Commodities

NCDEX seeks SEBI nod to launch options trading in nickle, aluminium

PTI New Delhi | Updated on January 15, 2018 Published on January 15, 2018

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Keen on options trading in more agri-commodities

Commodity bourse NCDEX has sought the Securities and Exchange Board of India's permission to launch options trading in non-farm items like nickle and aluminium. The exchange is also keen on options trading in more agri-commodities, enthused by the results of guarseed option that was launched last week, the exchange’s MD and CEO, Samir Shah, said.

“Our main focus is on options now. We want to launch non-agri items especially nickle and aluminium. It will all depend on the SEBI's approval. We have sought permission,” Shah, whose tenure ends this month, told PTI.

SEBI has allowed options trading with futures trade as underlying, he said. “We believe that options trading on actual commodity is much better solutions for farmers.” Under options contract, the buyer is not obliged to buy or sell the asset at a set price at any time during the contract’s life unlike futures contract.

Guarseed options

Stating that the turnover of guarseed options will improve gradually, Shah said, “Over a period of time, the turnover in guarseed option should be high.” When equity options were launched, it took 4-5 years for the instrument to develop. Today equity options are much more larger. “It is difficult to put a figure. We think at least 50 per cent of futures trades should come from options.”

According to NCDEX, three options contract in guarseed that will expire in February, March and April of this year is made available for trading. The guarseed options is of an European type with a tick size of Rs 0.50 per quintal. The Daily Price Range (DPR) will be based on the factors of DPR of the underlying futures contract and volatility.

Agri-options

The expiry date of agri-options will be the last Wednesday of the month that precedes the month of expiry of the underlying futures contract. On plans to launch more agri options, Shah said, “We have to wait and see our experience from guarseed options and go back to the Sebi. Sebi will allow more commodities. It wants to allow one at a time after seeing the results,” he added.

While the market regulator Sebi had allowed exchanges to launch options in September 2016, it was only on April 26, 2017, it clarified that the options would have futures as underlying for settlement.

Published on January 15, 2018
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