 6 -- Consider re-owning cash sales with Call Options.|
Six Step Plan FAQs
- What commodities can I protect with the Six Step Plan?
- You can hedge corn, soybeans, wheat, cotton, rice, milk, cattle, and hogs.
- What does it cost?
- The only fee charged by FCA is $40 per contract each time you purchase or sell an option. Using industry terminology, that is $80 per round turn. We typically make 4-8 transactions per year, and there are no management or consulting fees.
- What does "rolling an option" mean?
- "Rolling" is simply selling the option you currently own, and then purchasing a new option. Rolls are performed to improve your position in the market -or- to pull equity out of an option that has gained in value.
- When do we roll options up or down?
- Through years of experience, we have developed a systematic approach. For each commodity, we have prescribed increments which we believe are best for rolling options up or down. This approach takes the emotion and guesswork out of your marketing.
- When do we make cash sales?
- We suggest making cash sales on rallies and option roll-ups. Through years of experience, we have prescribed increments which we believe are best for making cash sales. This systematic approach takes the emotion and guesswork out of your marketing.
- What if we experience a disaster and our production is lost?
- When you know your production numbers or yield will be significantly reduced, we will need to assess how this impacts your previous marketing efforts. You may need to sell a corresponding amount of the options that you previously purchased.
- This sounds good, but I still don't fully understand. Is there someone who can walk me through this?
- One of our greatest privileges is coaching our clients through their use of the Six Step Plan and making sure that they fully understand the program. We will work with you on an individual basis until you are comfortable moving forward. Feel free to call us at any time.
- Can you help me explain this to my banker?
- Absolutely! We work with bankers and ag lenders across the country. It has been our experience that once your lender understands the program, he will be quite willing to lend you the money needed for purchasing options.
- Why should I choose First Capitol Ag and the Six Step Plan?
When selecting a marketing firm or broker, we would encourage you to compare track records. How have they performed over a 5-year+ period of time? Be cautious when working with firms that have no track record, or no structured marketing plan for you to follow.
Other benefits of the Six Step Plan:
- No margin calls
- 100% of your commodity is protected
- Covers your downside risk while maintaining upside potential
- Only makes 4-8 transactions on the average year
- No hidden costs
- Plan is structured and written