The Saudi Exchange (Tadawaul) will launch its third derivatives product - single stock options (SSOs) contracts - on November 27, following the launch of the derivatives market in 2020.

The SSOs will be cleared by the Securities Clearing Center Company(Muqassa), Tadawul said in a statement.

The move reinforces the bourse’s commitment to provide investors with new and diversified investment opportunities and tools to manage portfolio risk effectively and drive market liquidity.

SSOs are contracts that give the owner the right but not the obligation to buy or sell an underlying asset at an agreed upon price and date.

The value of SSOs is derived from the value of their underlying stock and can be traded on Tadawul by opening an account with a registered derivatives exchange member.

According to Tadawul, companies and individuals can hedge their portfolios using SSOs to minimise losses in adverse market conditions.

The SSOs enable investors to gain exposure at a lower capital outlay and boost profitability by utilising financial leverage. In addition, they complement liquidity flow towards the equity market.

Tadawul launched single stock futures on July 4, which allowed local and international investors to hedge and manage portfolio risks more effectively.

(Editing by Seban Scaria seban.scaria@lseg.com)