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Note : Alpha Commodities Pvt. Ltd., is Group Company ( Associate) of LKP Securities Ltd., by virtue of Promoters interest and Common Board of Directors.

Commodity Futures Trading India, Commodity Futures & Options

Commodity futures trading India has emerged as a distinct trading class in the last 14 years since the MCX first started trading in commodity futures. Over the last few years, NCDEX has built an expertise in agricultural commodities while the MCX has built expertise and volumes in the non-agri segment. Commodity futures trading is slightly different compared to the traditional equity F&O. While all equity transactions are necessarily settled only in cash, commodity futures can be settled either in cash or through delivery of the specific commodity. Also, the margins on commodity futures are lower than the margins on stock and index futures considering that the scope for extreme price volatility is lower in case of commodities.

Commodity futures trading in India…

For a long time the commodity exchanges were only permitted to offer trading in commodity futures. It is only recently that SEBI has permitted options trading on commodities too. Options on commodities are slightly different than equity options. While equity options are an option on the underlying asset, the commodity option will be an option on the underlying commodity futures. That makes it slightly more complicated. There is a reason for this dichotomy. In case of the equity markets, SEBI regulates the spot and the futures market. But, in case of commodities, SEBI only regulates the futures and options market while the spot markets are regulated by the respective states. That is why this commodity / future relationship is less seamless compared to equities.
Commodity futures trading can be used to take a directional view on commodity prices or even as a hedge against future prove movement. An individual trader who expects gold prices to go up can buy gold futures in the commodity exchange and reverse the transaction when the price moves up. The same can be done on the short side also. On the other hand, if an oil refiner wants to hedge against the rising crude oil prices, then that is also possible through crude oil futures. Of course, the hedger can decide whether they want to trade the movement or take actual delivery of crude oil on the settlement date.

Get Quotes on Commodities at LKP Securities…

An easy way to drill down into details of commodity futures and options is to use the LKP “Get Quotes” page. Here one can select the commodity by the specific exchange (MCX or NCDEX) and further drill down to the specific monthly contract. The page provides a quick screener with all relevant details about the particular commodity contract. These include the last traded price, the price change, the shift in open interest, the overall volumes on a particular day and the high/low to give you an idea of the range risk in the commodity. The page also captures a graphical price chart of the specific contract over the last 1 month to help you decipher the short term trading trend of the commodity. In a nutshell, a wealth of information considering that it is juxtaposed with a host of very specific analytics pertaining to the commodity.


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