What commodities can I trade in?
The FMC (Forward Markets Commission) approves commodities that can betraded. Commodities available for trading include bullion — gold and silver;metals — steel, copper, aluminium, lead and nickel; crude; and several agricommodities. However, not all commodities are traded on all these exchanges;while crude, gold and silver are highly traded on the MCX, agri commodities aretraded more on the NMCE and the NCDEX.
What are the features of a contract in commodity futures?
Commodity future contracts are tradeable standardised contracts, the terms andconditions of which are set in advance by the exchanges regulating the trade.The commodities are required to meet certain pre-set quality specifications; inthe case of gold, for example, on the NCDEX a minimum fineness of 0.995 and aserial number of an approved refiner.Each contract has a lot size and a delivery size, which are not the same; in thecase of gold, the lot size on the NCDEX is 100 gm while the delivery size is 1000gm. If a person wants to enter into a delivery settlement for gold, he will have toenter into a minimum of 10 contracts or multiples thereof. Market participantsare required to negotiate only the quantity and price of the contract, as all otherparameters are predetermined by the exchange.
How to settle a transaction?
A settlement takes place either through squaring off your position or by cashsettlement or physical delivery. Squaring off is taking a contrary position to theinitial stance, which means in the case of an original buy contract an investorwould have to take a sell contract.An investor who intends to give or take delivery would have to inform his brokerof the same prior to the start of delivery period.Delivery is at the option of the seller; a buyer can take delivery only in case of awilling seller. All unmatched/rejected/excess positions are cash settled; all openpositions for which no delivery information is submitted are also cash settled.Under cash settlement, the difference between the contract price and settlementprice is to be paid or received.
How do they differ from equity futures?