Commodities are backbone of an economy and participants like individuals and industrial units trade in commodity market. Different commodities could be traded at an exchange (for e.g. at MCX). Derivative contracts in commodities provide opportunity to take position on price movement and hedge a position in the spot market.
Broadly there are four different categories of commodities;
At MCX, there are different variants available for each commodity; for e.g. Gold Futures are available in 1 Kg as well as in 1 gm. Similarly, SILVER FUTURES are available in 30 Kgs and in 1 Kg.
Futures are available on individual commodities and indices
Market is open from 9:00 AM to 11:30/11:55 PM
Daily MTM is done on T+1 and Final Settlement is done on T+2 basis
Different lot sizes; for e.g. Gold Mini (100 gms), Gold Petal (1 gm) provides opportunity to a broad range of participants
Commodity prices are derived on the basis of global factors. Thus, a very high level of transparency is seen in commodity derivatives market.
Margin requirement is low; usually in a range of 10-25% for different commodities.
Commodities in Bullion are available in variants (lot size) like; GOLD, GOLD MINI, GOLD GUINEA, and GOLD PETAL SILVER, SILVER MINI, and SILVER MICRO
Tick size differs for different variants and commodities
Contracts are available through the year
Contracts are compulsorily settled by delivery except in energy category.
I Sec currently doesn’t offer delivery settlement and an open position is squared off prior to start of delivery margining period.
In all cash settled contracts (i.e. Crude Oil and Natural Gas); a pre expiry margin would be levied during five days’ period to the expiry date (w.e.f April 1, 2021)
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