SINGAPORE: Singapore Exchange (SGX) Monday launched the industry’s first options contract on TSR 20 rubber, the global benchmark grade, offering market participants a new risk-management tool.[the_ad id=”31605″]The SGX SICOM TSR 20 Rubber Options contract is based on the SGX SICOM TSR 20 (FOB) Futures contract, which has grown in liquidity amid China’s internationalisation and rising global demand for hedging. The options contract expires into futures positions, offering users the choice of physical delivery to settle their positions.
William Chin, Head of Commodities at SGX, said, “SGX SICOM derivatives are integral to the physical marketplace. This launch follows strong demand from market participants and is timely given the increased liquidity of the underlying futures. With the new options contract, we are expanding our service to a well-diversified SICOM community and enhancing price discovery of TSR 20 rubber.”
The SGX SICOM TSR 20 Rubber Options contract offers opportunities for delta-hedging strategies. Buyers of options have limited downside risk capped at the options premium, while enjoying upside potential. Writers of options can earn income via premiums collected.
It broadens SGX’s suite of rubber derivatives, comprising SGX SICOM TSR 20 Futures, SGX SICOM RSS 3 Futures and SGX SICOM Over-The-Counter (OTC) TSR 20 Rubber Forwards.
In 2018, SGX cleared more than 9 million metric tonnes of rubber derivatives, a 23% increase year-on-year. In January-April 2019, volume was almost 3.5 million tonnes, up 21% over the same period last year.