Unlike years in the recent past, market volatility has quieted. Joe Vaclavik, president of Standard Grain, says low volatility is making one marketing tool, the option, relatively more affordable.
"When volatility is low options are cheap on a relative basis to what we've seen in the past," says Vaclavik. "When volatility is high, options are a little bit more expensive."
This tells him two things.
"One, if you're somebody that needs to buy options because you've got an excessive amount of risk in one direction, then you can buy the options more affordable on a relative basis," says Vaclavik.
Two, it's probably a good time to stay away from being short options.
"There is a time for a farmer to sell options or for an end user to sell put options, but it's not when volatility is low," says Vaclavik.
He says if markets see a post-harvest rally and volatility increases, selling call options into December 2018 or July 2019 is not out of the question.
"If the strike price is right, if it's above the cost of production and if the volatility is giving you enough of a reward, then it makes sense to take that risk," says Vaclavik.