Traders in the KCBT wheat options trading pit attribute the increase in open interest to the fact that the base of local or independent traders has grown, increasing the amount of capital in the pit. This has increased the amount of commercial business because commercials can trade significant amounts without the price moving very much. Because of this and the fact that Kansas City wheat options offer a more appropriate hedge for hard red winter wheat than the soft-red based Chicago contract, more commercials are starting to trade in Kansas City. Traders note that they expect this to be a continuing trend.
Options give a buyer the right, but not the obligation, to buy or sell a KCBT wheat futures contract at a specified price. KCBT wheat options have been trading since 1984.
