(MENAFN- AFP) China launched stock options trading for the first time on Monday, aiming to develop broader capital markets and give investors a tool to manage risk.
An option gives the holder the right to buy or sell an underlying asset, but -- unlike futures -- with the choice of whether or not to exercise the contract.
The Shanghai Stock Exchange held a ceremony for the launch of the options on an exchange-traded fund, the China 50 ETF. It tracks 50 of its largest listed firms, including banking giant ICBC and carmaker SAIC Motor.
State media have said options could cause greater market volatility, but in the long run may help investors hedge against risk and discover value investing.
Yao Gang, deputy chairman of market regulator the China Securities Regulatory Commission, told the launch it "marked a new development in the establishment of a multi-tier capital market and also injected new vitality into Shanghai's establishment of an international financial centre".
In morning trading the most actively exchanged contracts were call options -- the right to buy the ETF -- expiring in March, Bloomberg News reported.
China's cabinet said in May last year that financial derivatives should be developed in a "steady and orderly manner". China introduced stock index futures in 2010 for investors to bet on future price movements.
The Shanghai exchange requires individuals to hold at least 500,000 yuan ($80,055) in their accounts to trade options, and 1.0 million yuan for institutions.
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