Two crude oil options contracts expiring on June 15, 2018 and July 17, 2018 will be available for trading on the day of the launch. The lot size of the option contract is same as the underlying crude oil futures contract (100 barrels). Significantly, this is India’s first crude oil options contract and on its expiry, the open position shall devolve into the respective underlying futures position. This contract has been designed to meet crude oil stakeholders’ hedging needs so as to protect them from rapid price fluctuations following market uncertainties.
India is the world’s third largest consumer of crude oil and is heavily dependent on imports for supply. For the SME sector the crude options contracts would serve as hedging tool which would help them better manage their energy price exposure. Moreover, the crude oil options contract will help the traders, manufacturers and other value chain physical market participants to mitigate the crude oil and its derivative products price risk; especially for industries such as petrochemicals, glass manufacturing, textiles, heat treatment, plastic, etc., which are highly exposed to crude oil price volatility.
Speaking on the development, Mrugank Paranjape, MD & CEO, MCX said, “We are pleased to announce the launch of options contract in crude oil which reflects the vibrancy and excitement of participants in this market. MCX crude futures has been one of the leading futures contracts on the exchange ever since its launch in 2005. The option contract will provide the physical market participants an excellent product to trade and meet their hedging requirements alongside the existing futures contracts. The contract has all ingredients to become one of the most favourable contracts on the exchange in times to come.”