January 2021 Agricultural Options Update

Monthly Highlights

  • In January, the Grain and Oilseed complex experienced large shifts in skew and elevated levels of volatility, given market conditions.
  • Soybean options set an all-time ADV record and averaged over 1M contracts of open interest this January, which has not happened since July 2016. The March contract saw the 25-delta risk reversal hit 6%, setting an all-time high with implied vols averaging 27%.
  • With the increase in volatility, short-term options have been popular. Weekly options posted the second-highest average open interest with Soybeans playing a large role in the complex.
  • In Corn, March 2021 implied volatility averaged 32% in January, which is double compared to 2020 and 30% higher than the 14-year average.

Elevated Volatility Levels – As the chart depicts, January showcased elevated volatility levels for the March contract.  2009 posted higher implied vols but, when compared to last year or the 14-year average, 2021 clearly started the year in a different vol environment.

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Skew – On top of elevated vol levels, the Grain and Oilseed complex has seen 25-delta calls at historic premiums compared to 25-delta puts. Soybeans, Soybean Meal, and Soybean Oil set all-time highs for the 25D risk reversal in the March contract.

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Skew Movement – Looking at the Soybean risk reversal, you can see that skew is not just setting new highs but moving around while doing so. The all-time high of 6% was set in the March contract on January 14 but then quickly collapsed down below 2%.

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Short-Term Options – Short-Dated and Weekly options both have seen very strong activity ‒ given the heightened volatility. Weekly options average open interest reached over 40K contracts with Soybeans setting an ADV record in December and January. Short-Dated New Crop options had the most active January ever.

*CME Data

Soybeans – Given the movements in price and elevated levels of volatility and skew, Soybean options hit an all-time monthly ADV record and have averaged over 1M contracts of open interest in January.  The Soybean complex has not had this many options contracts outstanding since July of 2016.

*CME Data

Contact Information

Steven A Stasys
Senior Director, Agricultural Options

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