The corn options was listed for trading on Dalian Commodity Exchange (DCE) on January 28. Over the past one month, the corn options has presented rational and smooth market operation, effective and reasonable pricing, active participation of institutional clients and steady increase in open interests , demonstrating its great market liquidity and development potential. Market participants generally believed that there will be huge development space for the corn options due to its solid industry basis.
Moderate liquidity and steady open interest growth
Statistics show that the corn options has run for 19 trading days till February 28, with the total trading volume of 326,000 contracts (unilateral, the same below), and the trading turnover of RMB 107.35 million. Its open interest has shown a progressive increase day by day and reached 113,000 contracts after the closing on February 28, which is 4.7 times as that on its listing day. The trading volume and open interests of the corn options accounted for 7.7% and 9.7% respectively in the underlying futures, and the daily turnover rate was 0.3, staying at a rational level. Besides, investors favored call options slightly, with the trading volume and the open interest account for 51.4% and 53.5%, respectively.
Reasonable pricing and effective functioning of marker makers
The corn options has shown effective and reasonable pricing in its price trend. The price of in-the-money contracts was generally higher than that of out-of-the-money contracts, the far-month contracts higher than the near-month contracts, and no price inversion and obvious arbitrage opportunity occurred in the market. The implied volatility of all options series remained at a rational range with no abnormalities, and that of corn options has kept rising after its listing. In particular, the implied volatility of corn option c1905 (a series with the largest open interest) has stayed between 10.5% and 13.5%, reaching the minimum of 10.7% on its listing day (January 28), and the maximum of 13.2% on February 18. The average implied volatility in the first month was 12.2%, nearly the same with the past volatility of the underlying futures and presenting a good performance.
A total of 12 market makers have performed the duties of continuous quoting and quote responding since the listing of corn options, which has helped to form a rational market price, better satisfied the demand of market trading and shown the preliminary functioning of market makers. Besides, it has demonstrated the market makers’ role in offering liquidity and reflected the rational and effect market operation of corn options.
Active market participation and the capacity of serving the real economy initially shown
Active participation from institutional clients has been seen in corn options since its listing, with the number of trading companies growing steadily. Till February 28, a total of 1,294 clients have involved in options trading, up by 398 compared with the first listing day, and 98 of them were institutional clients. And the trading volume and open interest of institutional clients accounted for 72.9% and 62.4%, respectively.
Louis Dreyfus involved in the corn options trading soon after the listing, and its options portfolio has helped to effectively avoid the price fluctuation risk in the futures market. As the corn options market gets increasingly mature, the corn industry will be able to adopt more flexible and more abundant hedging strategies to achieve sound and stable operation.
Beijing Jingliang Lugu Trading Co., Ltd. has also involved in the corn options trading in the first month.
