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Investors optimistic over equity trading options trial
Print Edition
THE Chinese mainland started trial trading of its first equity options yesterday. Although trading was light, investors were “generally optimistic” of the new hedging tool.
The options listed on the Shanghai Stock Exchange are based on the exchange-traded fund that tracks the SSE 50 index — a gauge of the performance of the 50 largest companies on the bourse.
An option is a contract that gives the owner the right to buy or sell an underlying asset at a specified exercise price on a predetermined date in the future.
The new hedging tool allows investors to manage risks in one of the world’s most-volatile stock markets.
“The launch of ETF-based options is a significant step for China to diversify trading strategies and hedging tools for investors ... and boost liquidity of underlying assets,” Yao Gang, vice chairman of the China Securities Regulatory Commission, said at the launch ceremony yesterday.
The first batch of 40 contracts included call and put options due for March, April, June and September, with five strike prices at 2.20 yuan (35 US cents), 2.25 yuan, 2.30 yuan, 2.35 yuan and 2.40 yuan.
A total of 542 investors, including 492 retail investors and 50 institutional investors, purchased 11,320 call contracts and 7,523 put contracts yesterday, with premiums totaling 28.7 million yuan, data from the exchange showed.
“The first day of trading was relatively light, with trading of call options being more active than that of put options, indicating investors were generally optimistic about the outlook of underlying assets,” said Lian Ping, chief economist with the Bank of Communications.
The underlying SSE 50 ETF rose 1.75 percent yesterday, compared with a gain of 0.62 percent in the Shanghai Composite Index.
Huang Hongyuan, general manager of the Shanghai exchange, said the regulator has imposed measures to control risks and safeguard investor interest.
Individual investors need to have at least 500,000 yuan in portfolio value to be able to trade. Other risk curbs include quota control, limits on daily price variation and circuit breaker mechanism.
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