A New Way to Manage the Spread Risk Between Calendar Months
Soybean Calendar Spread options (CSOs) are options on the price differential between two contract months, rather than on the underlying asset itself. Therefore, they offer alternative hedging capabilities compared to standard options, and can provide a more precise hedge against adverse movements in price spreads in the grain and oilseed markets.
CSOs are sensitive only to the value and volatility of the spread itself, rather than the price of the underlying commodity. They are more efficient than combining options on 2 different months in an effort to replicate the spread, and provide a better risk management device for hedgers and market participants exposed to calendar spread risks.
The three consecutive futures calendar spreads and the longer dated spreads will be listed at all times. When the existing longer dated spreads expire the corresponding longer dated spreads for the following year will be listed.