| CHICAGO, June 4
CHICAGO, June 4 CME Group will launch
three wheat options contracts on its Kansas City Board of Trade
hard red winter wheat futures beginning July 1, the exchange
said on Tuesday.
CME plans to offer two options on popular wheat spreads -
KCBT hard red winter wheat versus Chicago Board of Trade soft
red winter wheat, and KCBT wheat versus Minneapolis Grain
Exchange hard red spring wheat - and weekly KCBT options.
The products' debut follows CME's purchase of the KCBT last
year. CME is awaiting final approval of the products from the
U.S. futures regulator, the Commodity Futures Trading
The options on inter-market spreads will offer market
participants another way to trade the price difference between
the three U.S. wheat markets, each representing a different
wheat variety, analysts said.
"You have different fundamentals on each side, with the
stronger demand in Chicago and bigger production, and weaker
demand in Kansas City and smaller production," said Ken
Smithmier, a grains analyst with the Hightower Report in
He noted the Kansas/Chicago wheat spread has been active the
past month amid big sales of U.S. soft red wheat to China.
Options on KCBT-MGEX wheat could find favor among
speculators and commercial hedgers, including flour millers,
interested in trading the price difference between mid-protein
Kansas City wheat and the high-protein Minneapolis crop.
A Chicago-based option contract could also answer concerns
about liquidity in the smaller MGEX market.
"There are enough people that like to trade that, and have
gotten killed in the thin Minneapolis market," said Roy Huckabay
with the Linn Group, a Chicago brokerage. "Putting it on the
floor here and letting guys take those spreads home with a
limited risk option might be a popular trade," he said.
Weekly options on KCBT wheat could serve as a tool for
managing risk surrounding short-term events such as U.S.
Department of Agriculture crop reports or weather events, the
CME Group launched weekly options on CBOT corn, wheat and
soybean futures in June 2011.
All three KCBT options will be traded on the Chicago trading
floor and on CME's Globex electronic trading platform, the