Are Agricultural Options Overpriced?
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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.