Weekly Options on Grain Futures

Shorter-dated options have become more popular in the grain markets. The shortest common tenor is “weeklies”, touted as useful for positioning around major USDA reports. The value of weeklies can be lower than regular options because of the shorter tenor, and higher because of a volatility risk premium. The implied and realized volatility levels are higher in weeks that contain major USDA reports. The implied and spot volatility explain realized volatility, but at degrees that vary depending on the timespan considered. Weekly options are particularly informative in the near term and spot volatility provides extra information beyond the traditional Black-Scholes volatility. Spot volatility from weekly options and Black-Scholes implied volatility from regular options are a positively priced factor for futures returns