Multi Commodity Exchange (MCX) on Tuesday launched the country`s first gold options contract in New Delhi to coincide with the gold-buying festival of Dhanteras.

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"Gold Option contract, with Gold (1 Kg) futures as underlying, expiring on Nov. 28, 2017, and Jan. 29, 2018, are made available for trading from today," the exchange said in a statement.

India is the world`s second-biggest buyer of gold, typically importing around 800 tonnes a year, with the metal being used in everything from investment to religious donations and wedding gifts.

"The introduction of options gives a strong impetus towards systematic development and transformation of commodity derivatives market in India," MCX chairman Saurabh Chandra said in the statement.

Options give buyers the right to buy or sell an underlying asset at a specified price at the expiry and the risk is limited only to the premium paid to the seller of the option, the exchange said.

"While it`s too early to comment on the level of activity, the launch complements the already existing market components, and the combination of futures and options will certainly provide market participants the benefit of the good price discovery of futures while allowing more flexible risk management strategies through options," Mihir Kapadia, CEO and Founder of Sun Global Investments, said.

"In the long run, it may encourage increased trading and risk management activity of gold exposures through the financial markets such as futures and options."

In June, India`s markets regulator allowed hedge funds registered as category III Alternative Investment Funds (AIFs) to invest in commodity derivatives as clients, opening up the market to institutional investors for the first time.

(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)