On November 9th, at the Shenchenglunjian · 11th Derivatives Hedging Investment (International) Forum and the 9th Annual Meeting of China Absolute Return Investment Management Association, which is called“Derivative Tools – Options, Commodity Futures ETF”sub forum, Participants conducted in-depth discussions on the future development of the options market.
Since the beginning of this year, the domestic options market has expanded rapidly. Since the beginning of the three major commodity options of natural rubber, cotton and corn listed in the Shanghai Futures Exchange, Zhengzhou Commodity Exchange, Dalian Commodity Exchange respectively, on November 8, the CSRC announced the official launch of the pilot program for the expansion of stock index options, which will be approved Shanghai Stock Exchange and the Shenzhen Stock Exchange to list in the CSI300 ETF options, and approve CFFEX to list 300 stock index options. The innovation of option tools not only increases the risk management methods of industrial enterprises and institutions, but also enriches the means of allocation of investors.
"From the perspective of development, the domestic commodity option market has embarked on a smooth and orderly development path, the market scale has steadily expanded, investors have entered the market orderly, rational participation, market pricing is reasonable, and prices are effective." According to relevant persons of ZCE's options business, some sugar and cotton industry enterprises tried and explored the use of option management risks, and the market function was initially revealed. However, there are still some problems in China's commodity option market: the cost of capital is relatively high, the operating efficiency needs to be improved, the liquidity cannot carry the needs of larger-scale industrial preservation and institutional hedging risks, and the development speed of commodity options is different from the expectation of market participants. At present, ZCE is making efforts to promote the listing of PTA, methanol and rapeseed options, and continuously enrich the options tool system. At the same time, we will adjust management measures such as limiting positions, actively carry out business function improvement and technical system optimization, improve the liquidity and operational efficiency of the options market, expand the breadth and depth of the development of the options market, and provide better preservation and investment for industrial enterprises and investment platform.
In the view of relevant persons in the trading department of the DCE., the impact of commodity options on the target market and the spot market is far-reaching. The function of the commodity option against the target market can be summarized into three aspects: insurance, enhanced income and volatility management. First, the separation of option rights and obligations creates a special function of option insurance. Investors can buy option management risks while holding the underlying futures. Second, the option tool can help investors increase their income, and sell futures while holding the target. Third, because options can express volatility, the options tool becomes a unique risk management tool with both directional and volatility management. Finally, the flexible combination of various call and put options can meet the risk management needs of investors with more refined and personalized. At the same time, in terms of the impact of commodity options on the target market, it first has a positive effect on the price stability of the target market. From the comparison of data before and after the soybean meal option, the historical volatility of soybean meal futures decreased from 22% to 17%, and the highest value decreased from 40% to 25%. Second, to improve the liquidity of the target market, especially in the early stage of the listing. Again, the management of the underlying event driven risk. Taking soybean meal as an example, the trading volume of soybean meal options has been greatly enlarged in several important nodes during trade friction, indicating that the market has the initiative to manage this part of the special risk concept through option tools.
“Commodity options also have an associated impact on the corresponding spot market. With the continuous development of the trade with rights, it can be deeply integrated with the basis trade, such as the opportunity to provide a second point price on the basis trade. In this respect, it first affects the pricing of the spot market. On the one hand, the basis trade has realized the pricing of the future markets for the spot market. On the other hand, the on-court option market provides pricing reference for the specific option part of the trade with rights. Secondly, it has realized The seamless connection between price and risk management, whether it is basis pricing or trade in rights, is the trading price in the on-court futures market or the on-court option market, achieving seamless integration of the spot market, futures and derivatives markets; again, Through the transmission of upstream and downstream of the industrial chain, the company's profit management methods and inventory management models are deeply integrated with derivatives market tools. ” The above-mentioned by person from DCE.
"From the current development of the domestic commodity options market, there are still some gaps with the international market." According to the relevant person in the Derivatives Department of the SHFE, the product structure and quantity are first reflected. At present, there are nearly 200 options products of CME Group, and the total number of options launched by the domestic futures exchange is less than 10. CME's options cover most varieties, including non-ferrous metals, precious metals, ferrous metals, agricultural products (5.130, 0.00, 0.00%) and energy varieties, while there are currently only two categories of agricultural products and non-ferrous metals in the country. At present, several domestic commodity futures exchanges are accelerating the pace of research and development, and strive to list more options with higher market demand. Second, the industry customer participation in the options market has not been particularly deep. On the one hand, options as more complex financial derivatives, including a very complex model in terms of pricing, lead to higher overall participation threshold; on the other hand, because options are still niche markets, some industry customers have not too many options intend. This requires the Exchange to continuously strengthen communication with industry customers, allowing the market to recognize that options and futures do have some unique advantages in the service industry, especially in terms of insurance characteristics. In addition, the current domestic option products will be equipped with a market maker system in the process of promotion, aiming to help the market to improve liquidity. As the country has just started, there is a certain gap with the international market. The design of market management indicators for overseas exchanges is relatively mature.
The aforementioned ZCE people also believe that the current domestic commodity options market does have some shortcomings, such as the size of positions, the volume of transactions, the breadth and depth of investor participation, and the gap between market asset allocation needs. To this end, the Exchange is also continuously improving and optimizing relevant business policies, rules and systems, and technical systems.
“In terms of market cultivation, it is also necessary to innovate in the training of investors in the exchange to improve the market's understanding of options tools. At the same time, the Exchange has adopted a variety of ways to attract institutional investors to participate. For many institutional investors to consider the market liquidity risk, transaction costs, etc., the exchange will continue to optimize the corresponding business functions, providing better Commodity options investment opportunities and platforms.”The person said.