On May 6, Shanghai International Energy Exchange (INE), a Shanghai Futures Exchange (SHFE) subsidiary, released a circular on seeking public comments on its upcoming crude oil options contract and related rules. The crude oil options contract will be the first options product listed on INE and complements the product mix of crude oil futures (“SC”).

Public comments are being sought for the INE Crude Oil Options Contract Specifications and the Options Trading Rules of the Shanghai International Energy Exchange, as well as for other related implementing rules which have been revised accordingly.

The proposed crude oil options contract specifies that:

• Listed contracts: Options contracts will be listed for the nearest two consecutive months and, when the open interest of the underlying futures contract reaches a specific threshold after daily clearing separately announced by INE, for later months on the second trading day thereafter;
• Contract size: 1 SC contract;
• Minimum price fluctuation: RMB 0.05 Yuan/barrel;
• Price limit: Same as SC contract;
• Strike price range: Previous trading day’s settlement price of the SC contract plus or minus 1.5 times the current day’s price limit;
• Options style: American, i.e., buyers can submit an exercise request during trading hours on any trading day before the expiration date and an exercise or abandonment request before 3:30 p.m. on the expiration date.

To prepare for the launch of this product, on the basis of its current rules framework, INE has newly released the INE Crude Oil Options Contract Specifications and the Options Trading Rules of the Shanghai International Energy Exchange, and updated five related rules (i.e., Trading Rules, Clearing Rules, Risk Management Rules, Information Management Rules, and Futures Trading Participant Eligibility Management Rules) in order to support such activities as options trading, settlement, and exercise and performance.

An INE official commented that the launch of crude oil options will help enrich the product line in China’s crude oil market and thus provide the oil industry with a more complete set of risk management tools and make oil companies more competitive and meet the needs of related enterprises for elaborate risk management.

Link: https://mp.weixin.qq.com/s/O3qWoWFuXgBCen8-1IUxSA