Options Trading to Make Debut With Gold Coins

Options are making their final approach toward Iranian securities markets.

Contracts that allow you to buy the right to sell or buy a commodity at a future date have overcome all regulatory obstacles and will be launched for the first time in Iran in a month. 

Designed to comply with Islamic law, they will make their debut on Iran Mercantile Exchange. Their introduction is another key step in Iran's shift towards a market economy.

"Options will first become available on Emami gold coins, which already have a booming futures trade on IME," Hamed Soltannejad, IME's chief executive, told ILNA.

The coin is the benchmark for gold trading in Iran. Their futures are traded on IME while their spot trade is done in Tehran among bureaux de change overseen by the Central Bank of Iran.

Options have been an essential part of the world economy for the past four decades. They are far older though. In London, puts and "refusals" (calls) became well-known trading instruments in the 1690s. But in Iran, they have only been studied in financial textbooks.

Even futures trading is recent in Iran, let alone options. Futures, which allow investors to buy commodities and securities at a future date, were launched in Iran nine years ago. But it was not until the introduction of gold coin futures in 2007 that their trading got going.

In 2010, stock futures were launched but they have yet to catch the attention of investors. In contrast, the Chicago Board of Trade listed the first-ever standardized "exchange traded" forward contracts in 1864, which were called futures contracts.

Alireza Nasserpour, IME's deputy for derivatives development, says gold options trading will start within a month, Boursepress reported. 

"The options will first be traded through brokers and their online trading will come later when volume picks up," Soltannejad said.

They will be traded through existing platforms and do not require new permits or trading codes.

These options will be European style, meaning they can only be exercised at expiration, contrary to American style options that can be exercised any time from their sale up to the option's expiration.

Iran's capital markets are rapidly expanding. Bearishness in stock markets has redoubled the conviction of the regulator to speed up the process of introducing newer financial products to draw in money into securities markets.

IME is taking the lead in expanding the portfolio of financial instruments available to investors this year. 

Soltannejad said IME is setting up an exchange for offering foreign exchange futures to help Iranian companies and foreign investors hedge against foreign exchange fluctuations. 

The company, along with the Securities and Exchange Organization, is in talks with the Central Bank of Iran to work out the details for dollar/rial futures. 

IME has already drawn up contracts and offered schedules for the foreign exchange futures, said Soltannejad last month.