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Cash Settled Commodity Option Contracts as an Alternative to Minimum Support Price: A Mechanism to Alleviate Farmer Distress

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  • Sree Rama Murthy Y

Abstract

Cash settled commodity options is a possible alternative to create a mechanism so that minimum support prices work in reality and do not remain a paper exercise. This paper argues that the government should create a commodity options market for all minimum support price (MSP) commodities. Further option contracts should be cash settled. The government should participate by selling put options at or above the minimum support price, so that farmers can exercise the option if they find that market prices are below the minimum support price.

Suggested Citation

  • Sree Rama Murthy Y, 2020. "Cash Settled Commodity Option Contracts as an Alternative to Minimum Support Price: A Mechanism to Alleviate Farmer Distress," Information Management and Business Review, AMH International, vol. 11(4), pages 50-53.
    • Handle: RePEc:rnd:arimbr:v:11:y:2020:i:4:p:50-53
    DOI: 10.22610/imbr.v11i4(I).3010
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    1. Lien, Donald & Tse, Yiu Kuen, 2006. "A survey on physical delivery versus cash settlement in futures contracts," International Review of Economics & Finance, Elsevier, vol. 15(1), pages 15-29.
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    4. Lien, Donald & Tse, Yiu Kuen, 2002. "Physical delivery versus cash settlement: an empirical study on the feeder cattle contract," Journal of Empirical Finance, Elsevier, vol. 9(4), pages 361-371, November.
    5. Ali, Shayequa Z. & Sidhu, R.S. & Vatta, Kamal, 2012. "Effectiveness of Minimum Support Price Policy for Paddy in India with a Case Study of Punjab," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 25(2).
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