China launches aluminum, zinc options to serve real economy

SHANGHAI  -- China on Monday launched the trading of two commodity derivatives, aluminum options and zinc options, to better serve the real economy.

On the first trading day, call and put options contracts were listed at the Shanghai Futures Exchange, with underlying aluminum futures contracts to be delivered from October 2020 to January 2021, and zinc futures contracts to be delivered in October and November 2020.

The total trading volume for the contracts of the two options was 10.7 million yuan (about $1.53 million) on Monday, reflecting active transactions.

China is the world's largest production and trading market for non-ferrous metals. Related futures and options products have been used on a large scale to hedge risks.

Among them, aluminum futures contracts have been listed for 28 years, comprehensively serving as a tool of risk management for the production, sale and trading of aluminum.

"Options can well supplement futures," said Zhao Jinhua, chairman of China Aluminum International Trading Group Co Ltd, noting that commodity options will meet companies' needs for flexible risk management and lower the cost of hedging, through which companies will enhance competitiveness.

Fang Xinghai, vice-chairman of the China Securities Regulatory Commission, said earlier that China will launch more commodity futures and gradually launch underlying options with all futures contracts in accordance with the development of the real economy.

China has launched 18 commodity options over the past three years, and the country has become the world's largest market for commodity derivatives.

"Upon the launch of aluminum futures options and zinc futures options, China's commodities and derivatives market system is further improved," said Wang Chao, an analyst for futures, adding that China's derivatives market is speeding up to keep in line with the international market.

Meanwhile, China has further opened up its commodities market, having launched five commodity futures that are open to investors from home and abroad, including crude oil futures, natural rubber futures and low-sulfur fuel futures.

"We will advance the launching of futures for international investors once conditions mature," said Fang.