The Singapore Exchange (SGX) cleared a 50,000 mt coking coal options trade Wednesday, 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 $210/mt strike and a $3.70/mt premium, and put up for clearing on Wednesday.
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 $200/mt strikes, and premiums at $2.60-$3/mt.
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 $260/mt FOB Australia this week, up by around $50/mt 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 mt/month for Q1 2018 in call options traded November 20, with a $230/mt strike, and priced at a $2.70/mt premium.
The exchange first did Q1 2018 call options at a $195/mt strike for 10,000 mt/month at a $7.60/mt premium trading November 10.
A further 50,000 mt/month of Q1 2018 call options traded on November 13, with strikes at $195/mt and a premium of $7.60/mt.
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.
