March 2023 HIGHLIGHTS
- Off the March 31 Prospective Planting report, we saw a single day volume record for front-month based weekly options (57,314) as well as the recently launched New Crop Weekly options contract (2,773). New Crop Weekly options closed in on 5K contracts of open interest headed into the report.
- The volatility term structure of new crop Corn is now higher than old crop for the 2023 crop year after Prospective Planting.
- Soybean Meal options recorded the highest volume in March and is one of the most adopted products in 2023 at CME Group.
- Feeder Cattle options set an all-time average daily volume and open interest record as the industry manages the cattle cycle.
- Looking at Corn real-time CVOL Index (CVL) on March 31, market participants can see the major ramifications of the release of USDA data to implied volatility levels.
| Option Product | March ADV | Year/Year % Change |
|---|---|---|
| Corn | 91,744 | -35% |
| Soybean | 66,424 | -2% |
| Chicago SRW Wheat | 30,652 | -10% |
| Soybean Meal | 19,528 | 87% |
| Live Cattle | 15,878 | 56% |
| Hogs | 15,076 | 33% |
| Soybean Oil | 12,937 | 13% |
| SHORT-DATED NEW CROP OPTIONs | 11,890 | 27% |
| Ag weekly options | 11,575 | 151% |
| FEEDER CATTLE | 3,685 | 112% |
| KC HRW WHEAT | 3,389 | 30% |
| Calendar Spread Options | 3,005 | -15% |
Source: CME Group
Short Term Options ADV
| Weekly Options | Short-Dated New Crop Options | New Crop Weekly Options | ||
|---|---|---|---|---|
| MAR ADV | Mar ADV | Mar ADV | ||
| Corn | 5,546 | 7,661 | 271 | |
| Soybean | 3,484 | 4,228 | 101 | |
| Chicago SRW Wheat | 1,893 | |||
| Soybean Meal | 562 | |||
| Soybean Oil | 89 | |||
Source: CME Group
Ag risk management is evolving with market participants utilizing short-term options and calendar spread options (CSO) to better refine or isolate risk. March 2023 saw over 26K contracts trade per day as a short-term option or CSO, a 50% increase vs. last March.
Evolution of Ag options trading
Market participants can monitor volatility levels after a large event such as the USDA Prospective Planting report. Real-time Corn CVOL (CVOL) helps show the reaction intraday to help traders adjust and manage risk.
CVOL real time
Below is a chart of the volatility term structure on March 20th for Corn. The green line is old crop and the orange line is new crop (December). You can see old crop volatility priced higher going out to mid-July.
Corn volatility term structure
The chart below is the volatility term structure for Corn after Prospective Planting. The green line is old crop and the purple line is new crop (December). The market has switched and now pricing in higher volatility in the December contract going into the summer months vs. old crop.
With supply thinning and higher input costs, market participants are utilizing Feeder Cattle options at a record pace.
Feeder Cattle Options
All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
