(Yicai Global) June 18 -- Palm oil options were listed on the Dalian Commodity Exchange today as part of the Chinese government’s drive to introduce more complex trading instruments in the agricultural sector to hedge risk and stabilize prices.

Some 360 palm oil option contracts were listed today and trading is stable, said the DCE, one of the four futures exchanges on the Chinese mainland.

The trading unit of the options, which are open to both domestic and foreign traders, is palm oil futures. Options give the holder the right to buy or sell a commodity at a particular strike price allowing for better hedging flexibility.

Introducing palm oil options and overseas investors into the trading mix can provide more sophisticated risk management tools for palm oil production, processing and trading companies at home and abroad, and help promote deeper integration of domestic and foreign markets, the northeastern Liaoning province-based exchange said.

The DCE began trading in RBD palm oil futures in 2007. It was the first solely imported product to be traded in futures in China back then and in December last year became the seventh commodity future product available to overseas investors.

The DCE’s palm oil futures became the pricing benchmark for 70 percent of China’s palm oil spot trade by the end of last year end and had a great impact on international pricing.

China imports all its palm oil and last year brought in close to seven million tons, over 85 percent of which were hedged through palm oil futures on the Dalian exchange to reduce market risk.

Editor: Kim Taylor