Mcx commodity options trading
Multi Commodity Exchange recently launched Gold option segment which was not much attractive due to liquidity problem. It was less bought or sold in the market without disturbing the Gold price. Another noteworthy thing here is, the traders felt that the occurrence of price spread variation is more in the trading framework for these options. However, hedging (or) positional trader could utilize option trading.
Contract Specification for Gold options with Gold (1 Kg) Futures as underlying
Trading Period -Mondays through Friday
Trading Session -Monday to Friday: 10.00 a.m. to 11.30 / 11.55 p.m
Option Type – Call and Put
Lot size -100 Points
Order Types -All order types would be allowed (IOC, SL, SLM, GTC, Regular, Limit)
Exercise style -Options are likely to be European in nature
Strike Price Interval -Rs. 100
Tick Size (Minimum Price Movement) -0.50 paisa
Trading Period -Mondays through Friday
Margins-The Initial Margin shall be calculated using SPAN (Standard Portfolio Analysis of Risk) which is a portfolio based margining system. To begin with, the various risk parameters shall be as under:
A. Price Scan Range – 3.5 Standard Deviation (3.5 sigma)
B. Volatility Scan Range – 3.5 %
C. Short Option Minimum Margin – Minimum of 2.5% subject to Margin Period of Risk (MPOR) (i.e 2.5% *√2 currently)
D. Extreme Loss Margin – 1% (to be levied only on short option positions)
E. Premium of buyer shall be blocked upfront on real time basis. The Margin Period of Risk (MPOR) shall be at least two days. Parameters would be reviewed and changed, if required
Last- trading day (for Gold) – 3 days prior to the last tender day
Strikes – Considering one ‘At the money strike’ (ATM), there would be 15 strikes above and 15 strikes below ATM, taking the total to 31 strikes
Equity option traders are used to the following ‘Option Moneyness’ convention
1.At the Money (ATM) Options = This is when the spot is in and around the strike. So, in a given series, only 1 strike is considered ATM
2.In the Money (ITM) = All call option strike below the ATM and all put option strikes above the ATM are considered ITM options
3.Out of the Money (OTM) = All call option strike above the ATM and all put option strikes below the ATM are considered Out of the Money (OTM) options
However, the commodities options will introduce us to a new terminology – ‘Close to Money’ (CTM) and this is how it will work
Settlement of premium/Final Settlement - T+1 day
For Example: Option settlement,assume that commodities daily settlement price is 100. Assume this commodity has a strike interval at every 10 points.
1.At the Money (ATM)
2.Out of the Money (OTM)
All Call option above 100 are considered OTM and therefore worthless
All Put options below 100 are considered OTM and therefore worthless
3.In the money (ITM)
All Call options below 100 (including 80 and 90, which are CTM) are ITM,
All Put options above 100 (including 110 and 120, which are CTM) are ITM.
| Options Contract Launch Months |
Options Contract Expiry Months |
Corresponding Futures Contract Expiry Months |
| October-17 |
28th November 2017 |
5th December 2017 |
| October-17 |
29th January 2018 |
5th February 2018 |
| November-17 |
March-18 |
April-18 |
Contract Launch Calendar
| November-17 |
May-18 |
June-18 |
| November-17 |
July-18 |
August-18 |
| November-17 |
September-18 |
October-18 |
| December-17 |
November-18 |
December-18 |
| February-18 |
January-19 |
February-19 |
| April-18 |
March-19 |
April-19 |
| June-18 |
May-19 |
June-19 |
| August-18 |
July-19 |
August-19 |
| October-18 |
September-19 |
October-19 |
