BM&FBOVESPA authorizes launch of the flexible call and put options on soybean futures contracts

BM&FBOVESPA authorizes launch of the flexible call and put options on soybean futures contracts

New derivative instrument protects producers against soybean price variations

São Paulo, August 18 – BM&FBOVESPA authorized, on August 14, 2009, flexible call and put options on soybean futures contracts for registration in its OTC market.  The objective of the measure is to provide rural producers with another form of protection against soybean price variations, while at the same time facilitating crop financing on the part of financial institutions.

Under the ticker symbols of OCS for call options, and OVS for put options, the underlying asset for the new derivative instrument is the settlement price of the soybean futures contract traded at the Exchange. The expiration date for the flexible options can be agreed upon by the contracting parties, provided that such date is between 14 and 25 business days prior to the delivery month of the soybean futures contract that is agreed upon to fix the options price.

The new flexible call and put options will be cash settled, meaning that the parties do not have to be positioned in the BM&FBOVESPA soybean futures contract when the option is exercised by the buyer. Additionally, the flexible options will provide the counterparties with greater flexibility in defining the features of the transaction, such as contract size, expiration date, premium value, and strike price, all subject to the limits established by the Exchange.

It is also possible for these contracts to be registered in modalities with or without guarantee, and with the inclusion of barrier prices to activate or extinguish the rights and obligations of the option.