Agriculture puts surge after ETF peak rise since 2009

Options traders are snapping up protection against declines in agricultural stocks at the fastest rate in four years, locking in gains after a security that tracks the industry rallied the most since 2009, Bloomberg reports.The ratio has jumped from 0.74 on October 14 for the biggest increase since January 2008, the data show.The fund tracking Monsanto Company, Potash Corporation of Saskatchewan, Deere and Company and 43 other stocks rose by 13 per cent this month after falling 17 per cent in September. Investors are adding to hedges before Archer-Daniels-Midland Company and 12 more companies representing 34 per cent of the funds total market value report quarterly results in the next week. "Deere and the fertilizer companies are providing equipment to the global economy so if theres a slowdown in Europe and it affects Asia, theres going to be less demand for the products," Ann Miletti, who helps oversee about $209.1bn as senior portfolio strategist at Wells Fargo Advantage Funds, said in an interview yesterday at Bloomberg headquarters in New York. "Global growth is the biggest question mark." Implied volatility, the key gauge of options prices, for the ETFs contracts expiring in 30 days plunged by 38 per cent from October 4, when it reached the highest level since March 2009. The Chicago Board Options Exchange Volatility Index, known as the VIX, tumbled by 21 per cent during the period to 32.22 on Wednesday. The gauges 21-year historical average is 20.50. It fell by 3.7 per cent. The world economy will expand by four per cent in 2011 and 2012, the International Monetary Fund said on September 20, reducing its forecast from June estimates of 4.3 per cent and 4.5 per cent. European stocks slid from an 11-week high Wednesday after EU finance ministers canceled a meeting, fueled concern that the regions leaders may struggle to resolve the debt crisis."If you remain pessimistic on a European solution, this is a good way to play it," said Andrew Wilkinson, chief economic strategist at Miller Tabak and Company in New York. "Theyre growth- sensitive stocks so if were going to have a rerun to the downside then they would underperform."
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