China's Zhengzhou Commodity Exchange (ZCE) said on its website that it will roll out thermal coal options simulation trading on May 26 to prepare for real transaction.
Thermal coal contracts of ZC2007 (expiring in July 2020), ZC2008, ZC2009, ZC2011 and ZC2101 will be listed on the first day, the exchange said.
In efforts to provide more hedging instruments in the energy field, thermal coal option is likely to come online soon, industry insiders said.
ZCE carried out simulated option trading for rapeseed meal two months earlier before it was officially listed in the market on January 16, 2020.
In commodity derivatives trading, options give the buyer the right, but not obligation, to buy or sell a futures position at a specified price.
China now has 12 commodity options, including copper, gold and natural rubber on the Shanghai Futures Exchange; white sugar, cotton, PTA, methanol and rapeseed meal on the Zhengzhou Commodity Exchange; Soybean meal, corn, iron ore and LPG on the Dalian Commodity Exchange.
The global options trading has been scaling up year by year, and "the opportunity exists in the options market" is a consensus of the global futures market.
The market demand for options in China is rapidly rising, indicating maturity and deepening of China's futures derivatives market. However, it still cannot meet the market demand for more options.
China, the largest coal consumer in the world, saw its thermal coal prices bounce back rapidly last week. Fenwei CCI 5500 index, a guage of spot 5,500 Kcal/kg NAR thermal coal traded at northern transfer ports, stood at 543 yuan/t ($76.2/t) FOB with VAT as of May 22, rallying a total of 52 yuan/t in the week of May 18-22 with a two-digit rise each day on average, wiping out all declines since March 26.
The most-traded thermal coal contract for September delivery on ZCE stood at 534 yuan/t as of May 22, despite a 0.96% retreat from last session.
(Writing by Alex Guo Editing by Tammy Yang)
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