27 July 2020, Mumbai: National Commodity and Derivatives Exchange (NCDEX) launches ‘Options in Goods’ for 3 farm commodities. Through Options in Goods, a farmer can lock his price risks and is saved from price volatility.
SEBI, in January 2020, had allowed the exchanges to launch ‘Options in Goods’ in their commodity derivatives segment. Options in Goods provide a settlement mechanism where contracts settle on spot price and all open positions convert into physical settlement at expiry.
Options in Goods contracts through NDCEX is available on Wheat, Rapeseed-Mustard Seed and Maize – Feed/Industrial grade.
Compulsory Delivery for settlement
The farmers and Farmer Produce Organization (FPO) can now lock their prices to hedge risk even before actual sowing of the crop. By paying a premium, farmers will be able to lock their prices. The value of premium will depend upon the demand and supply of the commodity. The contracts will be completed only through compulsory delivery on the day of the settlement.
Options in Goods will also be beneficial for the value chain partners such as processors & aggregators.
Mr. Kapil Dev, Head of Business & Products, NCDEX said in his opening remarks said, “NCDEX has been launching dynamic products as per the need of the market regularly. The Option in Goods will be yet another dynamic tool wherein the farmers can efficiently use it for effective risk management and delivery both.”
Mr. Atul Roongta, CFO, NCDEX said, “We believe commodity derivatives market have made significant progress since inception and with Options in Goods we are bringing in another important product which will not only be useful to farmers, but also to hedgers, millers etc.