Oats are seeds or grains of a genus of plants that thrive in cool, moist climates. The oldest known cultivated Oats were found inside caves in Switzerland and are believed to be from the Bronze Age. There are about 25 species of Oats that grow worldwide. The top producers of Oats are of temperate climates, with the highest yields coming from Poland, Germany, Russia, and Canada. The U.S. also grows large quantities of Oats and continuously ranks in the top ten Oats producers compiled by the Food and Agriculture Organization.
Oats are usually sown in early spring and harvested in mid to late summer, but in southern regions of the northern hemisphere, they may be sown in the fall. Oats are used in many processed foods such as flour, livestock feed, and furfural, a chemical used as a solvent in various refining industries.
Oats futures provide a way to effectively manage the price risk of merchandisers, producers, food processors, and other commercial users. Futures contracts provide opportunities to evaluate both the current and future supply and demand situation, identify short and long-term cyclical price and volatility patterns. Oat futures traders are able to hedge or speculate based on expectations of directional price or spread movement.
The Oats contract trades at the Chicago Board of Trade (CBOT), part of the CME Group. The electronic futures contract trades on Globex from 7:00 PM CT to 7:45 AM Sunday through Friday. As well as the primary hours of 8:30 AM CT to 1:20 PM Monday through Friday.
One Oats futures contract is 5,000 bushels, or approximately 86 metric tons. The pricing unit is in cents per bushel. The previous settlement price (November 5, 2013) for December 2013 Oats futures was 340’0, or $17,000 per contract. The most common contract symbol is ZO.
One futures contract price increment or “tick” is 1/4 of a cent per bushel. A one “tick” move is $12.50. The next tick after 340’0 upward is 340’2 followed by 340’4. Therefore, a price move from 340’0 to 341’0 is $50. 341’0 reads as three dollars and forty-one cents or three forty-one even.
The performance bond or initial margin requirement to initiate one futures contract is $880 (as of November 11, 2015). To control that futures contract going forward the maintenance margin becomes $800 (as of November 11, 2015).
The Daily Price limit is 20 cents per bushel, expandable to 30 cents per bushel, when the market closes at limit bid or limit offer. For example, if the market closes at limit bid, or 360’0, on Wednesday, November 6, 2013, the next session’s Daily Price Limit would increase to 30 cents. If the following trading session fails to close at limit, the next session’s Daily Price Limit reverts to the 20 cents cap. The exchange resets daily limits for Oats in May and November of each year, based on a percentage of the average settlement price of benchmark contracts during a roughly nine-week observation period.
The Oat crop year begins in June and ends in May. The futures contract month listings are March (H), May (K), July (N), September (U), and December (Z).
The futures contract’s Last Trading Day (LTD) is the business day prior to the 15th calendar day of the contract month. The December 2013 Oats futures contract LTD is December 13, 2013 for example. The First Notice Day (FND) for that same contract is November 29, 2013.
Significant fundamental reports to be aware of are the United States Department of Agriculture (USDA) Crop Progress reports, typically released at 3:00 PM CT on Monday’s, and the periodic Crop Production and USDA Supply/Demand reports, typically released at 11:00 AM CT.
Visit https://www.danielstrading.com/ for additional contract specifications and market information regarding the Oats futures market.
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