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Potential Better Hedging Opportunity in Mini Corn Futures

04/19/2012 @ 12:21pm

Has anyone else noticed the premium of the mini Corn contracts  (1,000 bushels) being at a premium bid
to the big Corn contract (5,000 bushels)? I found out this week that the May mini Corn contract (YC) is currently being bid 7-8 cents higher than the larger (ZC) contract . I think this could potentially benefit hedgers, especially small hedgers, who can make delivery on the 1,000 bushel contract.

I have attached a pic of this. Also I can look at the electronic book and find the number of mini contracts, being bid, at a 2 cent premium over the bigger contract at around 45 contracts, which is equal to 8 of the typical larger contracts. The July contract of the mini vs big also has a 2-3 cents premium in the mini. I hope the readers can find this information helpful. For full disclosure I have positions in the corn futures market.

Of course hedgers have to think about the costs involved trading more contracts, but it appears possible that
a better price is in the mini contracts, especially if one intents to deliver the underlying corn.

Sincerely,

Chris Ridder

MSc Investment Management
Cass Business School
City University of London

YC is the electronic symbol for the mini Corn Mini Contract Link:
http://www.cmegroup.com/trading/agricultural/grain-and-oilseed/mini-sized-corn_contract_specifications.html

ZC is the electronic symbol for the big CornBig Contract Link:
http://www.cmegroup.com/trading/agricultural/grain-and-oilseed/corn_contract_specifications.html





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