On May 15, 2023, ethylene glycol options and styrene options were listed in Dashang, and the chemical sector of Dashang was realized.UfoblockchainFutures and options are fully covered. Over the past year, the ethylene glycol option and styrene option market has operated smoothly and orderly, the industry participation has increased steadily, and the option function has initially emerged, which provides an effective and flexible risk management tool for the relevant petrochemical industry chain enterprises.
The option function works well.
Ethylene glycol and styrene are important chemical intermediate products with a wide range of downstream applications. Ethylene glycol and styrene options have maintained a "steady start" since they were listed, providing flexible and personalized risk aversion strategies and programs for industrial chain enterprises.
From the point of view of the operation of the market, by the close of May 14, 2024, ethylene glycol options and styrene options have been running for a total of 242 trading days. Among them, the cumulative turnover, cumulative turnover and average daily position of ethylene glycol options are 1321 respectively.Ufoblockchain.10,000 hands, 5.41 billion yuan and 79000 lots, with trading volume and positions accounting for 12.8% and 13.4% of the underlying futures respectively. The cumulative trading volume, cumulative trading volume and daily average position of styrene options were 34.584 million lots, 8.75 billion yuan and 69000 lots respectively, and the trading volume and position accounted for 24.1% and 14.2% of the underlying futures respectively.
From the perspective of volatility, the implied volatility of the two options well reflects the market volatility expectations for the futures future. Xie Yilun, an options analyst at the East Securities Futures Derivatives Research Institute, said that over the past year, the implied volatility level of near-monthly average options for styrene and ethylene glycol was consistent with the historical volatility of the corresponding futures varieties. For example, the implied volatility of styrene options reached a high of 32% in September 2023, fluctuated within 15% to 30% in the rest of the year, and its long-term historical average of implied volatility was 25%, while the long-term historical average of futures volatility was about 23%. There is a strong correlation and correlation between the operation of the options market and the volatility of the corresponding futures varieties, and the option pricing efficiency is relatively high.
For the market operation "answer paper" submitted in the first year, the relevant industrial enterprises have also given recognition. According to Yuan Ye, the head of options in Zhongji Petrochemical Co., Ltd., since the listing of styrene and ethylene glycol options, the market liquidity and function have been steadily improved, and the option pricing is reasonable, which can reflect the underlying market changes timely and accurately, which provides an effective path for enterprises to understand market changes and carry out risk management.
Qian Cheng, senior business director of Jiayue products Group Co., Ltd., also said that the styrene and ethylene glycol options market is showing a stable operation. The option price discovery mechanism is effective, can keenly reflect market expectations, and provide rich risk management and cost optimization strategies for the upper and lower reaches of the industrial chain.
Industrial enterprises actively participate
In recent years, under the influence of factors such as crude oil price fluctuation and large number of chemical plants put into production, the price of domestic liquid chemical products fluctuates greatly. in the face of the increasingly complex market environment, the risk control awareness of ethylene glycol and styrene industry chain enterprises is increasing, and some enterprises have complied with the trend on the basis of the previous active use of futures tools. Explore the use of ethylene glycol and styrene options to achieve the goal of locking in sales profits or procurement costs.
From a strategic point of view, according to Yuan Ye, in spot trade, entity enterprises can get hedging strategies with high performance and price through the relevant structure based on buying rights; through the relevant strategies based on selling rights, they can hold long positions at the same time to thicken corporate earnings. In the over-the-counter aspect, the listing of over-the-counter options can also provide anchors for the pricing of over-the-counter products, which is of significant significance for stabilizing market quotations and increasing market liquidity.
In addition to the option strategy of one-leg hedging, enterprises can also develop a more flexible combination of option strategies according to their own needs. "for example, you can build a neckline strategy, that is, on the basis of buying put options and then appropriately sell call options to reduce the cost of hedging options." Xie Yilun said.
As a large domestic petrochemical trading enterprise, Sinopec has been involved in the futures market for a long time and has gradually explored the use of styrene options to upgrade risk management over the past year. Yuan Ye said, "since the listing of styrene options, we have built a 'three neckline' option structure, which not only hedges risks, but also thickens earnings while holding multiple orders of spot or futures through selling rights." The listing of floor options provides a new hedging tool for the industry, which not only ensures security, but also provides higher income space.
Qian Cheng said that after the listing of styrene and ethylene glycol options, Jiayue products adjusted and optimized virtual inventory and physical inventory through the flexible use of futures and options, which not only realized the optimization of inventory management and reduced the cost of holding goods. it can also more accurately serve the individual needs of downstream customers and reduce circulation costs.
Take the ethylene glycol option as an example, according to Qian Cheng, since the ethylene glycol price experienced a sharp decline in 2022, the absolute price fluctuated at the bottom of the industry valuation most of the time. Jiayue products use option tools to implement the hedging strategy of selling bullish and expressing purchase contracts in a low price environment, so as to optimize trade costs and provide more room for industrial traders to provide spot-point services for upstream and downstream. The flexibility of trade activities has been enhanced.
In the upper reaches of the industrial chain, the introduction of relevant option tools also provides space for Hengli and other upstream enterprises to explore options to avoid risk. Hengli produces many chemicals, including styrene and ethylene glycol. In the traditional use of derivatives model, the simple use of futures can not fully meet the needs of enterprises. " Zhang Ming, head of Hengli Hengyuan supply chain (Shanghai) Co., Ltd., said that after the listing of styrene and ethylene glycol options, Hengli embedded the nonlinear profit and loss of the options into the trade contract to provide customers with services such as floor price sales and capped price procurement through power trade to better meet the needs of upstream and downstream enterprises.
"through the application of styrene and ethylene glycol options, the procurement and sales methods are further optimized, and the transfer of inventory depreciation risk is realized. while the downstream procurement costs are greatly reduced, the actual sales revenue is not reduced, achieving a win-win situation for both sides of the trade and effectively improving customer stickiness." Zhang Ming said.
In the next step, based on the needs of the real industry, DSE will continue to optimize and improve the ethylene glycol and styrene option contract rules, carry out option training and promotion activities for industrial enterprises at different levels and categories, further enhance industry participation in the options market, and promote the options market. Stable and healthy development will protect the stable operation of industrial enterprises.