Gold
Traditionally, Gold has been used as money and also served as a relative standard for currency equivalents specific to economic regions or countries, until recent times. India continues to remain world's second biggest consumer of Gold.
From an overall evaluation it is seen that India has a traditional and stable market for gold consumption. There is increase in demand from Ornamental and Electronic Sectors. Gold is considered a valuable asset, for investments and bank reserves. A huge gap exists between demand and indigenous production which is likely to continue
The market participants engaged in import, exports, domestic trading, and manufacturing of gold and gold jewelleries are exposed to price risk. Commodity derivatives product provide an effective hedging tool much to the advantage of market participants.
Gold Mini Options
Illustration – Mechanism of Exercise
Option series having strike price closest to the Final Settlement Price (FSP) shall be termed as At-the-Money (ATM) option series.
This ATM option series and three option series having strike prices immediately above this ATM strike and three option series having strike prices immediately below this ATM strike shall be referred as ‘Close to the money’ (CTM) option series.
In case the FSP is exactly midway between two strike prices, then immediate three option series having strike prices just above FSP and immediate three option series having strike prices just below FSP shall be referred as ‘Close to the money’ (CTM) option series.
All option contracts belonging to ‘CTM’ option series shall be exercised only on ‘explicit instruction’ for exercise by the long position holders of such contracts.
All In-the-money (ITM) option contracts, except those belonging to ‘CTM’ option series, shall be exercised automatically, unless ‘contrary instruction’ has been given by long position holders of such contracts for not doing so.
All Out of the money (OTM) option contracts, except those belonging to ‘CTM’ option series, shall expire worthless.
| CALL | Gold Mini Option Strike | PUT | ||
|---|---|---|---|---|
| Mechanism of Exercise | Category of Strike | Category of Strike | Mechanism of Exercise | |
| All In-the-Money (ITM) option contracts, except those belonging to ‘CTM’ option series, shall be exercised automatically, unless ‘do not exercise' instruction has been given by long position holders of such contracts for not exercising | ITM that are not CTM | 45,000 | OTM that are not CTM | Shall expire worthless |
| 45,250 | ||||
| 45,500 | ||||
| 45,750 | ||||
| 46,000 | ||||
| 46,250 | ||||
| 46,500 | ||||
| Shall be exercised only on ‘explicit instruction’ for exercise by the long position holders | CTM | 46,750 | CTM | Shall be exercised only on ‘explicit instruction’ for exercise by the long position holders |
| 47,000 | ||||
| 47,250 | ||||
| 47,500 | ||||
| 47,750 | ||||
| 48,000 | ||||
| 48,250 | ||||
| Shall expire worthless | OTM that are not CTM | 48,500 | ITM that are not CTM | All In-the-Money (ITM) option contracts, except those belonging to ‘CTM’ option series, shall be exercised automatically, unless ‘do not exercise' instruction has been given by long position holders of such contracts for not exercising |
| 48,750 | ||||
| 49,000 | ||||
| 49,250 | ||||
| 49,500 | ||||
| 49,750 | ||||
| 50,000 | ||||
Updated on: 04/01/2023
