The China Financial Futures Exchange (CFFEX) will soon launch the country’s first-ever stock index options, the state media reported earlier this week.

The first batch would be based on China’s blue-chip CSI300 index and SSE50 index as well as the small-cap CSI500, CFFEX Chairman Zhang Shenfeng told a financial forum over the weekend.

“Innovation in China’s derivatives market is still at an early stage,” said Zhang, according to the official Shanghai Securities News. “However, the markets have huge potential and promising prospects.”

Stock index options will be the third product to be launched by the CFFEX. Currently, the exchange, which opened in 2006 to develop China’s financial derivatives markets, trades stock index futures and government bond futures.

Buyers of options contracts have the right, but not the obligation, to buy or sell an underlying asset at an agreed upon price during a certain period of time. They allow investors to hedge their investments.

So far, this year regulators have approved many new exchange-traded derivatives. These include individual stock options listed on the Shanghai Stock Exchange and asset-backed securities issued by financial firms.

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