Published On: Tue, Jul 17th, 2012

Bursa Malaysia Derivatives Berhad Launches Options on Crude Palm Oil Futures

Dato’ Tajuddin Atan Chairman Bursa Malaysia Derivatives

Dato’ Tajuddin Atan Chairman Bursa Malaysia Derivatives

Bursa Malaysia Derivatives Berhad (BMD) has launched Options on Crude Palm Oil futures contract (OCPO), the first Asian exchange-traded agricultural options contract, to complement its highly successful Crude Palm Oil Futures (FCPO) contract.

The OCPO, which uses FCPO as its underlying contract, offers another risk management tool for industry participants to better meet their hedging needs. Trading of the options contract commenced on 16 July 2012, with a total of 8 call options contracts traded.

Dato’ Tajuddin Atan, Chief Executive Officer of Bursa Malaysia and Chairman of Bursa Malaysia Derivatives said, “By introducing OCPO, we hope to further cement Malaysia’s position as the global premier market for palm oil. As it stands, our FCPO is the global pricing benchmark for crude palm oil. OCPO represents a natural extension to FCPO and its introduction to the market reflects the growing sophistication of the Malaysian derivatives market.

“We hope to attract new market participants such as options traders to our marketplace. We expect trading volume in the underlying FCPO contracts to grow as OCPO users trade both contracts.”

Through BMD’s partnership with CME Group, OCPO is listed and traded on the CME Globex® electronic trading platform, making it accessible to traders around the world.

The speculative position limits are increased to 10,000 futures equivalent contracts net long or net short for any single month, and 15,000 futures equivalent contracts for all contract months combined. The speculative position limits are combined together with the FCPO contract.

BMD has embarked on a series of awareness and educational programmes to highlight the benefits of OCPO trading and the new opportunities offered to market participants.

Option on Ringgit Malaysia Denominated Crude Palm Oil Futures (OCPO)
OCPO: Contract Specifications

Contract Code Calls: C OCPO

Puts: P OCPO

Type European Options
Underlying Ringgit Malaysia Denominated Crude Palm Oil Futures (FCPO) contract.
Contract Size One FCPO contract (of a specified month) of 25 metric tons (MT)
Tick Size RM0.50 per MT (RM12.50 per contract)
Strike Price Intervals Trading shall be conducted for put and call options with striking prices in integral multiples of RM50 per MT. There will be at least 11 strike prices (five are in-the-money, one is at-the-money and five are out-of-the-money).
Contract Months Monthly (list the third, fourth, fifth and sixth forward months) then alternate months going out 24 months of the FCPO contract. The first spot option contract month will be trading the 3rd month FCPO contract.
Daily Price Limit There will be no daily price limits.
Last Trading Day The spot options will cease trading at 6pm on the 10th day of every month, or the preceding business day if the 10th is a non-business day. The futures position will be delivered at end-of-day process and will be available for trading on the next day.
Exercise In the absence of contrary instructions delivered to the Clearing House, an option that is in-the money at expiration shall be automatically exercised. Exercise results in a long 3rdmonth FCPO position, which corresponds with the option’s contract month for a call buyer or a put seller, and a short 3rd month FCPO position for a put buyer or a call seller.
Expiration Unexercised options shall expire at 6.00pm on the last day of trading.
Trading Hours First trading session: Malaysian time: 10.30 a.m. to 12.30 p.m.

Second trading session: Malaysian time: 3.00 p.m. to 6.00 p.m.

Speculative Position Limit 10,000 futures equivalent contracts net long or net short for any single month.15,000 futures equivalent contracts for all contract months combined.

*Speculative Position Limits are combined together with the FCPO contract.

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