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Wheat's use by mankind dates back 10,000 years to the ancient Mesopotamians near modern day Turkey and Iraq. Over the millennia, wheat has been cultivated, and re cultivated so often for desirable qualities that domesticated wheat cannot survive in the wild. Wheat may be the most valued agricultural commodity besides maize throughout the history of mankind. Today wheat is cultivated all around the world and its demand has made it one to the most actively traded grain commodities in the world.
The Chicago Board of Trade (CBOT), The Kansas City Board of Trade (KCBOT) and The Minneapolis Grain Exchange (MGEX) are all very important exchanges used to trade wheat futures for the many different types of wheat that are grown in the USA. The classification terms spring and winter specify when the wheat is planted not harvested.
The Chicago Board of Trade is the largest exchange where wheat futures and options are traded. The CBOT was established in 1858 and is the oldest US commodity exchange still in operation today. The CBOT is the primary exchange for soft red winter wheat which is used to produce biscuits, muffins and cakes. Soft red winter wheat is also crushed to make cake flour. Soft red winter wheat is considered a low protein wheat. The CBOT wheat futures specifications are down the page.
The Kansas City Board of Trade (KCBT), was established in 1876 near one of the world's most fertile growing regions and is the largest wheat future market for hard red winter wheat. Hard red winter wheat is considered a high protein wheat and is used most often in making breads.
The Minneapolis Grain Exchange (MGEX) was established in 1881 as a cash market for grains. The MGEX is the largest wheat future market for hard red spring wheat. Hard red spring wheat is a high protein wheat used for making breads and hard baked goods.
WHAT IS A WHEAT FUTURES CONTRACT?
A wheat futures contract is an agreement between a buyer and a seller to receive or deliver a product on a future date at a price they have negotiated today.
The agreement is standardized as to delivery period, contract size and quality of the product. These specifications are determined by the exchange.
The only negotiable terms are price and the number of contracts involved in each trade. Delivery of the product seldom occurs. Wheat futures contracts typically are used as a price protection mechanism or an investment tool, not as a method of selling or obtaining a product.
To avoid having to meet his contractual obligation to receive or deliver a product, a buyer or seller must liquidate his wheat futures contract. A buyer (long) would sell his contract, and a seller (short) would buy his contract back. This procedure is called offsetting a position.
The ability to deliver is necessary to maintain the economic relationship between the cash and wheat futures markets. Many savvy wheat farmers use the wheat futures and wheat options to hedge their crops against adverse price movements.
Wheat Futures Contract Specifications
Kansas City Board of Trade
COMMODITY: Hard Red Winter Wheat Futures
(Trade commenced 1876)
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Trading Hours: |
9:30 a.m. to 1:15 p.m., Central Time |
Contract Unit: |
5,000 bushels |
Ticker Symbol: |
KW |
Delivery Months: |
July, September, December, March, May |
Price Quotation: |
Dollars, cents and 1/4-cents per bushel |
Min. Price Fluctuation: |
1/4 cent ($12.50 per contract) |
Max. Price Fluctuation: |
30 cents ($1,500 per contract) above or below previous day's settlement price |
Speculative Position Limits: |
Combined with wheat options for a net long or net short futures - equivalent maximum of:
Spot Month *: 600 contracts
Single Month: 3,000 contracts
All Months: 4,000 contracts
* Spot month limits go into effect on a contract at the close of trade the day before it's first delivery notice day. |
Delivery Mechanism: |
Physical; registered warehouse receipt issued by regular elevators |
Deliverable Grades: |
No. 2 at contract price; No. 1 at a 1 1/2-cent premium; No. 3 at a 3 cent discount, changing to a 5-cent discount with the July 2003 contract |
Delivery Points: |
Kansas City, Mo. - Kans. and Hutchinson, Kans. |
Delivery Notices: |
Must be issued and delivered to the KCBT Clearing Corp. before 4:00 p.m. on the second business day preceding the day of delivery, except on the last notice day of the delivery month, when delivery notices may be delivered to the Clearing Corp. until 2:00 p.m. on the last notice day (business day preceding the last delivery day) |
Last Trading Day: |
There is no trading during the last seven (7) business days of the liquidating month |
First Notice Day: |
The business day preceding the first business day of the liquidating month |
First Delivery Day: |
The first business day of the liquidating month |
Last Notice Day: |
The business day preceding the last business day of the liquidating month |
OPTION: Hard Red Winter Wheat Options
(Trading Began Oct. 30, 1984)
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Trading Hours: |
9:30 a.m. to 1:25 p.m., Central time |
Underlying Asset: |
One KCBT hard red winter wheat futures contract |
Ticker Symbol: |
Calls: HC. Puts: HP |
Delivery Months: |
Serial |
Strike Price Intervals: |
Integral multiples of 10 cents per bushel |
Listing of Strikes: |
New strikes are listed to maintain 30 above and 30 below the at-the-money strike in increments of 10 cents |
Price Quotation: |
Dollars, cents and 1/8-cents per bushel |
Min. Price Fluctuation: |
1/8 cent ($6.25 per contract) |
Max. Daily Price Fluctuation: |
30 cents ($1,500 per contract) above or below previous day's settlement price |
Speculative Position Limits: |
Spot Month *: 600 contracts
Single Month: 3,000 contracts
All Months: 4,000 contract |
Last Trading Day: |
1:00 p.m., Central time, on the Friday at least two (2) business days before first notice day for wheat futures |
Exercise: |
Any time prior to expiration by giving notice to the KCBT Clearing Corp. by 4:00 p.m., Central time, on any trading day up to and including the last trading day |
Chicago Board of Trade
CBOT Wheat Futures |
Contract Size: |
5,000 bushels |
Deliverable Grades: |
No. 2 Soft Red, No. 2 Hard Red Winter, No. 2 Dark Northern Spring, and No. 2 Northern Spring at par. Substitutions at differentials established by the exchange |
Tick Size: |
1/4 cent/bu ($12.50/contract) |
Price Quote: |
Cents and quarter-cents/bu |
Contract Months: |
Jul, Sep, Dec, Mar, May |
Last Trading Day: |
The business day prior to the 15th calendar day of the contract month |
Last Delivery Day: |
Last business day of the delivery month. For contracts with delivery in March 2000 and subsequent months: Seventh business days following the last trading day of the delivery month |
Trading Hours: |
Open Outcry: 9:30 a.m. - 1:15 p.m. Chicago time, Mon-Fri.
