Soybeans Commodity Futures Options Trading CBOT

Free Soybean Futures Trading Guide

 

Soybean Commodities and Options

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    soybean commodity futures

 

Soybean Futures and Options

Soybeans are one of the most active and popular commodities to trade. Soybeans are crushed to produce two main products - soybean oil and soybean meal. The oil is used in an extensive list of products and the meal is primarily used in animal feed. The U.S. is the largest producer of soybeans and they are mainly grown throughout the Midwest.

In the United States alone, farmers grow about half the world's supply, and they remain a leading dollar-earner among U.S. agricultural exports.

As important as they are, price stability becomes essential for those businesses that rely on soybeans for their manufacturing processes. Global supplies fluctuate continuously due to planting decisions made every spring, as well as variations in temperature and precipitation throughout the growing season. In addition, demand never ceases to change. As a result, prices can vary substantially from day-to-day.

Soybeans are a variety of edible bean also known as soya beans or Glycine max. Soybeans are also sometimes referred to as edamame, although this term is usually reserved for immature soybeans, or the dish comprised of steamed immature soybeans. This bean is native to East Asia, but is now widely cultivated and consumed across the globe. Soybean products are used for human consumption, animal feed, and a variety of non-food consumer and industrial products.

Tips on Trading Soybeans:

  • The summer months will be the most active and volatile. Monitor the weather in the Midwest for excessive heat or floods.
  • Monthly crop reports are a big market mover. Watch how the market reacts to the reports. Be cautious if the market moves lower on a bullish report.
  • Keep antacids nearby. The market can be a roller coaster during the summer and emotions can control the markets.
  • Avoid buying expensive options when the market is very volatile. Traders can bid prices to levels that may be sucker bets.
  • Don't over-analyze, it is just supply and demand that moves soybean prices and every other market.

Soybean Futures: The Diversity of Soybeans

Soybean complex:

Soybean complex refers to the soybean, its two principal by-products: soybean oil and soybean meal, and their special interrelationship throughout the production, processing, and marketing processes.

Whole soybean products are especially appreciated in Asia and among natural-food devotees in Europe and the United States. Soybeans provide the basis for low-fat sources of protein such as tofu, miso, and soymilk.

Soybean oil remains the most widely used edible oil in the United States, with consumption exceeding that of all other fats and oils combined. It is a major ingredient in cooking oil, margarine, mayonnaise, salad dressing, and shortening. Lecithin is a natural emulsifier derived from soybean oil and, without it; chocolate would separate from cocoa butter and spoil many sweet moments.

Soybean meal is the dominant protein supplement used in U.S. livestock and poultry feeds. Soy products are also used to make baby food, diet-food products, beer and ale, and noodles. Technical uses include adhesives, cleansing materials, polyester, and other textiles.

Futures markets supply the mechanism for long-term business planning, which can lead to operational profitability for farmers, processors, livestock producers, and food manufacturers.

Soybean Futures Indispensable Financial Tools

Who trades soybean futures and options?

Virtually everyone, farmers, merchandisers, processors, and other hedgers in the agricultural commodity pipeline use CBOT futures and options to manage prices. Futures and options contracts are designed to promote better business planning, more consistent product quality and service, and increased operational profitability. Speculators also trade in the pursuit of profitable returns on their investments, even though they may not have direct involvement in agribusiness.

Here are some specific examples of why people trade soybean futures and options:

A soybean processing plant uses soybean, soybean oil, and soybean meal futures to hedge its gross processing margin - the difference between the cost of soybeans and the eventual revenue of the finished oil and meal. Buying soybean futures protects against rising inputs costs. Selling soybean oil and meal futures protects against falling prices for the later sales of meal and oil. The risk-management program helps to stabilize costs and pricing, thereby giving the processor a competitive advantage in the marketplace.

Pursuing greater return on capital, an attorney decides to trade commodities futures. After analyzing different data, she anticipates soybean prices to rise and, with the help of a broker, buys a soybean futures contract. Three weeks later, weather conditions reduce the harvest forecast and soybean prices rise. The investor sells her futures contract at a price greater than what she paid for it, thereby profiting from the transaction even though her profession has no direct link to farming or food production. By participating in the trading process as a speculator, she adds liquidity to the marketplace and provides hedgers with an outlet to transfer their risk.

Soybean Futures Contract Specifications

Contract Size 5,000 bushels (~136 metric tons)

Deliverable Grade #2 Yellow at contract price, #1 Yellow at a 6 cent/bushel premium, #3 Yellow at a 6 cent/bushel discount

Pricing Unit Cents per bushel

Tick Size (minimum fluctuation) 1/4 of one cent per bushel ($12.50 per contract)

Contract Months/Symbols January (F), March (H), May (K), July (N), August (Q), September (U) & November (X)

Trading Hours CME Globex (Electronic Platform)

Sunday – Friday, 7:00 p.m. – 7:45 a.m. CT and
Monday – Friday, 8:30 a.m. – 1:15 p.m. CT

Open Outcry (Trading Floor) Monday – Friday, 8:30 a.m. – 1:15 p.m. CT

Daily Price Limit: $0.70 per bushel expandable to $1.05 and then to $1.60 when the market closes at limit bid or limit offer. There shall be no price limits on the current month contract on or after the second business day proceeding the first day of the delivery month.

Settlement Procedure Daily Grains Settlement Procedure (PDF)

Final Soybean Settlement Procedure (PDF)

Last Trade Date: The business day prior to the 15th calendar day of the contract month.

Last Delivery Date Second business day following the last trading day of the delivery month.

Product Ticker Symbols CME Globex (Electronic Platform) ZS
S=Clearing
Open Outcry (Trading Floor) S

Soybean Futures Options

Contract Size One Soybean futures contract (of a specified month) of 5,000 bushels

Tick Size (minimum fluctuation) 1/8 of one cent per bushel ($6.25 per contract)

Strike Price: Intervals trading shall be conducted for put and call options with striking prices in integral multiples of ten (10) cents and twenty (20) cents per bushel. More details on strike price intervals are outlined in Rule 11A01.E.

Contract Months/Symbols January (F), March (H), May (K), July (N), August (Q), September (U) & November (X); a monthly (serial) option contract is listed when the front month is not a standard option contract. The monthly option contract exercises into the nearby futures contract. For example, an October option exercises into a November futures position.

Daily Price Limit: $0.70 per bushel expandable to $1.05 and then to $1.60 when the market closes at limit bid or limit offer. There shall be no price limits on the last trading day.

Last Trade Date For Standard and Serial Option Contracts: The last Friday which precedes by at least two business days the last business day of the month preceding the option month.

Exercise The buyer of a futures option may exercise the option on any business day prior to expiration by giving notice to the Clearing House by 6:00 p.m. Chicago time. Option exercise results in an underlying futures market position. Options in-the-money on the last day of trading is automatically exercised.

Expiration Unexercised Soybean futures options shall expire at 7:00 p.m. on the last day of trading.

Trading Hours CME Globex (Electronic Platform) Sunday –

Friday, 7:00 p.m. – 7:45 a.m. CT and
Monday – Friday, 8:30 a.m. – 1:15 p.m. CT
Open Outcry (Trading Floor) Monday – Friday, 8:30 a.m. – 1:15 p.m. CT

Product Ticker Symbols CME Globex (Electronic Platform) OZS
S=Clearing
Open Outcry (Trading Floor)
CZ for calls/PZ for puts

Exchange Rule These contracts are listed with, and subject to, the rules and regulations of CBOT.

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