NCDEX to discontinue 'options on goods’ contracts in select commodities

Commodity market news: Commodity exchange NCDEX has announced that it will discontinue the ‘options on goods’ contracts in select commodities, including jeera, turmeric and maize, with effect from April 15. The move will apply to goods option contracts of “maize, guar complex (guar seed and guar gum) and spices complex (dhaniya, jeera and turmeric)” due to non-availability of further expiries from February 2024, and the last date of trade for the existing expiries will be April 12, according to the bourse. 

Earlier, NCDEX had said that no new expiries would be launched after January (contracts with new expiries were originally due to be launched on February 2, 2024). 

“In continuation to the aforementioned directive, as there is Nil open interest, we hereby inform that April 12, 2024 will be the last trading day for the existing running Options on Goods Contracts on Maize, Guar Complex (Guar seed and Guar gum) and Spices Complex (Dhaniya, Jeera and Turmeric) and the contracts will be discontinued with effect from the April 15, 2024,” NCDEX said in a circular dated April 9. 

Here's the list of the ongoing contracts of these commodities on the exchange that will be unavailable for trading from the start of the trading hours on April 15, according to NCDEX:

However, trading in the futures contracts of these commodities will continue normally. 

"Several sections of the market are anticipating the replacement of the outgoing 'option on goods' contracts with 'option on futures' contracts, as the ‘option on goods’ category introduced by the regulator attracted no response... Any such move is likely to promote market participation and hence lead to higher volumes," Ajay Kedia, MD at Kedia Commodities, told Zeebiz.com. 

What are 'options on goods' contracts?

First things first, an options contract carries the right but not the obligation for a buyer to buy or sell a certain underlying asset at a given price on or before a fixed date known as the expiry date. Options contracts provide investors with the flexibility to buy or sell assets at a predetermined price within a specified timeframe. These contracts enable investors to hedge against market volatility, speculate on price movements, generate income through premiums, and diversify their investment portfolios. 

Just like a futures contract, an 'options on goods' contract also carries a date of expiry (the date on which the contract expires at the end of the day's trade), but mandates a compulsory physical delivery of the goods involved (known as the underlying asset).