Traders at the Iran Mercantile Exchange are showing rare interest in options contracts since the past three months.
Investors traded 440,000 options contracts since the beginning of the fiscal year from late March until June 13, which is a record in the five-year history of launching options instruments in the IME, according to the IME news agency, Imereport.ir.
IME is a commodities exchange in Tehran founded in 2006 to host deals in farm, industrial and petrochemical products in the spot and futures markets.
The IME put the value of traded options at 18.65 trillion rials ($60 million) and the underlying assets for these contracts were gold coins and saffron.
A put option is a financial market derivative instrument that gives the holder the right to sell an asset at a specified price (the strike) by a specified date. Put options are most commonly used to protect against a fall in the price of a stock below a specified price.
If the price of the stock declines below the strike price, the holder of the put has the right, but not the obligation, to sell the asset at the strike price, while the seller of the put has the obligation to purchase the asset at the strike price if the owner uses the right to do so.
As per available data, more than 588,000 futures contracts worth 30.26 trillion rials (97.6m) were traded in the derivatives market in the said period mainly backed by gold, saffron and silver.
A futures contract is a legal agreement to buy or sell a particular commodity asset, or security at a predetermined price at a specified time in the future. Futures contracts are standardized for quality and quantity to facilitate trading on a futures exchange.
In addition, investors traded 1.06 billion units of exchange-traded commodities (ETCs) worth 28.42 trillion rials ($91m) in three months.
ETCs made debut in January 2021 in Iran’s capital market. They offer traders and investors' exposure to commodities like metals, energy, and livestock.
An ETC is traded on the stock exchange, like a stock, but tracks the price of a commodity or a commodity index. This allows investors to gain exposure to commodity markets without buying futures contracts or the physical commodity.
