One Kilogram Gold Bars (Photographer: Dario Pignatelli/Bloomberg)

MCX Launches India’s First Gold Options

Finance Minister Arun Jaitley launched the country’s first gold options on commodity exchange MCX Ltd.

"This marks a very important evolution in trading of yellow metal itself. It hedges all risks by giving them (traders) the option of futures," Jaitley said after launching the options trade on Dhanteras, considered auspicious to buy the precious metal. It is the first time that SEBI has allowed commodity options, 14 years after commodity exchanges started operations in the country, he said.

Options are derivatives which give a buyer the right but not the obligation to buy or sell an underlying asset or instrument at a specific price on or before a certain date.

The European-styled gold options will be hedger-friendly and physically settled, MCX said in a statement. The gold options contract, with 1 kilogram gold futures as the underlying asset, will trade from Tuesday and will expire on November 28 and January 29.

The options will turn into 1 kg gold futures position on exercise at expiry. “The options will complement existing commodity futures trading and help price discovery,” MCX Director and Chief Executive Officer Mrugank Paranjape said.

MCX has a market share of over 90 percent in India’s commodity trading. It has a large presence in gold, base metals, and energy.

(With inputs from PTI)