SHANGHAI (Reuters) -China opened its stock option market to foreign investors on Tuesday, as Beijing steps up efforts to increase the appeal of yuan assets.

The announcement by the Shanghai Stock Exchange comes on the heels of measures to lure global investors into China's bond market, and promote international use of the Chinese yuan.

The Shanghai bourse said qualified foreign institutional investors will be allowed to trade options for hedging purposes, and can submit applications immediately.

An equity option offers the right - but not the obligation - to buy or sell a stock at a predetermined price at some point in the future.

The deregulation could offer foreign investors a much-needed tool to hedge risks in China's 100 trillion yuan ($14.05 trillion) stock market. Chinese shares are on a tear, fuelled by policy support and growing confidence in Chinese innovation. 

Currently, five option products are traded on the Shanghai exchange, based on exchange traded funds.

China's financial regulators are ramping up efforts to attract foreign investors, as U.S. President Donald Trump's trade war and capricious policies dent the appeal of dollar assets.

Last week, China expanded foreign access to its bond repurchase market, and increased the daily net trading limit on the cross-border scheme Swap Connect.

Authorities also unveiled plans to boost offshore yuan business in Hong Kong, and opened an operation center in Shanghai to promote global adoption of central bank digital yuan. 

($1 = 7.1190 Chinese yuan renminbi)

(Reporting by Shanghai NewsroomEditing by Ros Russell)