/ 14 June 2011

JSE launches new currency options contracts

The Johannesburg Stock Exchange on Tuesday said it has launched exotic currency options contracts to give investors greater flexibility in their currency bets.

The two new options — the knock-out barrier and up and out options — are based on the dollar/rand and offer participants exchange traded products similar to those that have previously been available only over-the-counter.

The knock-out barrier option has a built-in mechanism to expire worthless should a specified price level be exceeded.

The up and out variation has a barrier level above the current spot price and the spot price has to move up for the option to be knocked out, the JSE said in a statement.

“The products will allow investors to create more diversified trading strategies using exchange traded products without taking on any credit risk,” Warren Geers, general manager of derivatives trading at the JSE, said in the statement.

The contracts were launched together by the JSE and Absa Capital, the investment banking arm of South Africa’s Absa Group. — Reuters