August 2020 Agricultural Options Update

Ag option product suite

Monthly highlights

  • Week 2 weekly options expire on the same day as the upcoming September WASDE and are pricing in the largest move in Chicago Wheat.
  • November Soybean implied volatility was at historical lows during most of August, with 20-day historical volatility trading over implied volatility.
  • Soybean Meal showed strong volume with the 25-delta risk reversal increasing from 1.5% to 4% in late August.
  • Record Ag option block volume occurred in August, driven by high delta option strategies.

Source: CME Group

September WASDE – By taking the high price minus the low price for the trading day of the September WASDE and dividing it by the settle price of the previous day, you can get historical ranges. Week 2 weekly options expire on September 11, the same day as this year’s WASDE. An options straddle can be a good indication of market expectations going into a known event. The chart below shows the Week 2 weekly option as a percentage of the underlying, compared to 10 years of historical ranges.

*Week 2 straddle price as of 8/28/2020

November Soybeans - Implied volatility over the last 14 years

Source: CME Group

Soybeans November implied volatility vs. 20-day historical volatility

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Soybean Meal

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Relationship-based trading in Ag options

Source: CME Group

Source: CME Group

Contact Information

Steven A Stasys
Senior Director, Agricultural Options

About CME Group

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