MCX Launches Options Contracts on Bullion Index to Deepen Commodity Markets

Multi Commodity Exchange of India Ltd on Monday said it has launched monthly options contracts on its bullion index, MCX BULLDEX, as it seeks to offer more hedging tools to investors in the precious metals segment.

The options contracts, which became effective from Monday, are based on an index comprising MCX's gold and silver futures contracts, allowing market participants to gain diversified exposure to both precious metals through a single instrument. An option is a financial derivative contract that gives the buyer the right, but not the obligation, to buy or sell a specified quantity of an underlying asset at a predetermined price (called the strike price) on or before a specific date (expiration date).

MCX BULLDEX provides balanced exposure to the bullion segment for investors and institutions in a cost-effective manner, meeting both investment and hedging requirements, the exchange said. The index conforms to standards set by the International Organisation of Securities Commissions (IOSCO) Principles for Financial Benchmarks in its computation and governance.

"The introduction of options on MCX BULLDEX marks a pivotal development in India's commodities ecosystem," MCX Managing Director and CEO Praveena Rai said in a regulatory filing. "This is a unique and innovative product which will enhance the range of products in the commodity derivatives ecosystem and assist market participants to take exposure to a basket of commodities in the bullion segment," Rai added.

Options on sectoral indices are considered effective tools for price risk management, the exchange said.