Country’s first agri-commodity options in guarseed will be launched on NCDEX on January 14 with an aim to give stakeholders a new set of financial instruments to hedge their price risks. NCDEX is the second exchange after MCX to launch options trading in commodities. In October 2017, MCX had launched gold options. Guarseed will be the first agri-commodity options. Options are derivatives which give a buyer the right but not the obligation to buy or sell an underlying asset or instrument at a specific price on or before a certain date. NCDEX logs guarseed trade volume of ₹400-600 crore daily. The domestic market for guarseed is valued at ₹300-500 crore. Options allow traders to hedge their risks at a fraction of the cost compared to futures contracts
Announcing the day of the launch, NCDEX MD and CEO Samir Shah said: “Options will protect farmers from downward price movement as well as give them an opportunity to sell their produce at higher prices in case of the price increase.” This instrument will create a win-win situation for farmers, irrespective of the price movement, he was quoted as saying in the statement. NCDEX said it is launching guarseed options as it is one of the most liquid contracts on the exchange platform. Besides, a large number of informal trading centres in some communities of Rajasthan are already involved in some form of informal options trading, it 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.
National Commodity & Derivatives Exchange Limited (NCDEX) is an online commodity exchange based in India. It has an independent board of directors and provides a commodity exchange platform for market participants to trade in commodity derivatives. It is a public limited company, incorporated on 23 April 2003 under the Companies Act 1956 and obtained its Certificate of Commencement of Business on 9 May 2003. It commenced operations on 15 December 2003.
With PTI inputs