A few months back, the CME Group launched weekly grain options for corn, wheat, and soybeans. On Sunday, September 25th, the CME Group will introduce Live Cattle and Soybean Oil/Meal weekly options. These options, short term in nature, will trade just like the monthly options that we all know. Each weekly option will have a one month life span. You can trade one week, two week, and three week options for the next month as soon as they expire for the current month – the 4th week would be the monthly serial option. These options have American style features and are traded both electronically and in the pits.
I would encourage the orders to be entered on the floor; however, for those looking to enter them on the screen, use limit orders only. The symbol for the 2nd week expiration in September Corn would be ZC2U11 (expires September 9th). For September, there will be 3 weekly options with expirations on 9/2, 9/9, and 9/15. Next, the monthly October options will expire on 9/23, the Week 1 October options will expire the following week, and the Week 1 November options will begin to trade the week after. That is how the cycle works each week as we move forward.
For example, on September 12th, the USDA will release its latest WASDE (World Agriculture Supply and Demand Estimates) report. Typically, these reports provide those trading grains a bit of heartburn because the reports are released during the session break. When the market opens for trading 2 hours later, the market often moves so quickly that traders can’t adjust their positions to the newly reported information. Sometimes, being long/short in a grain market before these reports is equivalent to betting on the flip of a coin. With these weekly option expirations, speculators can easily buy short term straddles, strangles, or directional protection in this market for much less than in the monthly option market. This is an important development because a producer can now spend much less to eliminate the risk these supply and demand reports bring.
The cattle options will be a great tool. Producers can use them to curb risk from cattle on feed reports released after the close of business on a Friday or monthly crush reports released during the morning trading break in the grain markets. In the corn market, where the recent rise in prices is being credited to a lack of future supply, the ability to lock in profits before these reports is a technique I see many traders embracing.
Take a look at the USDA’s National Agricultural Statistic Service (NASS) to see the schedule for these reports. Plan ahead. If you have any questions, contact a Daniels Trading broker for a consultation.