GOLD OPTIONS ON MULTI COMMODITY EXCHANGE


Multi Commodity Exchange

  • Similar to the BSE and the NSE, MCX is an exchange where commodities are traded.

  • It was formed in 2003.

  • It falls under the regulatory purview of SEBI.

  • Four types of commodities are traded on the MCX:

  1. Bullion

  2. Base metals

  3. Energy

  4. Agro commodities.

  • Difference between Options and Futures

  • Under both futures and options, an investor enters into a contract to buy (or sell) an asset at a pre-determined price within a certain time frame.

  • However, under a future, an investor is obligated to buy or sell (as the case maybe) within the time frame while under options, he has the option not to.

  • Recently, gold options were launched for the first time in India on Multi Commodity Exchange (MCX).

  • The launch of gold options is in line with the government’s announcement of including new commodities in the derivatives markets.

  • This is the first commodity that the Securities and Exchange Board of India (SEBI) has approved for options trading in 14 years.

  • The launch is also in consonance with the earlier initiatives taken up by the government for easing trade in gold such as the Gold Monetisation Scheme launched in 2015 and the Sovereign Gold Bonds launched in 2016.

  • The options allow trading in 1 kg of gold.

  • The gold options would allow investors to hedge any volatility in the price of the metal.

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