Introduction
Cash settlement of commodity options refers to the transaction of a certain kind of right. After the buyer has paid a certain amount of money for option premium, the buyer is entitled to buy from or sell to the right seller a certain commodity in an agreed amount and at an agreed price within a certain period of time in the future, meanwhile, the buyer is also entitled to not perform the buying and selling contract mentioned above.
Features
1. The customer can participate in the international commodity trading, with the credit or deposit in Bank of China, according to his/her own actual demand and the commodity price fluctuation in the international market, in which Bank of China buys and sells a certain commodity on behalf of the customer in the international commodity market. The final settlement is the netting settlement based on the difference between the agreed price on contract and the actual price on the maturity day. This is cheaper and easier than the delivery with physical object.
2. The commodity option buyer can choose a beneficial price level from the agreed price on the contract and the spot price on the maturity day for settlement, and the option seller can obtain the yield from option fees in the beginning of trade. Bank of China can also provide the customer with option portfolio and "zero option premiums" product, so as to meet the requirement of commodity value maintenance. It can also provide the portfolio of option transaction with different terms to meet the customer's requirement in term matching.
Term
The transaction term should be over one year, and the longest should be determined by various transaction objects, and it is generally two years.
Target Customers
Customer with the demand of buying and selling commodities some day, such as manufacturers and consumers of all kinds of commodities. Customers are inquired to open a foreign currency account in Bank of China.
Process
The customer should deliver an order and confirm the transaction details in the form of proxy. After the transaction is finished, Bank of China should issue the transaction verification letter; On the pricing day, the option buyer should determine whether or not the option is to be performed, and notify the option seller. If the option is to be performed, it should be transacted on the settlement day, if not, the transaction should be automatically terminated. The customer can require Bank of China to unwind the transaction during the term according to his/her own demand.
|
