The world’s most heavily traded derivatives are not available in the United States or Europe. It’s the Korea Composite Stock Price Index 200 index options.

Trading the financial markets has become a common obsession in Korea (South, not North). Ordinary people in Korea trading the KOSPI 200 options have made the Korea Exchange (KRX) the third most heavily traded derivatives exchange in the world.

It’s behind only the CME Group (includes both the Chicago Mercantile Exchange and Chicago Board of Trade) and Eurex.

However, it’s not just the Korean appetite for risk that makes the that one index option so popular. They outsell the KOSPI 200 futures by forty-six to one. And from 2003 to 2008 the index option monthly trading volume increased from 5.6 million contracts to 183 million. Their trading symbol is K200.

These index options are relatively small, making them accessible to many people. A contract size is KRW 500,000 (currently $432) times the index price. For perspective, that’s about one-fifteenth as large as an options or futures contract on Japan’s Nikkei 225.

The actual underlying index is two hundred of the largest companies on the entire KOSPI index, which is the companies listed on the Korean stock exchange, comparable to the U.S. S&P 500.

The tick size is 0.05 point valued at KRW 25,000. Trading hours are 9:00AM to 3:15PM Monday through Friday Korean time, which is fourteen hours ahead of New York City Eastern Standard Time.

The last trading day for these contracts is the second Thursday of the contract month. On that day, trading hours close at 2:50PM. The next day is the final settlement day.

Contract months are March, June, September and December. You are limited to taking a position of more than 7,500 contracts. The initial margin is KRW 16,830.750 (currently $14.568). Commissions vary, but are low because there’s a lot of competition between brokers.

Of course, Koreans form the major market for these index options. Their television shows many educations programs on technical analysis and other stock and options trading strategies.

But foreigners are joining the index options game in Korea. In 1999 they financed just 2% of options and futures transactions. Now, according to the Korea Exchange, it’s as high as 25%.

Trading index options may not be the most common reason to hop on a plane to visit Seoul Korea, but maybe it’s more common than we think (be warned, however — plane flights to the Far East average twelve hours or more in length.).

Want to join in? During October 2008, KRX and the Chicago Mercantile Exchange signed a contract listing KOSPI 200 futures contracts on the CME’s Globex platform. The CME will match trades, but the KRX continues to clear and settle the trades.

However, don’t be too hasty. You still have to open up an account with a Korean broker. And all transactions must be cleared and traded in Korean won. You could make a profit on the options trade, but lose it because the U.S. dollar declines during that period.