Ncdex launches options on spot in 3 agri goods

National Commodity and Derivatives Exchange has launched options trading on Rapeseed–Mustard Seed, Wheat and Maize (Feed and industrial grade) based on spot prices.

Contracts expiring in October and November will be available for trading from July 27 in all the three commodities.

Ncdex is the first exchange to launch Options based on spot agriculture goods. The settlement mechanism of these option contracts are based on spot price and all open positions converts into physical settlement on expiry of the contract.

Vijay Kumar, Managing Director, Ncdex said the launch of options in goods will play a major role in bringing the farmer groups and physical traders on Ncdex platform for hedging their price risk.

It is best suited for farmer producer organisation and individual farmers who can protect themselves by buying put options and deliver physical goods, he said.

In January, SEBI allowed the exchanges to launch ‘Options in Goods’ in the commodity derivatives segment.

It would be beneficial for farmers and farmer groups to lock their price and hedge against any adverse price movement.

For instance, if a Farmer Producer Company buys a put option contract, on expiry, it has to give delivery directly at the exchange platform if the contract expires in-the-money. The option contracts would have same quality specifications, delivery centres, final settlement price methodology, trading hours and minimum tenor as the corresponding futures contracts.

Kapil Dev, Head of Business & Products, Ncdex said earlier the exchange had option contracts devolving into Futures after the expiry but in the new option contracts are settled through delivery on expiry.