NCDEX to launch guar seed options trading on January 14

Farmers prepare soybean seeds to plant in a field in Hernandarias, Paraguay February 7, 2017. Picture taken February 7, 2017. REUTERS/Jorge Adorno - RTX306M2

NCDEX on Friday said it will launch the country's first agri-commodity options in guarseed on January 14 with an aim to give stakeholders a new set of financial instruments to hedge their price risks.

The options trading in guarseed will be inaugurated by Finance Minister Arun Jaitley on the auspicious day of Hindu festival 'Makar Sankranti'.

NCDEX is the second exchange after MCX to launch option trading in commodities. In October 2017, MCX had launched gold options. Guarseed will be the first agri-commodity options.

Options are derivatives which give a buyer the right but not the obligation to buy or sell an underlying asset or instrument at a specific price on or before a certain date.

Announcing the day of the launch, NCDEX MD and CEO Samir Shah said: "Options will protect farmers from downward price movement as well as give them an opportunity to sell their produce at higher prices in case of price increase."

This instrument will create a win-win situation for farmers, irrespective of the price movement, he was quoted as saying in the statement.

NCDEX said it is launching guarseed options as it is one of the most liquid contracts on the exchange platform.

Besides, a large number of informal trading centres in some communities of Rajasthan are already involved in some form of informal options trading, ii added.

While the market regulator Sebi had allowed exchanges to launch options in September 2016; it was only on April 26, 2017, it clarified that the options would have futures as underlying for settlement.