April 2020 Agricultural Options Update

Ag Option Product Suite

Monthly Highlights

  • This past month July Corn 25-delta puts trade at a premium to calls, a first looking back to 2007.  This is with July Corn futures down 6% on the month and implied volatility sitting around 26% compared to a 13-year average of 30%.
  • The Dairy option complex hit an all-time volume and third-largest month-end open interest (OI) figure. Class III June implied volatility was trading around 30%, more than double the 13-year average of 14%.  
  • Like corn, the July Soybean Oil 25 delta puts trade at a premium to calls, a first looking back to 2007.
  • The Wheat complex showed strong volume in April. It is interesting to note the July hard red winter (HRW)-soft red winter (SRW) futures spread rallying from -69.25 to -32.75 over the month.  Implied volatility increased in HRW by 5% to 32% with SRW increasing 4%, sitting at 29%.
Option Product April ADV Year/Year % Change
Corn 77,085 -19%
Soybean 38,956 -21%
Chicago SRW Wheat 29,939 29%
Hogs 15,137 -26%
Live Cattle 11,218 -1%
Soybean Meal 10,230 44%
Soybean Oil 6,840 38%
KC HRW Wheat 5,065 76%
Ag Weekly Option 3,727 31%
Short-Dated New Crop Option 4,536 -13%
Class III Milk 3,151 54%
Feeder Cattle 1,177 -29%
Calendar Spread Option 293 -41%

Corn skew - The corn market historically has had a premium to calls when compared to an equal distance put. Looking back to 2007, the 25-delta put has a higher implied volatility than a 25-delta call.  It is unique given the fact that the July contract covers part of the North American growing season, where weather can be a concern.

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Soybean Oil skew - At the end of April, soybean oil was also showing the 25-delta put with a higher implied volatility compared to a 25-delta call for the first time. 

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Dairy complex - The dairy complex hit an all-time volume record driven primarily by Class III Milk options, with the May $11 put and June $10 put being the most active options.

Wheat complex - The Wheat complex was active in the options market in April.  The below chart shows the implied volatility relationship between July HRW vs. SRW in the blue line.  The grey line shows the July HRW-SRW futures spread rallying throughout April.

Contact Information

Steven A Stasys
Senior Director, Agricultural Options
steven.stasys@cmegroup.com
+312-648-3822

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