On Monday, June 4, 2012, short-dated new crop options will be added to the option lineup on CBOT Corn and Soybean futures; on Tuesday, September 4, 2012, short-dated new crop options will be added to the option lineup on CBOT Wheat futures. CBOT currently lists standard, serial, and weekly options on Corn, Soybeans, and Wheat futures. For all these different types of options, the underlying instrument is the futures contract that is nearest to the expiration of the option. Based on the idea of successful weekly options, the Exchange plans to list short-dated new crop options during the planting and growing seasons. These new options exercise into the new crop futures (December Corn, November Soybean, and July Wheat) instead of the nearby futures. They also expire much earlier than standard new crop options. The lower time value will provide market participants an additional cost effective tool to hedge new crop positions. In addition, these new options will give market participants increased hedging flexibility and increased trading opportunities such as trading high impact events on new crop markets in specific time frames; hedging positions in old/new crop Calendar Spread Options; and managing Greek sensitivity of option books. For Corn and Soybeans, three contract months (May, July, and September) will be listed on the first business day every January. No other contract months will be listed in the same listing cycle. A new listing cycle will start on the first business day of the next January. For Wheat, three contract months (December, March, and May) will be listed on the first business day every September. No other contract months will be listed in the same listing cycle. A new listing cycle will start on the first business day of the next September. Other than different underlying futures and listing cycles, these new options will have the same contract specifications – American-style exercise, strike price ranges, strike price increments, minimum option premium increments, daily and final settlement – as their related standard options. If you would like to read the entire SER document please click here.
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