Are agricultural options overpriced?

Hernán A. Urcola, Scott H Irwin

Research output: Contribution to journalArticlepeer-review

Abstract

As 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.

Original languageEnglish (US)
Pages (from-to)63-77
Number of pages15
JournalJournal of Agricultural and Resource Economics
Volume36
Issue number1
StatePublished - Apr 2011

Keywords

  • Agricultural options
  • Mispricing perceptions
  • Trading returns

ASJC Scopus subject areas

  • Animal Science and Zoology
  • Agronomy and Crop Science
  • Economics and Econometrics

Fingerprint Dive into the research topics of 'Are agricultural options overpriced?'. Together they form a unique fingerprint.

Cite this