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Commodities
Key Takeaways
What are Derivatives & Futures contracts Benefits & Risk in trading with Futures contracts What is a Commodity Traded & Actively traded Commodities Commodity exchanges in India Contract specification & margin Things to remember Requirements to trade in Commodities
Derivatives
A security whose price is dependent upon or derived from an underlying asset. Its value is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes. Most derivatives are characterized by high leverage.
Derivatives
Futures Contract
Futures:
A financial contract obligating the buyer to purchase an asset (or the seller to sell an asset), such as a physical commodity or a financial instrument, at a predetermined future date and price. Futures contracts detail the quality and quantity of the underlying asset. They are standardized to facilitate trading on a futures exchange. Some futures contracts (Mostly in Commodities) do get settled with physical delivery of the asset, while others are settled in cash. The futures markets are characterized by the ability to use very high leverage relative to stock markets.
Terms to remember:
Long Position :- When you have bought a futures contract, you are holding a long position. Short Position :- When you have sold a futures contract, you are holding a Short position. Spot Price:- The Current Market price at which the underlying asset is trading in the live market or rather Exchange. Lot Size:- Fixed standard size (quantity) of contract based on underlying asset value. M to M:- The profit or loss from the level of position created with comparison to the current market price is known as Mark to Market. Mark to Market profit or Loss is always adjusted against the margin & the current cash balance.
Equity Futures
To Buy worth 100000 (1000 units of Rs. 100 each) Margin required 20% Required Funds 20000 Profit on movement of Rs. 10 Rs. 10000 10 x 1001 Returns on Investment
Commodity Futures
To Buy worth 100000 (1000 units of Rs. 100 each) Margin required 5% Required Funds 5000 Profit on movement of Rs. 10 Rs. 10000 10 x 1001 Returns on Investment
50%
RISK OF RUMOURS
What is a Commodity?
In economics, a commodity is the generic term for any marketable item produced to satisfy wants or needs. Economic commodities comprise goods and services. The more specific meaning of the term COMMODITY is applied to goods only.
Mumbai
Ahmedabad
Timing
All Commodities: 10 AM to 5 PM. International Commodities: Summer (Mar to October): 5 PM to 11.30 PM. Winter (Nov to Feb): 5 PM to 11.55 PM. Same as MCX
Settlement
Cash Settled
Same as MCX
Index Components
NCDEX - Dhaanya
NCDEX Dhaanya Weights Commodity Weight (%) 1 2 3 4 5 6 7 8 9 10 Chana Cotton Seed Oilcake Guar Seed Gur Soy bean Jeera Mustard Seed Pepper Wheat Turmeric 11.35% 2.03% 17.11% 3.37% 15.22% 4.06% 11.56% 5.20% 27.35% 2.75% MCX COMDEX 1 2 3 4 MCX METAL INDEX 5 6 7 8 MCX ENERGY INDEX 9 10 11 12 13 14 15
MCX - COMDEX
MCX COMDEX Weights Commodity Weight (New) Group Adjusted Wts. Gold Silver Copper Zinc Aluminium Nickel Lead Crude Oil Natural Gas Ref. Soy Oil Potato Chana Crude Palm Oil Kapaskhalli Mentha Oil 15.21% 9.66% 7.13% 2.00% 2.00% 2.00% 2.00% 35.41% 4.59% 3.91% 4.76% 4.14% 3.19% 2.00% 2.00%
40.00%
40.00%
20.00%
Technical
o Trends & Patterns o Chart formations o Cycles & o Seasonal Odds
Sentiments
o Human Emotions
o Weather o Domestic production & use o Reserves Inventories o Imports & Exports o Interest rates o Dock & Trucker strikes o C.P.I & P.P.I data o Value of the Currency o Actions of other countries o Inflation & o Government programs
Opportunities
in Commodity markets
Speculation - Investors and traders wanting to benefit or profit from price variations
are essentially speculators. They serve as counterparties to hedgers and accept the risk offered by the hedgers in a bid to gain from favourable price changes.
Initial Investment
Contract Name
Price
Value
Margin %
Potential Profit
Potential R.O.I
(Per Day)
3000 24000
1 Gram
1 Gram
4% 4% 4% 4%
1 1 10 100
MCX
NCDEX
Initial Investment
Contract Name
Price
Value
Margin %
Potential Profit
Potential R.O.I
(Per Day)
1 Kg 1 Kg 1 Kg
1 Kg 5 Kg 30 Kg
5% 5% 5%
1 5 30
MCX
NCDEX
Initial Investment
Contract Name
Price
Value
Margin %
Potential Profit
Potential R.O.I
(Per Day)
25000
Crude Oil
5000
1 BBL
100 BBL
500000
5%
100
50
5000
20%
MCX
NCDEX
Initial Investment
Contract Name
Price
Value
Margin %
Potential Profit
Potential R.O.I
(Per Day)
5250 21000
420 420
1 Kg 1 Kg
250 Kgs 1 MT
105000 420000
5% 5%
250 1000
4 4
1000 4000
19% 19%
MCX
NCDEX
Initial Investment
Contract Name
Price
Value
Margin %
Potential Profit
Potential R.O.I
(Per Day)
18375
Natural Gas
140
1 mmbtu
1250 mmbtu
150000
11%
1250
3750
20%
MCX
NCDEX
Modes of Trading
Self (Online Trading) Web-site TradeTiger Dealing Room Dial n Trade 1800 270 7050 (Toll Free) 1800 22 7050 (Toll Free) 1800 22 7004 (Toll Free) 3030 7600 (Local Charged)
How to Trade?
Thank You
&
Happy Trading