my country’s first batch of options denominated in RMB and fully open to foreign investors are here.
The China Securities Regulatory Commission has recently approved the Shanghai International Energy Trading Center (hereinafter referred to as “Shanghai Energy”), a subsidiary of the Shanghai Futures Exchange, to list crude oil options. The contract will be officially listed on June 21, 2021 trade.
Last Issue Energy listed crude oil futures in 2018. “As the first domestic commodity futures open to the outside world, the market of crude oil futures has been operating smoothly since its listing, the scale has steadily expanded, the investor structure has continued to be optimized, and its functions have gradually come into play.” said the last issue of Energy.
Data show that in 2020, there were a total of 41.5858 million crude oil futures transactions, with a cumulative transaction value of 11.96 trillion yuan; the average daily holdings of crude oil futures by general legal persons increased to about 42%.
According to statistics from the Futures Industry Association (FIA), since 2018, Shanghai crude oil futures trading volume has ranked third in the world, second only to CME’s WTI crude oil futures and ICE’s Brent crude oil futures. .
The person in charge of the futures business of Sinochem Petroleum Co., Ltd. said that since the Shanghai crude oil futures were listed three years ago, the contract has begun to show scale in terms of trading volume, open interest, and the number of market participants. , the functions of futures contracts in price discovery and risk management are gradually emerging, and the external environment for launching crude oil options is already available.
With the deepening of domestic supply-side structural reform, my country’s oil-related enterprises are transforming to high-quality development, and the demand for refined and diversified corporate risk management has increased. The market is enthusiastic about the launch of crude oil options. The voice is getting stronger day by day. In particular, the violent fluctuations in the international crude oil market in 2020 have given my country’s oil-related companies a deeper understanding of strengthening risk management, and the related needs have become stronger.
“The launch of crude oil options is an indispensable part of the process of improving China’s energy derivatives system. Especially after the violent fluctuations in crude oil prices in 2020, Shanghai crude oil futures have been greatly affected by Asia and even With more attention and participation in the global market, it is just the right time to launch crude oil options at this stage.” said Ouyang Xiuzhang, Asia CEO of Freepoint Group, an international trader.
Ouyang Xiuzhang said that for most overseas traders and overseas institutions, the cash margin system, position management, and corresponding delivery supporting processes of crude oil futures contracts need to be experienced. A relatively long learning and adaptation process; and the launch of crude oil options can effectively simplify margin and position management, avoid risks while also reducing transaction costs, thereby providing more investment opportunities and trading strategies. This will encourage more global investors, especially overseas traders, to focus on the Shanghai crude oil futures market and further deepen the price discovery function of the futures market.
“Based on international options trading experience, the launch of commodity options can manage crude oil price risks in multiple dimensions. For entity oil-related companies, listed crude oil options will improve management efficiency and optimize resource allocation.” Liu Yong, head of futures at Shandong Dongbo Petrochemical Co., Ltd., said.
Pan Xiang, a crude oil analyst at Huatai Futures Research Institute, said that compared with futures, option profits and losses have non-linear characteristics. For companies that use option hedging, they can not only hedge risks The effect is that you can also capture the potential benefits brought about by price increases or decreases. The option buyer only needs to pay a premium, while futures hedging must pay a certain proportion of margin. Therefore, companies that use option buyers for hedging do not need to worry about the risk of margin calls, especially when price fluctuations are more severe, which will affect the company. Capital usage is low. Most oil-related companies in mature overseas markets use option hedging, such as airlines, international oil companies, etc., to hedge the risk of oil price fluctuations through various option portfolio products. Compared with futures, options can form different hedging combinations according to the different risk management needs of enterprises, so they are more flexible.
According to China Business News, when designing the crude oil options contract rules, Shanghai Energy insisted on combining international experience and local advantages. The contract rules integrated the operating experience of domestic listed options and crude oil Characteristics of futures opening to the outside world.
Last Issue Energy stated that listing crude oil options and opening them to the outside world will not only enrich the risk management tools of domestic and foreign oil-related companies, help companies improve their risk management levels and achieve sustainable development, but also through Complementing each other with crude oil futures, it will help better utilize the resource allocation role of the futures market and promote the construction of Shanghai as an international financial center.
As for the next step, Last Issue Energy stated that the trading center will continue to carefully prepare for various listings, carry out in-depth market training and investment education work, and ensure the smooth launch and stable operation of crude oil options. .