Electronic (a/c/eSM): 8:30 p.m. - 6:00 a.m. Chicago time, Sun.-Fri.
Trading in expiring contracts closes at noon on the last trading day |
Ticker Symbols: |
Open Outcry: W. Electronic (a/c/e): ZW |
Daily Price Limit: |
30 cents/bu ($1,500/contract) above or below the previous day's settlement price (expandable to 30 cents/bu). No limit in the spot month (limits are lifted two business days before the spot month begins) |
CBOT Wheat Options |
Trading Unit: |
One CBOT® Wheat futures contract (of a specified contract month) of 5,000 bu |
Tick Size: |
1/8 cent/bu ($6.25/contract) |
Strike Price Intervals: |
5 cents/bu for the first two months and 10 cents/bu for all other months. At the commencement of trading, list 5 strikes above and 5 strikes below the at-the-money strike |
Contract Months: |
Jul, Sep, Dec, Mar, May; 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 August option exercises into a September futures position |
Last Trading Day: |
For standard option contracts: The last Friday preceding the first notice day of the corresponding wheat futures contract month by at least two business days.
For 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 Board of Trade Clearing Corporation 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 are automatically exercised |
Expiration: |
Unexercised options expire at 10:00 a.m. Chicago time on the first Saturday following the last day of trading |
Trading Hours: |
Open Outcry: 9:30 a.m. - 1:15 p.m. Chicago time, Mon-Fri.
Electronic (a/c/eSM): 8:30 p.m. - 6:00 a.m. Chicago time, Sun.-Fri.
Trading in expiring contracts closes at the same time as the underlying futures contract (1:15 p.m.) on the last trading day |
Ticker Symbols: |
Open Outcry: WY for calls/WZ for puts
Electronic (a/c/e): OZW |
Daily Price Limit: |
30 cents/bu ($1,500/contract) above or below the previous day's settlement premium. Limits are lifted on the last trading day |
Hard Red Spring Wheat Futures Contract Specifications
Minneapolis Grain Exchange (MGEX)
TRADING HOURS:
Open Outcry: 9:30 a.m. - 1:15 p.m. Monday - Friday (Central Time)
Electronic: 7:32 p.m. - 6:00 a.m. Sunday - Friday (Central Time)
CONTRACT UNIT:
5,000 bushels
TICKER SYMBOL:
Open Outcry: MW
Electronic: MWE
DELIVERY MONTHS:
March, May, July, September and December
DAILY PRICE LIMITS:
$.30 per bushel or $1,500 per contract.
MINIMUM PRICE FLUCTUATION:
1/4 cent per bushel or $12.50 per contract
SPECULATIVE POSITION LIMITS:
Spot month: 600 contracts
Single month: 3000 contracts
All months: 4000 contracts
DELIVERABLE GRADES:
No. 2 or better Northern Spring Wheat with a protein content of 13.5% or higher, with 13% protein deliverable at a discount.
DELIVERY POINTS:
Elevators located in Minneapolis/St. Paul, Red Wing and Duluth/Superior
LAST TRADING DAY:
The business day preceding the fifteenth calendar day of that contract month
FIRST NOTICE DAY:
The last business day of the month preceding the delivery month
FIRST DELIVERY DAY:
The first business day of the delivery month
LAST NOTICE DAY:
The last business day preceding the last delivery day
LAST DELIVERY DAY:
The seventh business day following the last trading day
HARD RED SPRING WHEAT OPTIONS CONTRACT SPECIFICATIONS
TRADING HOURS:
Open Outcry: 9:30 a.m. - 1:30 p.m. Monday - Friday (Central Time)
Electronic: 7:34 p.m. - 6:00 a.m. Sunday - Friday ( Central Time)
UNDERLYING ASSET:
One Minneapolis Grain Exchange Hard Red Spring Wheat futures contract (5,000 bushels)
TICKER SYMBOL:
Open Outcry: WP - puts, WC - calls
Electronic: OMW
DELIVERY MONTHS:
March, May, July, September and December
MINIMUM PRICE FLUCTUATION:
1/8 cent per bushel or $6.25 per contract
DAILY PRICE LIMIT:
$.30 per bushel (same as underlying futures)
SPECULATIVE POSITION:
3000 futures-equivalent contracts--any one month
4000 futures-equivalent contracts--all months combined
LAST TRADING DAY:
Trading in an option class shall terminate on the last Friday which preceded by at least two business days, the last business day of the month preceding the options contract month. If such Friday is not an Exchange business day, then trading shall terminate on the preceding business day.
AUTOMATIC EXERCISE:
Based upon the settlement price for Spring Wheat futures on the last day of trading for Spring Wheat options, the Clearing House shall automatically exercise all in-the-money options unless notice to cancel automatic exercise is given to the Clearing House.
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