The Securities and Exchange Board of India (SEBI) allowed stock exchanges to launch ‘option in goods’ in their commodity derivatives segment. This is in addition to ‘options on commodity futures’. Norms for options on goods are liberal compared to those on options on futures.
- The provision shall pave the way for launching options contracts in commodities based on underlying spot market price and settlement through compulsory delivery.
- For the first time, Indian commodity derivatives market will witness both European as well as American options, where as in securities market options are restricted to European style only.
- As of now commodity options are permitted based on futures of that commodity as underlying. This means that on expiry of options, it devolves in futures or every option trade if not squared off on expiry in futures.
Source : Economic Times