Research on the Mechanism of Option Spread Design from a New Perspective Take Three Commodities for Example

This paper selects three commodity futures prices of CME in recent three years as samples, uses the Black Scholes option pricing model and Monte Carlo pricing method to price pig spread options, and obtains the option price of half-year spread options in the past two years. Then calculate the maturity value of breeding value options. Finally, the calculation results are compared and analyzed. The results show that although the breeding price spread fluctuates a lot, trading the breeding price spread options between feed raw materials and pigs can effectively avoid the risk of breeding price spread decline. Because some samples were selected at unstable prices, feed prices rose, and pork prices fell, resulting in negative farm income. The result of the call option is a net loss and the total loss of royalty. But compared with the loss of breeding profit, the loss of option speculation is limited. In general, the farm can hedge the risk of future breeding profit decline by selling call options and buying put options. On the other hand, investors in the futures market can also gain speculative benefits by selling call options or buying put options.