Option liquidity?

heech · May 28, 2009

Hi,

I'm a self-admitted newb, so bear with me.

It's just after the start of the 18:00 PM session right now. I'm looking at the ATM options for front-month futures... But for most of these options, I'm not seeing anything on the ask/bid.

ZCN9 is currently showing ask/bids at 425 and 430, for example. But I can't get anything for ZON9, or ZWN9. (And I thought wheat had higher liquidity than most other ags...?)

Are there no market makers sitting on these? Is this a function of the *time*, and would there be ask/bids in the morning session?

traderTX · May 28, 2009

yep...wait till the pit opens, then you'll have plenty of bid/ask..at least in the corn, wheat, and beans. Oats probly looks like the bid ask on milk as far as options goes...probly better off going to the floor for oats options. All depends on your size though for the "big 3".

heech · May 29, 2009

traderTX,

Thanks for that info.

How do I distinguish between going to the pit and/or electronically for the options? I can go at this one of two ways... either via IB, or RTrader through Zen-Fire. Both have built in option books, and I'm not clear how to distinguish pit and/or otherwise.

heech · May 29, 2009

It is right now 9:45 AM PST, so 11:45 CST.

I'm still not seeing any ask/bid quotes for ZO (oat) options for Jul 09.

Is this normal? What am I missing?

traderTX · May 29, 2009

Quote from heech:

It is right now 9:45 AM PST, so 11:45 CST.

I'm still not seeing any ask/bid quotes for ZO (oat) options for Jul 09.

Is this normal? What am I missing?

Yes...oats is one of the most thin markets out there (along with rice, bellies, and lumber). Also, we are about to ramp up into roll next week in the July, so yet another reason you may not see electronic quotes. Finally, the screen will not be NEARLY as active on the thin contracts as with the "big 3" grains. My suggestion...if you want to trade the July Oat options...make a call down to your friendly neighborhood filling broker down on the floor.

traderTX · May 29, 2009

Quote from heech:

traderTX,

Thanks for that info.

How do I distinguish between going to the pit and/or electronically for the options? I can go at this one of two ways... either via IB, or RTrader through Zen-Fire. Both have built in option books, and I'm not clear how to distinguish pit and/or otherwise.

the pit and electronic quotes will have a seperate symbol. If you are using Zen-Fire, you're not getting pit quotes. Not sure if IB quotes the pit or not. More than likely if you want these quotes you'll need to get either a DTN/CQG type product or I think PatSystems has a pit order system that you can do from your computer.

heech · May 29, 2009

Quote from traderTX:

Yes...oats is one of the most thin markets out there (along with rice, bellies, and lumber). Also, we are about to ramp up into roll next week in the July, so yet another reason you may not see electronic quotes. Finally, the screen will not be NEARLY as active on the thin contracts as with the "big 3" grains. My suggestion...if you want to trade the July Oat options...make a call down to your friendly neighborhood filling broker down on the floor.

Thanks again, very helpful.

In terms of rolling over... this is a purely voluntary thing, not anything exchange-mandated, correct? People are just getting out of the July into the September future contract?

I believe the July futures don't expire until mid July... why would people start rolling over now? Is there greater volatility later on...?

I'm just trying to figure out how to model the price moves in futures, if I'm going to use them to hedge my option positions. Will the July futures get very thin/volatile the last couple weeks of June...?

heech · May 29, 2009

Also, are pit + electronic option prices usually pretty much in sync? Is there a significant difference in ask/bid?

Is there a minimum order size on pit-traded contracts?

I'd assume people are arb'ing these things so they all stay in line... but who knows.

youngtrader · May 29, 2009

don't trade grain options on the screen simple as that! All the liquidity and volume is in the pit. So if you want to make a trade get with a firm that fills orders on the floor.

nazzdack · May 29, 2009

Quote from heech:
----In terms of rolling over...
----why would people start rolling over now?

With the grains, people are rolling out of "old crop", i.e. May and July, bypassing the "swing crop", i.e. August and September, and primarily rolling into the "new crop" harvest months, i.e. November and December. That should be apparent from looking at the distribution of open interest in the futures contracts.