Commodity Analysis

Guidelines on commodity options

Compiled by BL Research Bureau | Updated on January 12, 2018 Published on June 18, 2017


The Securities and Exchange Board of India released guidelines on commodity options last week, which allow only select futures contracts to be traded in options. In the case of agricultural commodities, futures contracts where the average daily turnover is over ₹200 crore and in non-agricultural commodities, contracts with over ₹1,000 crore daily turnover will be eligible to trade in the options segment. However, each exchange can launch options only on one commodity, it said. If a farmer buys a put option and the price goes down, the profit will be automatically credited to the farmer’s bank account. The next day, as the market opens, the farmer will get a short position in the futures market and will be charged the daily MTM margin based on market volatility. However, if the farmer does not wish to keep the position open, he can square up the futures contract. On the other hand, if the price goes up, the options contract will expire automatically. The farmer’s loss will be limited to the premium paid for the contract.

Retail inflation drops

The CPI inflation dropped to 2.18 per cent in May 2017. This was led by a fall in food prices. The food index dropped to a negative 0.22 per cent (vs 7.2 per cent in the same month last year). In the food basket, vegetables and pulses saw the maximum price correction. From 10.8 per cent in May 2016, vegetable inflation dropped to a negative 13.4 per cent in May 2017.

Record export of pulses

Export of Indian spices and spice products hit ₹17,665 crore in 2016-17 against ₹16,238 crore in 2015-16. In terms of volume, it was 9,47,790 tonnes compared to 8,43,255 tonnes the previous year. Chilli continued to be the most exported spice, with exports of 4,00,250 tonnes amounting to ₹5,071 crore. Cumin was the second-most exported, registering a volume of 1,19,000 tonnes valued at ₹1,963 crore. The increased global demand for turmeric, especially in the pharmaceutical sector, drove exports to 1,16,500 tonnes in volume terms and ₹1,241 crore in value.

Published on June 18, 2017
This article is closed for comments.
Please Email the Editor