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Dalian Commodity Exchange (DCE) launched RBD palm olein options on June 18, 2021, making it China’s first option contract opened up to overseas traders. One year later, the RBD palm olein options market has seen smooth operation and recorded ever-growing trading volume. The options are functioning effectively.
Statistics show that by the end of June 2022, the cumulative trading volume of RBD palm olein options hit 22.33 million lots, with a total turnover of 34.51 billion RMB and an average daily open interest of 156,000 lots. Its cumulative trading volume and average daily open interest equal to 9.0% and 24.8% of that of the underlying futures, respectively. This year in particular, due to the noticeable fluctuation of spot price and the rising demand for industrial risk management, the trading volume and open interest of RBD palm olein options have increased significantly, with its trading volume jumping to the fourth place in the global agricultural options market. Since the launch of the options, institutional clients have shown great interest in the trading, with their number rising steadily. By the end of this June, the open interests held by institutional clients accounted for 61.3% of the total.
Palm oil is known as the vegetable oil with the highest yield, largest consumption and strongest global trade. China is entirely dependent on imports, being the world’s second largest importer of palm oil. So far palm oil has become China’s second largest vegetable oil consumed, next only to soybean oil. Sharp fluctuations in oil prices have been recorded since last year. During that period, RBD palm oil options have functioned quite effectively, providing industrial enterprises with a more refined and tailored risk management tool.
Ever since the debut of RBD palm olein options, relevant companies have shifted from using futures only to constructing the portfolio of both futures and options for risk management, exploring an important way to implement refined risk management. In particular, the entities with low risk tolerance took advantage of the “insurance” function of the options to avoid the pressure of margin calls when the market moves against them.
According to sources from DCE, as for the next step, they will steadily launch more oil and oil seeds options based on the demand in the spot market; continue to optimize the options contract and rules to facilitate the effective functioning of the options. In addition, DCE will continue to develop the options market by expanding the scope of participants in the commodity options market and cultivating the client base for newly listed options, so as to promote the sustainable and healthy development of the options market.
