At-a-glance

  • Short Dated New options reached 330K contracts in open interest, the highest level since 2015 and 79,789 contracts traded June 23, the largest trading day since 2016.
  • Live Cattle futures have increased in price over the last two years as volatility has decreased and call skew has increased.  Spread trading has been the majority of option volume for the last three months with verticals and three-ways being the most popular strategies.
  • Wheat CVOL (WVL) volatility and call skew have not subsided to levels pre-Ukrainian invasion.
  • The Corn option complex (SDNC/CSO/Weekly/standard) reached the third highest level of open interest in 37 years on June 22, with 2,406,655 contracts outstanding.
OPTION PRODUCT JUNE ADV YEAR/YEAR % CHANGE
Corn 139,614 5%
Soybean 67,315 -26%
Short-Dated New Crop Option 28,891 -3%
Chicago SRW Wheat 26,154 47%
Soybean Oil 11,684 -35%
Live Cattle 10,449 21%
Soybean Meal 10,126 -19%
Hogs 8,713 -33%
Ag Weekly Option 6,949 -22%
KC HRW Wheat 3,255 40%
Claendar Spread Option 2,936 62%
Feeder Cattle 1,403 36%
Class III Milk 739 -41%

Non-Standard Corn options – Short Dated New Crop options made up 8% of all Corn option volume in the first half of 2022.  Calendar Spread options have also been heavily utilized, setting record volume and open interest for the product during the first half of 2022.

Live Cattle – The below CVOl chart depicts volatility (blue line) decreasing and call skew (purple line) increasing as time goes on and prices rally.

Live Cattle Option Strategies – With the lower vol and higher call skew market, participants are utilizing more vertical and three-way strategies in the market.  The last three months have shown more spread volume than outright in the cattle market for the first time.

Chicago Wheat CVOL – Using CVOL it’s easy to see the large spike in volatility and call skew at the beginning of March.  Through June volatility is still trading around 50% compared to the low 30s at the beginning of the year.

Original report published on CME Group.

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