AUG ZS 13 calls @ 13

Discussion in 'Ag Futures' started by TraDaToR, Jun 29, 2009.

  1. TraDaToR

    TraDaToR

    Hello,

    don't you think those calls are overvalued? Aug Futures are @ 11.1 and
    Aug ZS 9 puts are sold @ 2 or something. This dissimetry seems too important to me. I sold 1 contract.( wow ).

    How does market makers introduce
    bullish bias like that in their pricing models?

    I am quite new to options.

    Thanks a lot.
     
  2. 1) There can be "wide" bid-ask spreads on the calls that create the appearance of a mispricing.
    2) Physical commodities, such as grain, "panic" to the upside. That's why the call options seem overvalued.
    3) Did you short-sell the put or the call? If it was the call, you may not sleep very well for the next few weeks. :cool:
     
  3. caroy

    caroy

    The up side bias in option pricing currently in the August beans is due to tight ending stocks in old crop beans. The beans in the ground now are the Nov contract. Tomorrow is the acreage report in grains. We'll see how many acres have gone from corn to soy due to the wet spring.

    You're right about a big bias right now in the Aug / Sep contracts but it is tied to tight old crop ending stocks.

    I hope you took advantage of the collapsing volatility in August premium and hedged that call buy buying a further OTM call.
     
  4. TraDaToR

    TraDaToR

    Thanks a lot, guys...

    It wasn't due to large B/A spreads. 13 was the fill I got on ask.

    I will perhaps hedge with some further OTM calls.

    Last question: Who is making a market in electronic ag options? Citadel?
     
  5. It doesn't matter. Citadel doesn't care either way about your 1-lot. :D
     
  6. There are a few that I know of..but its a small % of their operation. Go to the pit and save yourself the hassle.
     
  7. TraDaToR

    TraDaToR

    Easy... They sure don't care about me but I care that Citadel or any other MM is bullish.:D
     
  8. TraDaToR

    TraDaToR

    I always lean on MMs and at least get B/A midpoint...so I guess for little sizes like mine elec is better.

    Thanks.
     
  9. 1) MM's tend to be market neutral. They do not have a directional bias.
    2) You have to have your "own" opinion, not what you think another guy's opinion is. :cool:
     
  10. TraDaToR

    TraDaToR

    I agree with you, but as you said on an other thread, "options are becoming the underlying", the hedging product( futures )may move according to option prices / MM book.

    Does it make sense?
     
    #10     Jul 1, 2009