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NCDEX to launch ‘Options on Goods’ contracts

The National Commodity and Derivatives Exchange (NCDEX) on Tuesday said it will launch the ‘Options in Goods’ contracts on rapeseed, wheat and maize from July 27. The contracts of the three commodities, expiring in October and November 2020, would be available for trading from July 27 onwards, the exchange said in a statement.

NCDEX has become the first exchange in the country to launch Options in Goods contracts in agri derivatives space after the permission given by the regulator Securities and Exchange Board of India (SEBI).

SEBI in January 2020 had allowed exchanges to launch ‘Options in Goods’ in their commodity derivatives segment.

Options in Goods provide a settlement mechanism where contracts settle on spot price and all open positions convert into physical settlement at expiry.

With Options in Goods, the contracts will be completed only through compulsory delivery on the day of the settlement.

“The introduction of Options in Goods will play a major role in bringing the farmer groups and physical traders on our platform. I have no doubt that the launch of this category would open doors for those working with physical commodities to try NCDEX platform for hedging their price risk like never before.

“We think that these products are much more simplistic in nature and are best suited for FPOs or farmers who can protect themselves by buying put options and if required can deliver physical goods smoothly,” NCDEX MD and CEO Vijay Kumar said.

The option contracts would have the same quality specifications, delivery centres, final settlement price methodology, trading hours and minimum tenor as the corresponding futures contracts.
“Earlier we had the option contracts which used to convert into Futures after the expiration. But in these newly launched option contract, the contracts would be settled directly through delivery after the expiry. This is an easy tool which can be used for risk management and delivery both,” NCDEX Head of Business and Products Kapil Dev added. PTI