Option on Ags futures

T

traderjean

Hi everyone !

I am trying to understand the tick size and price of option on Corn for exemple.

When I go on the CBOT site, it says :

1 tick = 1/8 cent per bushel = $6.25 per contract

For exemple a 700 Sept08 PUT quotes 35'0. Now what is a tick ? 35'0 to 36'0 ?

And a 1/8 cent is 0.125 cents right. So why don"t I see any of that on the option quotes.

It would be great if someone could explain to me, i am used to trading options on stocks and indexes, but there seems to be something I missed out on corn and wheat.

Thanks
 
1) Each penny is $50 per contract. Each tick, 1/8th of a penny, is $6.25 per contract. That is correct.

2) The option can trade from 35, to 35 & 1/8, to 35 & 1/4, to 35 & 3/8 et al.

3) The "problem" is that the options are being quoted in "round cents" because of the extreme volatility. That put-option could be quoted "35-bid, 36-offer" or maybe "35-bid, 37-offer". The fractions are being ignored. There's no way you'll see a quote of "35 & 1/4 - bid, 35 & 3/8 - offer".
 
just thought I'd add a little of the logic behind the quote and how to calculate the dollar value of the premium.

The full size grain contract size is 5,000 bushels per contract. So if you see a quoted of 5 cents, you can interpret that as 5 cents per bushel. 5 cents times 5,000 bushels per contract gives you a calculation of $250. Thus every penney move on the futures (or option) is equal to $50 per contract.
 
Quote from traderjean:

Hi everyone !

I am trying to understand the tick size and price of option on Corn for exemple.

When I go on the CBOT site, it says :

1 tick = 1/8 cent per bushel = $6.25 per contract

For exemple a 700 Sept08 PUT quotes 35'0. Now what is a tick ? 35'0 to 36'0 ?

And a 1/8 cent is 0.125 cents right. So why don"t I see any of that on the option quotes.

It would be great if someone could explain to me, i am used to trading options on stocks and indexes, but there seems to be something I missed out on corn and wheat.

Thanks
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The tick, minimum movement for options is one cent.

Of course, ag options are not that liquid, so for practical purposes, you can consider the bid-ask spread the "minimum fluctuation".
 
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