Fast but noisy: Why options react first in agricultural derivatives markets

Richie Ma and Teresa Serra

No 404352, 2026 Annual Meeting, July 26 - 28, 2026, Kansas City, Missouri from Agricultural and Applied Economics Association

Abstract: This paper examines price discovery in agricultural derivatives using Chicago Mercantile Exchange intraday data, revealing a decoupling between timeliness and efficiency. We show that options lead underlying futures in timeliness, yet futures remain the primary anchor for pricing efficiency. While options are thinly traded, they exhibit a significantly higher frequency of aggressive quotes that move the best bid or offer price—over three times that of futures. A 1% increase in relative aggressive quoting is associated with a 0.75%–0.98% increase in options’ timeliness. These findings challenge trade-centric views, showing that aggressive limit orders rather than executed trades are associated with timely information incorporation in modern electronic markets.

Keywords: Agricultural Finance; Farm Management (search for similar items in EconPapers)
Pages: 49
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea26:404352

DOI: 10.22004/ag.econ.404352

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