{"id":7667,"date":"2025-09-11T06:51:54","date_gmt":"2025-09-11T06:51:54","guid":{"rendered":"https:\/\/www.alcircle.com\/blog\/?p=7667"},"modified":"2025-09-11T06:51:55","modified_gmt":"2025-09-11T06:51:55","slug":"hedging-with-jorge-episode-68-buying-call-options","status":"publish","type":"post","link":"https:\/\/www.alcircle.com\/blog\/hedging-with-jorge-episode-68-buying-call-options","title":{"rendered":"Hedging with Jorge #Episode 68: Buying call options"},"content":{"rendered":"\n<p>In this episode of <em>Hedging with Jorge<\/em>, we continue our journey through the world of aluminium risk management and explore the basics of <strong>call and put options<\/strong>. Whether you are a producer, trader, or consumer, understanding these instruments is essential for managing price volatility in the aluminium market.<\/p>\n\n\n\n<figure class=\"wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio\"><div class=\"wp-block-embed__wrapper\">\n<iframe loading=\"lazy\" title=\"Hedging with Jorge #Episode 68: Buying call options\" width=\"696\" height=\"392\" src=\"https:\/\/www.youtube.com\/embed\/t3l2g1OuwAw?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe>\n<\/div><\/figure>\n\n\n\n<p><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">What does \u201cAt the Money\u201d mean?<\/h3>\n\n\n\n<p>Let\u2019s begin with the concept of an <strong>at-the-money (ATM) put option<\/strong>.<br>Suppose the prevailing aluminium futures price on the <strong>third Wednesday of December<\/strong> is <strong>$2,700 per tonne<\/strong>. If you set your option strike price at the same level $2,700 this is called an <strong>at-the-money put<\/strong>.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>In this case, you sell the option and receive a <strong>premium<\/strong> from the buyer.<\/li>\n\n\n\n<li>The buyer gets the right to sell aluminium to you at $2,700, exactly the current market level.<\/li>\n<\/ul>\n\n\n\n<p>Now, what if you lower the strike price to <strong>$2,600<\/strong> instead of $2,700? This makes it an <strong>out-of-the-money put<\/strong>. The buyer only has the right to sell to you at a lower price than the prevailing market. That means the <strong>premium you receive will be lower<\/strong>, since the buyer is taking the risk of the first $100 drop in price.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Understanding calls: The right to buy<\/h3>\n\n\n\n<p>On the other side, we have the <strong>call option<\/strong>, which gives the buyer the right to purchase aluminium at a predetermined price.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>If you buy a call at <strong>$2,700<\/strong> (the prevailing price), it is an <strong>at-the-money call<\/strong>.<\/li>\n\n\n\n<li>To pay less premium, you can go <strong>out-of-the-money<\/strong> by setting the strike at <strong>$2,800<\/strong>. Here, you run the risk of the first $100 rise in price, but your <strong>premium is significantly lower<\/strong>.<\/li>\n<\/ul>\n\n\n\n<p>This principle paying less for an option by accepting some initial risk is central to how producers and consumers use calls and puts in their hedging strategies.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Recap: At the money vs out of the money<\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>At the Money Put\/Call<\/strong>: Strike price = prevailing market price ($2,700 in our example).<\/li>\n\n\n\n<li><strong>Out of the Money Put<\/strong>: Strike price lower than market ($2,600).<\/li>\n\n\n\n<li><strong>Out of the Money Call<\/strong>: Strike price higher than market ($2,800).<\/li>\n<\/ul>\n\n\n\n<p>In both cases, the option premium is lower because the holder absorbs the initial $100 movement.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Setting up for the zero-cost collar<\/h3>\n\n\n\n<p>As we wrap up, remember that for an <strong>aluminium consumer<\/strong>, the natural position is to go <strong>long in the futures market<\/strong> essentially locking in purchases for future needs. Instead of just buying futures, consumers can build more sophisticated strategies:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Sell an out-of-the-money put<\/strong> (e.g., $2,600).<\/li>\n\n\n\n<li><strong>Buy an out-of-the-money call<\/strong> (e.g., $2,800).<\/li>\n<\/ul>\n\n\n\n<p>Together, this creates the structure of a <strong>zero-cost collar<\/strong>, where premiums offset each other and risk is managed more efficiently.<\/p>\n\n\n\n<p>In the next episode, we\u2019ll put all these pieces together and see how consumers can use the <strong>zero-cost collar<\/strong> strategy to manage aluminium price risk effectively.