Riding the cash market is naturally the most high-risk method. You won’t incur any extra costs, but you’re at the mercy of the market. If it goes up you win, down you lose.
For those looking at lower risk strategies, Bradley suggests forward contracting or the futures market.
Forward contracting allows you to agree on a price and delivery date with your buyer, without any extra broker fees. This locks in your price above your breakeven but limits your ability to capture any extra profit should the market turn up.
The futures markets give you the ability to lock in that base price now even if you don’t have a buyer lined up. Working with a broker, you can manage your position to offset any by hedging, but you’ll also still be limiting potential gains in an up market.
Bradley classified put options as a medium-risk method that lets us prevent losses but not prevent extra gains.
“Options give you the choice but not the obligation of buying or selling the underlying contract. A “put” gives you the option to sell a contract. A “call” gives you the option to buy a contract. You can also buy or sell a put and buy or sell a call. A put is the best way to set a minimum expected price without limiting the potential income from the market going up.”