Are Agricultural Options Overpriced?
AbstractAs agricultural options markets grow, perceptions of overpricing persist among market participants. This study tests the efficiency of corn, soybean, and wheat options by computing trading returns. Several call and put option strategies yield significant profits, but returns are influenced by movements in the futures price, and straddle trading does not lead to significant returns. The combined analysis of put, call, and straddle returns indicates that significant returns can be attributed to drifts in the underlying futures, and that the corn, soybean, and wheat options markets are efficient.
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Bibliographic InfoArticle provided by Western Agricultural Economics Association in its journal Journal of Agricultural and Resource Economics.
Volume (Year): 36 (2011)
Issue (Month): 1 (April)
agricultural options; mispricing perceptions; trading returns; Risk and Uncertainty;
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- Jens Carsten Jackwerth & George M. Constantinaides & Stylianos Perrakis, 2005.
"Mispricing of S&P 500 Index Options,"
CoFE Discussion Paper
05-09, Center of Finance and Econometrics, University of Konstanz.
- Stylianos Perrakis & Jens Carsten Jackwerth & George Constantinides, 2005. "Mispricing of S&P 500 Index Options," Working Papers wp05-07, Warwick Business School, Finance Group.
- George M. Constantinides & Jens Carsten Jackwerth & Stylianos Perrakis, 2008. "Mispricing of S&P 500 Index Options," NBER Working Papers 14544, National Bureau of Economic Research, Inc.
- Isengildina-Massa, Olga & Irwin, Scott H. & Good, Darrel L. & Gomez, Jennifer K., 2008. "The Impact of Situation and Outlook Information in Corn and Soybean Futures Markets: Evidence from WASDE Reports," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 40(01), April.
- Bozic, Marin & Newton, John & Thraen, Cameron S. & Gould, Brian W., 2012. "Parametric Bootstrap Tests for Futures Price and Implied Volatility Biases with Application to Rating Livestock Margin Insurance for Dairy Cattle," Staff Papers 135077, University of Minnesota, Department of Applied Economics.
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