Mainland launches stock option trading

The Chinese mainland launched its first stock options on Monday, giving investors more tools to manage risks as the country's stock market showed signs of losing steam after gaining 53 percent last year.

Shanghai Party Secretary Han Zheng and China Securities Regulatory Commission Chairman Xiao Gang opened the market for the option trading at the Shanghai Stock Exchange.

The first day's trading involved transactions on about 18,800 contracts. Premium trade volume reached 29 million yuan (4.4 million U.S. dollars), according to statistics from the Shanghai Stock Exchange.

"We hope the introduction of stock options will provide domestic investors diverse choices, promote product innovation and enrich trading strategies," said Huang Hongyuan, general manager of the Shanghai Stock Exchange.

Huang said he expected the stock option would better reflect market sentiments and increase pricing efficiency.

Option trading could accommodate the needs of insurance companies and pension funds, improving the structure of funds in the market, he added.

The Shanghai Stock Exchange requires individual investors to have at least 500,000 yuan in their accounts to trade options, while institution investors must hold at least one million yuan.

The benchmark Shanghai Composite Index rose 0.62 percent to end at 3,095.12 points as the stock option 50 ETF was introduced.

The Shanghai Composite Index, the world's best performer in the last year, sagged in most trading days in the past two weeks because of pressures from tightened stock financing and waves of initial public offerings (IPOs).

Chen Dongwei, an analyst with CITIC Securities, said the introduction of the derivatives had given steam to banking, insurance and securities traders.

Western Securities Co. Ltd. increased 10.02 percent to close at 32.07 yuan per share, while China Minsheng Banking Corp. Ltd. rose 1.87 percent to end at 9.24 yuan.

"The risk-control tool will help improve stock market liquidity and boost investor confidence," said Qiu Yanying, chief analyst at V. Stone, a private fund.

The Shumi Fund Research Center wrote in a note that the option would have little impact in the near term, but in the medium and long term, the option trading would develop more products and make "potential and gradual influences" on the valuations of blue chips.

Chinese regulators have been trying to help individual investors better manage their risks by building a comprehensive derivative system. China introduced stock index futures in 2010 for investors to bet on future price movements.

The Shanghai Stock Exchange will expand the scope of assets that the options can be bet on as it develops comprehensive arrangements of security deposits, according to a report from the exchange.