Traders await first ag options expiry under new trading hours

* Expanded trade gives options traders an extra window

* June ag options set to expire at 1:15 PM.

* Electronic futures trading closes at 2:00 PM

* Low volume in June options may cushion volatility

* Expiration could be wild in July and future months

By Sam Nelson

CHICAGO, May 25 (Reuters) - Traders eagerly await the
first expiration of agricultural options on Friday under the
newly expanded 21 hour per day electronic trading that began on
Monday as part of the CME Group's goal to match rival
Intercontinental Exchange's move to capture market
share.

Chicago Board of Trade June ag options will expire at 1:15
p.m. CDT (1815 GMT) but futures trading will continue to 2:00 PM
for the first time. The new trading hours have raised some
concern even though the low volume June options contracts are
much less significant and probably less volatile than the
upcoming expiration of July options.

"That's a big question that everyone has at this point
whether it's a commercial, local or fund. The 45 minutes of
extra futures trade after expiration opens up a whole new box of
worms," said Matt Pierce, options strategist for
GrainAnalyst.com.

"At least it's June options expiration first which is very
low volume, regarding July expiration its a major concern for
everyone," Pierce said.

Until now, options traders holding a position at expiration
have had to let the exchange know by 4:00 PM whether or not they
wanted to exercise their options position.

"It gives me as a local 45 minutes of extra time to possibly
exercise my options position. For example if I'm holding a call
with a $6 strike exercise price and before 2:00 PM futures go up
to say $6.05 I can exercise my position," said Justin Steinberg
a local corn options trader.

If no call was made by the options trader to the exchange,
their position would be exercised either in the money or if out
of the money, it would exercise worthless.

"In the past we've had to wait until 4:00 PM to exercise.
They still have to be exercised by then but there is another 45
minute window of time for futures to move which could help
exercising a position," Steinberg said.

"So someone on the other side of the exercise may not be so
happy. It can be good or not, depending on your position," he
said.

Traders have always been concerned that big orders may be
entered in the markets near expiration that could skew the
market in their favor.

Such is the high risk of trading.

Corn futures and options traders will closely be following
Friday's expiration for hints of what may be coming down the
road but some traders already see potential drama at today's
expiry.

"New buying in the $5.90 and $5.95 June calls (corn)
Thursday certainly makes you wonder if there's potential for
some mischief, especially with the automatic exercise of
in-the-money positions," said Bryce Knorr, senior editor for
Farm Futures Magazine.

In-the-money positions could be automatically exercised
during the remaining 45 minutes of CBOT corn futures trade on
Friday.

"You can mark my word that sometime in the next 12 months
some cowboy hedge fund or whatever will make a wild play in
futures which will really impact the options expiration," said
Matthew Connelly a local options and futures broker.

"I don't think there will be much going on in this
expiration because of the low open interest but when we get to
July expiration it could be a different story," Connelly said.

(Reporting By Sam Nelson)