The Shanghai Futures Exchange (SHFE) announced yesterday that it would launch mock trading of commodity-future options on November 19. The mock trading will open to the whole market, and the products involved are copper-future option and gold-future option.

It is learnt that the mock trading of options launched by the SHFE has been approved by the China Securities Regulatory Commission (CSRC), and it aims at providing members and investors with a platform for options trading and, through the mock trading, enabling investors of all kinds to have an in-depth understanding of the options business rules of the SHFE, to get familiar with relevant investment strategies, and to understand the future options market. Meanwhile, the SHFE also hopes to further optimize relevant business rules of the SHFE and accumulate related experience of options’ risk control through the mock trading.

An official of the SHFE introduced that the SHFE has set up a special options research group since 2002 to study about the feasibility of trading of commodity-future options in China. In 2010, the Option Development Group was established, and a set of complete commodity-future options scheme that suits all products of the SHFE was formulated as well. In 2012, the SHFE set up the Office for Promoting Derivatives’ Innovation for propelling development and listing of such products as options and indexes. The SHFE has held an array of symposiums on options previously to discuss with some institutions on options rules. At present, the framework of the options trading rules has been completed and the mock trading is ready to launch.

From now on, with the proceeding of the mock trading of options, the SHFE will strengthen its communication with members, software suppliers, and various investors to speed up the preparatory work for the listing of options.

Data show that future option is another revolution of futures in the 1980s after financial futures in the 1970s. In October 1984, the Chicago Board of Trade (CBOT), for the first time, successfully applied the options trading in buying and selling of futures contract of long-term state treasury bonds, and a futures option came into being since then. Just as commodity futures have provided spot traders with a risk-avoiding tool, options have provided futures traders with such a tool. Most futures products in the international futures market have ushered in options trading.