At-a-glance
  • Chicago Wheat front month volatility stayed steady through May as deferred maturities softened.
  • CVOL Index shows how affected commodities from the Ukrainian conflict have reacted over the last three months in terms of implied volatility and their relationship to each other.
  • Livestock options had an active May as the call skew was historically strong in Lean Hog and Feeder Cattle options.

Option Product

May ADV

Year/Year % Change

Corn

113,319

-38%

Soybean

65,231

-26%

Chicago SRW Wheat

26,789

18%

Soybean Oil

9,121

-36%

Soybean Meal

8,506

-33%

Hogs

11,392

8%

Live Cattle

10,785

33%

Short-Dated New Crop Option

15,915

-20%

Ag Weekly Option

5,742

-29%

KC HRW Wheat

4,414

65%

Calendar Spread Option

1,194

-9%

Feeder Cattle

1,640

38%

Class III Milk

945

18%

Source: CME Group

Implied volatility- last three months – With the use of CVOL, you can see that Corn, Chicago Wheat, and WTI Crude Oil spiked in early March due to the Ukrainian conflict affecting global supply. Chicago Wheat (green line) had an outsized reaction compared to the others but has since dropped below WTI and is still trading above corn.

SRW Wheat term structure – Diving in a little further on how Wheat volatility has decreased, we can compare the volatility at the beginning of May (green) to the end of the May (blue). The July contract stayed at the same level (38%) but the deferred contracts decreased significantly.

Feeder Cattle – As Feeder Cattle futures have slowly rallied over the last two years, we are seeing the August 22 risk reversal print new highs during May. The risk reversal is looking at the difference between 25 delta call minus the 25 put, which was trading roughly at the same volatility level in May, uncommon when looking at the past.

Lean Hog and Live Cattle skew –Using CVOL to look at Live Cattle and Lean Hog skew over time, you can see the effects of the COVID lockdown starting in April 2020. Live Cattle seems to have leveled out around -1 as Lean Hog Skew has been more erratic.


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.

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