Wheat Options

Wheat options trade heats up big time on Friday.

 

Wheat options by Thomas Barry (TQB): Vol. off the leash.

 

This wheat story really had staying power from the beginning.  No one questioned the meatiness of the surrounding developments in the Ukraine and the building momentum that ensued on a technical level and then even on the weather related front.  But going home on Friday it has entered a whole new realm of ramped up interest from some big customers doing very bullish things.  At least four or five times since Tuesday, this market has seen a concerted effort by some pretty established locals and customers to step out and knock down inflated premium levels once things appeared to be somewhat settled into our new range, usually during the mid-session.  But each and every time the tide turned once again to the upside, with Fridays action all one way….straight up.  This was thanks to huge buying in the July 600 puts; first as part of intermarket action against the Dec. 410 corn puts and then later covered v. wheat futures.  But all the same, there was at least 6000 of those bought on Friday.  Then, right at that point of the day when it looked like we could see more of that same attempt at pressing it, Rosenthal showed up to buy the May 630 puts covered v. 6.82.  They started by paying 10 1/4 and then steam-rolled their way all the way to 12 1/4 v. that same futures level for a total that was approaching 4000 and leaving a trail of destruction that many at this point didn’t really expect.  The sheer volume in the wheat options over the last three session has been truly impressive.  But one really has to step back and wrap the mind around this little observation…….Wednesday, Thursday, and Today by themselves would each represent the biggest options volume performance in the history of the wheat options contract (screen and pit combined)…..each one of them! That makes the fact that we just saw them occur in succession all the more mind-blowing.  Things were at their most heated levels going home.  May was up 5%, July was up 3% and the Sep and DEc. were both up between 1% and 2%.  The underlying wheat market has traveled farther than almost anyone could have imagined just two weeks ago.  The technical picture gets really thin if can go a bit further from here.  Look for the next two weeks before the Mar. 31 report to see more of the same wild movement in both implied and underlying futures.  And as for the volume, it’s difficult to believe we’re going to fall off too drastically now that we’ve re-opened the sort of  O.I. numbers that we haven’t seen in years.  That’s becoming the subject above and beyond everything else now…the numbers.  They are getting big!

 

Remember – The world breaks everyone…but some are stronger at the broken places.

 

WHEAT     ATM^    VOL

J690^       34-36      43

K690^      67-70      36 3/4

N690^      90-93      32 1/4

U700^      112-114  30 1/2

Z710^      132-136   28 3/4

 

KCWHEAT    ATM^      VOL

J750^          32-35       42

K750^         64-68       31

N750^         89-93       28 3/4

U750^         110-111   27 3/4

Z760^         128-133    25 ¾

 

 

Thomas Barry (TQB)