CME Group’s Tim Andriesen tells NAFB that options on agricultural futures products were first introduced back in the mid 1980’s as a new way for farmers and market participants to manage their price risk. He says weekly options provide a shorter time to expiration.

“In this case, from 28 days down to just a few days, with weekly options expiring every Friday,” said Andriesen. “This makes them helpful for more targeted risk management strategies based on specific time frames, like the release of USDA reports. Like Short-Dated New Crop options, these have become an increasingly popular tool over the last few years with them accounting for four percent of our total corn options volume in June.”

Andreisen adds CME Group has a tool to help put the ongoing market volatility into perspective.

“CME introduced a tool last year called CVOL, or the CME Group Volatility Index,” said Andriesen. “CVOL measures the 30-day forward-looking implied volatility of an underlying futures contract based on pricing data in our options markets and it can be used to help gauge market sentiment across different products. Currently, we have CVOL indexes across our major agriculture products, as well as an aggregate index that looks at implied volatility across the asset class as a whole. For example, the Corn CVOL recently hit 56 percent, which is a level that has not been seen since 2012. What this says is that there is a lot of uncertainty and risk to manage today, and this is a really good tool for people to look at volatility relative to historical volatility.”

Short-Dated New Crop options – launched in 2012 – reference the new crop contracts, but expire every month rather than just before the delivery period like standard options. Learn more at cmegroup.com.