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Palm Olein Option Market on DCE Operates Rationally and Steadily with Cost-Effective Pricing for One Month Since Its Listing and Internationalization

Date:19 July 2021
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As China’s first option contract open to the outside world, palm olein options were officially listed on Dalian Commodity Exchange (DCE) on June 18, which also allow overseas investors to trade. It has been one month since then. Over the past month, the palm olein option market has been operating rationally and steadily, which is characterized by cost-effective pricing, active participation of domestic and overseas clients and steady growth of option open interests. This demonstrates good market liquidity and development potential. Industrial clients begin to use the palm olein option on DCE to carry out risk management, and all actors in the market are full of expectations for palm olein options to serve the development of the global industry.

According to statistics, as of July 16, palm olein options had been operating for 21 trading days in total, with a cumulative trading volume of 931,400 lots (one-sided, the same below), a cumulative turnover of RMB 1.512 billion, and an average daily open interest of 59,700 lots. Among the listed option series, the p2109 series was the most actively traded, accounting for 90.0% of the total trading volume of palm olein options and 78.0% of the daily open interests.

In terms of price trend, palm olein options are priced in a co-effective manner. The price of the ITM contract of all options is generally higher than that of the OTM contract, and the price of forward contract is higher than that of nearby contract. No price inversion phenomenon and no obvious arbitrage opportunity has been found in the market. In terms of investor participation, institutional clients have been actively involved in the trading of palm olein option since its listing, and the number of institutional clients participating in the trading has steadily increased. It is reported that since June 18, about one fifth of the individual customers and institutional clients involved in the options trading of DCE have participated in palm olein options, with institutional clients accounting for 62.8% of the open interests of palm olein options, while clients with overseas accounts and clients with overseas background representing 5.0% of the open interests.

It is generally believed that the good liquidity performance of palm olein options in the first month after listing on DCE is closely related to the market experiences of soybean meal options and corn options in the past two years after their listing. This is also the result for the cultivation of options market over the years.

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