The Saudi stock exchange Tadawul will begin trading single stock options (SSO) on Monday where investors can trade SSOs on four listed stocks as their underlying assets.
The first tranche of SSOs have the stocks of Aramco, Al Rajhi Bank, Saudi Telecommunication Company (STC), and SABIC as underlying assets, the exchange said on its website.
SSOs contracts will be cleared by the Securities Clearing Center Company (Muqassa).
The contracts are the third derivatives product to be introduced in the Saudi Exchange and will enable investors to hedge and manage portfolio risks more effectively. The Saudi Exchange plans to expand its suite of SSOs contracts to include additional companies.
The Saudi Exchange will launch physically settled American options, which are a type of financial contracts that require the actual delivery of the underlying asset that can be exercised at any time prior to expiration.
The moves come as Saudi Arabia reforms the exchange to attract foreign investors and issuers as part of the kingdom's broader plans to diversify the oil-dependent economy.
(Writing by Brinda Darasha; editing by Seban Scaria)