Dubai: The Dubai Gold and Commodities Exchange (DGCX) announced on Monday that it will launch Indian rupees options contract in September this year extending its rupee derivative offerings.
The new contract is scheduled for launch on September 26. The contract will be the only exchange-traded rupee options product offered to markets outside India.
Currently DGCX has rupee futures trading. The exchange had attracted huge volumes on its futures contracts. Analysts expect the availability of options trading will improve the volumes on futures contract further as it gives a hedging option to futures exposure.
"The provision of an Indian rupee options contract will enable us to build on the exceptional volume growth achieved by our Indian rupee futures contract over the last 12 months and meet member demand to further strengthen our rupee offering," said Eric Hasham, CEO of DGCX.
In other markets, including India, traders have been using the combination of futures and options combination to hedge the risks effectively boosting volumes in both types of contracts.
"Options is an effective hedging tool for those who trade in futures. In effect, both these contracts support mutually helping to improve market volumes," said Sajith Kumar PK, chief executive of JRG International Securities DMCC.
Traders said the market needs more awareness of the product to use this new risk management tool effectively.
"Our unique new Indian rupee options contracts will provide our members with more flexibility to hedge risk and trade in the Indian rupee in a transparent, regulated and cleared trading environment," said Hasham.
Each DGCX Indian Rupee Options contract represents Rs2 million. Prices will be quoted in US cents per 100 rupees, with a minimum premium fluctuation of 0.000001 US dollars per rupee ($2 per contract). At launch, the October 2011 expiry month will be available to trade.
DGCX will hold workshops on the rupee options contract prior to its launch on September 26. The dates of these workshops will be announced in due course.
Rupee option is a contractual agreement to buy or sell rupee in exchange to dollar at a particular price and at a specified date in the future by paying an upfront premium. It is similar to the rupee futures, but the difference is that the holder of the option has no obligation to buy or sell.
