Corn Mini Traders Beware And Hedgers Take Possible Advantage

Includes: CORN
by: Chris Ridder, CFA

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 . Here is a snapshot of this:

(Click to enlarge)

Small, speculative traders need to watch out that this premium should theoretically drop and the price then match the larger more liquid contract. The big Corn contract (ZC) could move up 5 cents but buyers of the mini contract (YC) could still see a loss!

Bona-fide hedgers now have an opportunity to receive a better locked in price. Of course hedgers have to think about the costs involved trading more contracts, but it appears possible that a better price is available in the mini contracts, especially if one intends to deliver the underlying corn.

I looked at the electronic book and found the number of mini contracts, being bid, at a 2 cent premium, or more, over the bigger contract at around 45 contracts; which is equal to 8 larger contracts. The July contract, in Corn, of the mini vs. big also has a 2-3 cents premium in the mini.

For full disclosure I have positions in the corn futures market.

YC is the electronic symbol for the mini Corn Mini Contract (Link)

ZC is the electronic symbol for the big Corn Big Contract Link (Link)

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I have positions in the corn futures market.