Question

The Multi Commodity Exchange has introduced gold option

contracts for the first time in India. The derivative instrument allows investors to enter into contracts to either buy or sell gold sometime in the future at a pre-determined price, thus allowing investors to hedge any volatility in the price of the metal, for a price. ________________. As the Finance Minister stated during the launch of the derivative at the MCX, gold options will also help bring into formal channels more of the gold that is traded. Notably, the introduction of gold options is in line with the government’s announcement last year that it would take steps towards introducing new varieties of commodity derivatives in the market. In each of the following questions a short passage is given with one of the lines in the passage missing and represented by a blank. Select the best out of the five choices given to make the passage complete and coherent (Coherent means logically complete and sound)

A The government should now resist similar temptation and focus instead on real-time monitoring systems.

B The fact that options usually also turn out to be cheaper than binding future agreements will help in the wider participation of investors in the realm of commodity speculation.

C To improve market efficiency, the market regulator is also mulling the entry of mutual funds and portfolio management services into the business of investing in commodity derivatives.

D The debut of gold options should be seen as a step towards greater reforms.

E While it may have been relevant for the specific circumstances, the wide-ranging nature of the move slowed the development of a healthy market for commodity speculation.

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The Multi Commodity Exchange has introduced gold option

Solution