As an important liquid chemical, ethylene glycol is closely related to listed chemical options such as methanol and PTA in the industrial chain, which reflects the supply and demand situation of upstream coal, petroleum industry and downstream polyester industry to some extent.
After the listing of ethylene glycol futures, it effectively played the role of industrial chain risk management and price discovery. As of May 1 day, 2023, the average daily trading volume of ethylene glycol futures was 540,000 lots and the average daily holding volume was 360,000 lots, which met the basic conditions for listing options in terms of positions and liquidity. At present, enterprises still need to use nonlinear hedging tools through the OTC market. With the listing of ethylene glycol on-site options, investors have more hedging and speculative tools to choose from, and OTC market-making institutions have also added more hedging methods, which is conducive to optimizing the construction of OTC options market.
Analysis of ethylene glycol option contract
1, contract code interpretation
The ethylene glycol option contract is based on the ethylene glycol futures contract, and the ethylene glycol option contract EG2309-C-4200 refers to the call option with the strike price of 4200 in September 2023, and the expiration date is August 7, 2023.
2. The lowest price change
The minimum change price refers to the minimum change in the unit price of the option contract. Judging from the operation of listed options, shallow option contracts are usually active, and their price fluctuation does not exceed 1/2 of the underlying futures. Setting a smaller minimum fluctuation price is conducive to improving the accuracy of quotation, so that the option price can reflect the changes of the underlying futures price in time and effectively. Therefore, the minimum variable price of ethylene glycol option is designed as 0.5 yuan/ton, and the ratio of the minimum variable price of the underlying futures is 1/2.
3. Execute price setting
The ethylene glycol option is set by segment exercise price range. With the change of futures price, the Exchange will add option contracts with new exercise price according to the price range corresponding to the fluctuation range of the settlement price of the underlying futures of the previous trading day 1.5 times the price limit, so as to meet the diversified hedging needs of investors.
4, the correct method
Ethylene glycol option is an American option, and the buyer can exercise the right on the expiration date of the contract and any trading day before it. American option exercise is flexible and convenient, which can reduce the influence of centralized option exercise on the operation of the target market and follow the consistent setting style of big businessmen.
5. commodity options and stock index options are different in delivery. Stock index options are delivered in cash, while commodity options is delivered in kind. After exercising their rights, investors will get corresponding future positions, and it is necessary to ensure that the account funds are sufficient and the exchange positions are limited.
6. Price range
The range of price limit refers to the maximum value that the option contract rises or falls in a trading day. The fluctuation limit of ethylene glycol option contract is the same as that of basic futures contract.
Prospect of follow-up investment opportunities
Judging from the historical fluctuation in recent three years, ethylene glycol has the characteristics of long-term stable fluctuation, periodic fluctuation and slow convergence after rising. Looking back on the past market, ethylene glycol has its particularity. In addition to the long-term contradiction between supply and demand, the upstream and downstream start-up situation leads to the mismatch between supply and demand, which leads to a short-term shock rise, which is affected by the double fluctuation of upstream prices of raw materials such as coal and oil. In addition, the liquid nature of ethylene glycol is prone to storage and market problems. According to the fluctuation data of ethylene glycol, the median values of HV30, HV60 and HV90 are 24.9%, 26.6% and 27.25% respectively. Therefore, judging from the volatility in the later period, there is a certain margin of safety for opening positions below 25%.
The listing of ethylene glycol options also provides new ideas for option investment in chemical industry chain, such as the linkage of price difference between PTA and polyester industry chain, the linkage of price difference between upstream and downstream of methanol, and the inter-temporal and cross-species arbitrage of options inside and outside the market.