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>In this episode of Hedging with Jorge, we continue our journey through the world of aluminium risk management and explore the basics of call and put options. Whether you are a producer, trader, or consumer, understanding these instruments is essential for managing price volatility in the aluminium market. What does \u201cAt the Money\u201d mean? Let\u2019s [&hellip;]<\/p>\n","protected":false},"author":89,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[168],"tags":[267,10,314,65,37,305],"class_list":{"0":"post-7667","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-primary-aluminium","7":"tag-open-forum-for-aluminum-community-blog","8":"tag-aluminium","9":"tag-aluminium-hedge","10":"tag-aluminium-industry","11":"tag-aluminium-price","12":"tag-hedging"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Aluminium Call &amp; Put Options Simplified<\/title>\n<meta name=\"description\" content=\"Understand aluminium call &amp; put options, premiums and zero-cost collar strategies for risk management\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.alcircle.com\/blog\/hedging-with-jorge-episode-68-buying-call-options\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Aluminium Call &amp; Put Options Simplified\" \/>\n<meta property=\"og:description\" content=\"Understand aluminium call &amp; put options, premiums and zero-cost collar strategies for risk management\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.alcircle.com\/blog\/hedging-with-jorge-episode-68-buying-call-options\" \/>\n<meta property=\"og:site_name\" content=\"AL Circle Blog\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/AlCircle\" \/>\n<meta property=\"article:published_time\" content=\"2025-09-11T06:51:54+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2025-09-11T06:51:55+00:00\" \/>\n<meta name=\"author\" content=\"Jorge Eduardo Dyszel\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@alcircle\" \/>\n<meta name=\"twitter:site\" content=\"@alcircle\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Jorge Eduardo Dyszel\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/www.alcircle.com\\\/blog\\\/hedging-with-jorge-episode-68-buying-call-options#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.alcircle.com\\\/blog\\\/hedging-with-jorge-episode-68-buying-call-options\"},\"author\":{\"name\":\"Jorge Eduardo Dyszel\",\"@id\":\"https:\\\/\\\/www.alcircle.com\\\/blog\\\/#\\\/schema\\\/person\\\/64371a8562aa8589375f4f9a8c08a9f6\"},\"headline\":\"Hedging with Jorge #Episode 68: Buying call options\",\"datePublished\":\"2025-09-11T06:51:54+00:00\",\"dateModified\":\"2025-09-11T06:51:55+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/www.alcircle.com\\\/blog\\\/hedging-with-jorge-episode-68-buying-call-options\"},\"wordCount\":459,\"commentCount\":1,\"publisher\":{\"@id\":\"https:\\\/\\\/www.alcircle.com\\\/blog\\\/#organization\"},\"keywords\":[\"AL Circle\",\"aluminium\",\"aluminium hedge\",\"aluminium industry\",\"Aluminium price\",\"hedging\"],\"articleSection\":[\"Primary Aluminium\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\\\/\\\/www.alcircle.com\\\/blog\\\/hedging-with-jorge-episode-68-buying-call-options#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/www.alcircle.com\\\/blog\\\/hedging-with-jorge-episode-68-buying-call-options\",\"url\":\"https:\\\/\\\/www.alcircle.com\\\/blog\\\/hedging-with-jorge-episode-68-buying-call-options\",\"name\":\"Aluminium Call & Put Options Simplified\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.alcircle.com\\\/blog\\\/#website\"},\"datePublished\":\"2025-09-11T06:51:54+00:00\",\"dateModified\":\"2025-09-11T06:51:55+00:00\",\"description\":\"Understand aluminium call & put options, premiums and zero-cost collar strategies for risk management\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/www.alcircle.com\\\/blog\\\/hedging-with-jorge-episode-68-buying-call-options#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/www.alcircle.com\\\/blog\\\/hedging-with-jorge-episode-68-buying-call-options\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/www.alcircle.com\\\/blog\\\/hedging-with-jorge-episode-68-buying-call-options#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/www.alcircle.com\\\/blog\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Hedging with Jorge #Episode 68: Buying call options\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/www.alcircle.com\\\/blog\\\/#website\",\"url\":\"https:\\\/\\\/www.alcircle.com\\\/blog\\\/\",\"name\":\"AL Circle Blog\",\"description\":\"Aluminium Industry Trend &amp; 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