We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
Agriculture Option Returns.
- Authors
Locke, Peter; Tzu-Man Huang
- Abstract
We generate daily returns of options and straddles using prices from a high frequency data set from January 1995 to June 2012 on U.S. agriculture futures contracts, including corn, soybeans and wheat. We examine the effect of time to expiration and moneyness on the returns. Our evidence suggests that for call and put options, longer-term in-the-money options generate higher returns. We also find higher return volatility approaching expiration, which adds a new twist to the Samuelson effect. The straddle strategy offers higher returns when volatility increases. If the Samuelson effect (increasing volatility toward delivery) holds, we expect to find higher straddle returns when approaching option expiration. However, longer-term straddles seem to generate higher returns in our sample. We suspect that the deteriorating effect of time dominates the Samuelson effect in straddle returns.
- Subjects
FUTURES; OPTIONS (Finance); AGRICULTURE; SOYBEAN; EXPIRATION
- Publication
Quarterly Journal of Finance & Accounting, 2019, Vol 57, Issue 3/4, p41
- ISSN
1939-8123
- Publication type
Article