Gold & Silver

MCX gets SEBI’s nod to launch monthly gold options contract

Suresh P. Iyengar | | Updated on: May 17, 2022

The monthly options contract will bring down cost of trading as investors incur less carrying cost.

MCX, the country’s largest commodity exchange, has received market regulator Sebi’s approval to launch monthly options contract on Gold Kg. Currently, options on gold are traded bi-monthly aligning with the futures expiry.

The exchange plans to seek approval from Sebi for launching monthly options contract in silver, sources said.

The monthly options contract will bring down cost of trading as investors incur less carrying cost. The monthly option contract will devolve on the nearest running futures contract irrespective of its expiry. For instance, the options contract expiring in April will devolve in June futures contract, since there is no futures contract that expires in April.

The trading volume currently shoots up whenever there is a near month future contract expiry. For instance, options trading volume in February was low at ₹715 crore but picked up to touch ₹2,400 crore in March as there was a April futures contract expiry. It again fell to ₹700 crore in April and pick up in May as there is a futures contract expiring in June. The monthly options contract will eliminate such volatility in trading volume and bring in much needed liquidity.

The cost of trading in shorter options will come down substantially. For instance, ATM (at the money) Call options (50,000 strike) for 60 days works out to ₹96,292 while it slip down to ₹68,374 for 30 days Gold KG options.

Registers growth

The options contract on futures is fast picking up on MCX and registered a growth logging in ₹34,038 crore last fiscal against ₹32,538 crore logged in the previous fiscal.

The overall options trading volume was at ₹15,065 crore in December quarter against ₹1,144 crore registered in the previous year. Trading volume in bullion options last quarter was at ₹1,545 crore (₹790 crore), energy was ₹13,517 crore ( ₹354 crore) and base metal was up at ₹4 crore (₹0.5 crore).

Published on May 17, 2022
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