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China adds more commodity options to hedge price risks

Updated: Jan 29,2019 10:10 AM     Xinhua

BEIJING — China launched options for natural rubber, cotton and corn, adding to the tools available to hedge price risks in one of the world’s major commodity markets on Jan 28.

Approved by the China Securities Regulatory Commission (CSRC) earlier this month, new natural rubber options trading on the Shanghai Futures Exchange, cotton options trading on the Zhengzhou Commodity Exchange, and corn options trading on the Dalian Commodity Exchange doubled the amount of options listed on the country’s three commodity exchanges.

The options for natural rubber included eight trading contracts, those for cotton included four contracts while corn options saw five contracts.

Options give a holder the right to buy or sell a commodity at a particular strike price and allow greater hedging flexibility for commercial hedgers, such as processors and traders.

China launched soybean meal and sugar options in 2017, its first such commodity derivatives. It started copper option trading in September 2018.

CSRC Spokeswoman Gao Li said the spot commodity prices of natural rubber, cotton and corn had seen frequent fluctuations in recent years, and the trading of related options will help companies to manage risks in an individual and sophisticated manner.

It will also help to reduce insurance costs for farmers and better serve the vitalization of rural areas, Gao said.

Launching these options will expand the scope of option products and enrich derivative tools that can serve the real economy, said Luo Xufeng, general manager of Nanhua Futures.