Cme Grains After Wasde

By Craig Bewick
JAN 12 2021

US Equities were mixed today as the small cap Russell 2000 was broadly higher, the Nasdaq was lower and the S&P 500 and Dow Jones were closer to steady on the day.  Somewhat interestingly, even with the price decline in the Nasdaq-100, the implied volatility in the E-mini Nasdaq-100 options ticked down and with volatility in the E-mini Dow Jones options rose with the moderate price rally.  In other CME Group markets, the US Dollar rose against most major currencies again today, WTI Crude Oil futures prices advanced another 1.7% and Grains futures prices were up sharply. 

CME Group Wheat, Corn and Soybean futures prices, which we’ve written more extensively about lately, all rallied after the first USDA Supply and Demand (WASDE) report of 2021 was released today.  Corn was up by about 5% after ending stocks and production came in lower than expectations.  Similarly, Soybean and Wheat futures prices were up about 3.7% and 4.7% respectively as ending stocks were lower there as well.   As we sometimes see after the release of major economic or, in this case, crop reports, implied volatility in Soybean and Corn options declined today (as the uncertainty regarding the report was removed from the market) though it actually ticked higher in Wheat options.  Consistent across all three grain products was that the Calls were bid versus the Puts as the underlying futures price rallied.  The QuikStrike graphs below depict the out of the money (15 and 25 Delta) Call volatility minus the Put volatility for all three products.

ABOUT THE AUTHOR

Craig Bewick has spent 25 years in futures and options markets, starting at CBOT and CME working in risk management, regulatory, technology, product management and client development. 

After 8.5 years with WH Trading LLC, Craig returned to CME Group as the Director, Client Development and Sales, working to educate and promote futures trading. Craig currently writes for InFocus Options Corner.

Connect with Craig at activetrader@cmegroup.com

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