Thermal coal options officially came online on June 30 at China's Zhengzhou Commodity Exchange (ZCE) after a trial run for more than a month, becoming the sixth type of commodities options in the exchange.
The kickoff of thermal coal options will further improve risk management system of the coal industry and better serve the reform of coal and power marketization.
In commodity derivatives trading, options give the buyer the right, but not obligation, to buy or sell a futures position at a specified price.
Thermal coal, accounting for three quarters in China's total coal consumption, is closely related to the country's economic growth and has a vast market connecting many industries. Hence the demand for risk management for enterprises is high and urgent.
For the sake of healthy development of industrial enterprises, ZCE launched thermal coal futures in September 2013. State-owned enterprises such as CHN Energy and Huaneng have used the futures tool to manage risks, laying a solid foundation for the listing of thermal coal options.
Thermal coal options are a good supplement to the futures. The options are helpful to guide more customers to participate in transactions, optimize the structure of investors and improve the quality of market operations, said Xiong Jun, president of ZCE.
China Securities Regulatory Commission on June 12 announced the launch dates for six new types of commodities options – including thermal coal, zinc and aluminium – to be traded on exchanges in the country.
Besides thermal coal, polypropylene, polyvinyl chloride and linear low-density polyethylene options will be traded on the Dalian Commodity Exchange from July 6. Aluminium and zinc options will begin trading on the Shanghai Futures Exchange on August 10.
(Writing by Alex Guo Editing by Harry Huo)
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