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SGX exchange clears coking coal put options for Jan 2018

Coal News - Published on Tue, 02 Jan 2018

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Platts reported that Singapore Exchange cleared a 50,000 tonne coking coal options trade, as volumes held on the exchange grew following a launch of the contracts in September. The January 2018 put option was said to have traded on December 22, basis USD 210 per tonne strike and a USD 3.70 per tonne premium, and put up for clearing.

Activity in put options after December's steep rise in physical prices may suggest interest to guard against a price correction in January.

The SGX said two January puts traded on December 18, each at USD 200 per tonne strikes, and premiums at USD 2.60 to USD 3 per tonne.

The options trade, and current interest in puts, follows increased price volatility in the coking coal market, especially for benchmark grade material tracked by the TSI index.

2017 saw 30 day historical price volatility reach 134%, according to Platts calculations.

Reference coking coal prices have surged to over USD 260 per tonne FOB Australia this week, up by around USD 50 per tonne so far this month.

Call options traded earlier on the SGX may have helped buyers protect from further upside in coking coal spot prices.

Previously in November, 50,000 tonne per month for Q1 2018 in call options traded November 20, with a USD 230/mt strike, and priced at a USD 2.70 per tonne premium.

The exchange first did Q1 2018 call options at a USD 195 per tonne strike for 10,000 tonne per month at a USD 7.60 per tonne premium trading November 10.

The SGX launched options in coking coal in September, with CME Group offering coking coal options in October.

SGX now holds 440,000 mt open interest in options on Australia FOB coking coal futures, based on latest SGX data.

SGX coking coal swaps and options contracts are settled against TSI's Australian Premium Hard Coking Coal FOB index.

TSI is a specialist pricing unit under S&P Global Platts. The CME's options also settle basis TSI PHCC FOB Australia.

The SGX coking coal options are based on the futures contract and are Asian style, with average price settlement for the month.

The final settlement price for a call option is the underlying average futures price minus the strike price, multiplied by the contract size, while for a put option it is the strike price minus the underlying futures average price, multiplied by the contract size.

The SGX traded 14.1 million mt in coking coal futures and swaps over January-November 2017, more than double the combined volume of swaps traded on both the SGX and Chicago Mercantile Exchange in 2016.

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Posted By : Nanda Koijam on Tue, 02 Jan 2018
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