  A classical inventory problem is studied from the perspective of embedded
options, reducing inventory-management to the design of optimal contracts for
forward delivery of stock (commodity). Financial option techniques \`{a} la
Black-Scholes are invoked to value the additional `option to expand stock'. A
simplified approach which ignores distant time effects identifies an optimal
`time to deliver' and an optimal `amount to deliver' for a production process
run in continuous time modelled by a Cobb-Douglas revenue function. Commodity
prices, quoted in initial value terms, are assumed to evolve as a geometric
Brownian process with positive drift. Expected revenue maximization identifies
an optimal `strike price' for the expansion option to be exercised, and
uncovers the underlying martingale in a truncated (censored) commodity price.
The paper establishes comparative statics of the censor in terms of drift and
volatility, and uses asymptotic approximation for a tractable analysis of the
optimal timing.
