In its effort to deliver new products to commodity market participants and expand the market ecosystem, the Bombay Stock Exchange (BSE) on Monday launched consignment contract options like Gold Mini and Silver Kilo. The exchange said in a statement that it had launched two contracts.
The first of these is Gold Mini (100 gram) and the second is Silver Kilo. The contracts have been launched by SK Mohanty, a full-time member of market regulator Sebi. Mohanty had emphasized that this is the right time to launch these contracts.
BSE MD and CEO Ashish Kumar Chauhan said, "These contracting options will enable small jewelers and retailers to come forward and reduce their risk on BSE's commodity platforms." Through this option deals, futures traders will get oats to hedge their future price movements. Also in this option the holder or buyer of the contract can buy or sell the goods to the other party at predetermined prices.
Bombay Stock Exchange Chief Trade Officer Sameer Patil said that these contracts are deliverable and the deals will be terminated with the physical delivery of the goods at the time of their expiry. The National Stock Exchange will launch the Gold Mini option on June 8.
“This is the first time that a domestic exchange is launching trading in options on physical gold," said Ravi Varanasi, chief business development officer at NSE. “Investors are now seeking the safety of their investments. Gold has always played the role of safe harbour asset. This options product provides excellent hedge and trading possibilities in gold during these uncertain times.”
Naveen Mathur, Director, Anand Rathi Share & Stock Brokers, said if "handled well", both NSE and BSE could "attract" participants to their new products.
The options will be European style, which can be exercised only upon expiry. An option facilitates the purchase or sale of an underlier at a fixed price for delivery on a future date. The option buyer has a right but not the obligation to take or give delivery but the option seller is obligated to give or take delivery.
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