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It has been a whole month since the options on soybean meal futures (“soybean meal options” for short) were listed and traded on Dalian Commodity Exchange (DCE) on March 31. DCE held the “Forum on First-Month Operation of Options on Soybean Meal Futures” in Shanghai. It is the first option product on commodity futures listed and traded in China, and its first month saw moderate liquidity, steadily increasing participants in trading, transactions and open interests, active involvement of corporate clients, effective functioning of the market makers, the reasonable level of implied volatility, and stable and orderly market operation on the whole.
According to statistics, in the 19 trading days by April 28, soymeal options totaled a trading volume of 320,000 contracts (single-sided, the same below) and a turnover of RMB 266 million with the average daily trading volume at 17,000 contracts and the average daily turnover at RMB 14 million; the open interest showed the trend of increase as after the closing on April 28 the open interest stood at 64,000 contracts, up by 300% from that on the first day of the listing. The trading volume and the open interest of the soybean meal options were 2.2% and 2.9% respectively of those of the underlying futures in the same period, and the turnover rate remained at a reasonable level of about 0.4.
Among the listed and traded contracts of soybean meal options, the series of m1709 option contracts were the most active, with the trading volume and open interest accounting for 63% and 57% of the totals respectively. The trading volume of the three dominant series of option contracts m1709, m1707 and m1801 took up 99% of the totals. The transaction prices concentrated at about the at-the-money and slightly-out-of-the-money levels, showing rational performance in general. Except the m1709 and m1801 series of options contracts, all the other 5 series recorded more trading volumes than those of the underlying futures contracts in the same period.
In terms of the prices, the soybean meal options were priced reasonably and effectively. The soybean meal options contracts and the underlying futures contracts have maintained sound correlation in prices, and the prices of the call option contracts have followed the strike prices to decrease progressively while the prices of the put option contracts have followed the strike prices to increase progressively, resulting in few arbitrage opportunities in the market. Regarding the volatility, the implied volatility rates of the dominant series of soybean meal options have been in a reasonable range with stable prices and small fluctuations. Specifically, on April 28 the implied volatility of dominant series of soybean meal option contracts stayed at 13% to 14%, close to the historical volatility of the underlying futures, demonstrating rational performance.
The investors have been increasingly active in participation with the number of the corporate clients involved constantly on the rise. According to the statistics of DCE, as of April 28, there were 1,442 clients participating in the trading of the soybean meal options, including 270 corporate clients, 140 more than the number on the first day of the listing. The trading volume recorded by the corporate clients accounted for 65% of the total, indicating that the corporate clients were the main participants in the market.
10 market makers for the soybean meal options have effectively fulfilled their tasks of continuously quoting and responding to quotes, and played an important role in forming reasonable prices and providing market liquidity. According to the sources, since the listing of the options, the market makers have registered stable trading volume and open interest, which accounted for 41% and 33% of the totals respectively.
The soybean meal options can also meet the diversified demands of the enterprises as an effective tool for risk management. For example, a subsidiary of CEFC signed a cooperative hedging (options) contract with a client in early April. The client purchased the soybean meal basis contracts with the delivery from late April to early May from the oil mills, and hedged against the risk of dropping spot prices through the option operations by the subsidiary of CEFC.
