Bond Options are Derivative Contracts that give investors the right, but not the obligation, to buy or sell a Bond Future Contract on a future date at a fixed price. Call Options give investors the right to buy the underlying Bond Future. Put Options give them the right to sell it. Bond Options are cash settled and easy to access through a JSE Debt Board member , However, if Bond Options are held until expiry, the Bond will be delivered physically, in terms of the underlying Future.
Bond Options are traded by professional and private investors seeking cost-effective exposure to Bonds. Hedgers can use Bond Options to protect an existing Bond portfolio against adverse interest rate movements. Arbitrageurs use them to profit from the price differentials of similar products in different markets. Speculators use Bond Options in the hope of making profit on short-term movements in prices. Some investors use Bond Options to enhance the overall performance of a portfolio.
To trade Bond Options, investors need to become a member of the Interest Rate and Currencies market or register as a client with an
authorised JSE Debt Board member, deposit the required initial margin and sell or buy according to your needs.