Gold Option will be launched today i.e. October 17, 2017. On the auspicious day of Dhanteras, commodity derivatives market will write a new chapter in its book. Interestingly, this development comes exactly after 14 years of futures launch in the country that commenced in 2003.
Gold Option will be available in Mega Gold Contract and not in any other gold variants such as gold mini.
How does Gold Option work?
Two types of options —call and put — will be available.
Buying a call option means the buyer expects prices to go up, and buying a put option means the buyer sees prices falling. In both cases, if the expectation of price movements comes true, the premiums for options go up and the buyer benefits. Exactly the reverse happens in selling options.
The settlement of options will be different from what happens in equities. In equities, options are settled in cash, but in commodities, since the settlement is also allowed in physical deliveries, options will also have that alternative.
Hence, all options on maturity will devolve into futures or become futures contract, if not squared off before the given time-frame. After it becomes futures, all norms of futures will apply.
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