Basics ofCommoditiesIIFL Training Team
Commodities as an asset class is integral to completion of the      Investment Puzzle       IIFL Training Team
Product                Participants           Risk• Commodity             • Speculators      • Limit  future              ...
What is a Commodity? Commodity includes all kinds of goods “Every kind of movable property other than actionable  claims...
DerivativesDerivatives are financial contracts, which derive their value from an underlying asset. The underlying "asset c...
Commodity Market Types                                      SpotBuyer   Seller                                      Forwar...
Futures ContractLegally binding agreement to buy or sell an underlying assetsometime in futureQuantity – Lot size fixedDel...
Futures Position BUY Futures : Right as well as obligation to buy  underlying commodity at the future date SELL Futures ...
International ExchangesChicago Board of Trade (CBOT)                    New York Mercantile Exchange (NYMEX) London Metal ...
Domestic Exchange Cotton 1893 (Bombay Cotton Exchange) Oilseeds 1900 (Gujarati Vyapari Mandali) Wheat 1913 (Chamber of ...
Structure of Indian Commodity Market                   Ministry of                Consumer Affairs &                Public...
Leading Commodity Exchanges          IIFL Training Team
Commodities Traded on Exchanges                             Commodities MarketPrecious Metals      Base Metals            ...
Lot Size and Margin - MCX                                                                         CONTRACT MARGINMCX SYMBO...
Lot Size and Margin - MCX                                                                            CONTRACT MARGINNCDEX ...
Market Timings of Indian ExchangesMonday to Friday Bullion/ Metals Trading:  During May – October :10.00 am to 11.30 pm  ...
Order ManagementTime Conditions                              Price Conditions •   Day                                     ...
Clients can trade on both on Exchanges    Online                           Offline     DEMO                IIFL Training T...
Brokerage  Brokerage Structure                          ChargesRegistration fees           Rs.500                         ...
Intention Matching In case of Intention matching, request from both the  buyers and sellers are sought The Intentions sh...
Sellers Option In case of sellers option the seller can opt to deliver at the  warehouse location of choice Seller has t...
Compulsory Delivery In case of compulsory delivery all the open position on  the expiry needs to be settled through physi...
1 kg gold                                 1 kg SilverDemat of a Commodity            IIFL Training Team
Process of Demat of a Commodity                                      CreditsMCX/NCDEX     NSDL/CDSL                       ...
Websites for More information                 Relevant websites for commodity For Energy:                                ...
Thank You IIFL Training Team
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Commodity Basics

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Commodity Basics

  1. 1. Basics ofCommoditiesIIFL Training Team
  2. 2. Commodities as an asset class is integral to completion of the Investment Puzzle IIFL Training Team
  3. 3. Product Participants Risk• Commodity • Speculators • Limit future • Hedgers • Cover• Factors effecting • Arbitragers • Our responsibility commodity prices• Charges• Delivery process The Commodities market IIFL Training Team
  4. 4. What is a Commodity? Commodity includes all kinds of goods “Every kind of movable property other than actionable claims, money and securities" Agro Non agro IIFL Training Team
  5. 5. DerivativesDerivatives are financial contracts, which derive their value from an underlying asset. The underlying "asset can be equity, commodity, foreign exchange, interest rates, real estate or any other asset. IIFL Training Team
  6. 6. Commodity Market Types SpotBuyer Seller Forward IIFL Training Team
  7. 7. Futures ContractLegally binding agreement to buy or sell an underlying assetsometime in futureQuantity – Lot size fixedDelivery time - Expiry date is fixed IIFL Training Team
  8. 8. Futures Position BUY Futures : Right as well as obligation to buy underlying commodity at the future date SELL Futures : Right as well as obligation to sell underlying commodity at the future dateRight – To claim profit, if anyObligation – To pay loss, if any IIFL Training Team
  9. 9. International ExchangesChicago Board of Trade (CBOT) New York Mercantile Exchange (NYMEX) London Metal Exchange (LME) Tokyo Commodity Exchange (TOCOM) IIFL Training Team
  10. 10. Domestic Exchange Cotton 1893 (Bombay Cotton Exchange) Oilseeds 1900 (Gujarati Vyapari Mandali) Wheat 1913 (Chamber of Commerce – Hapur) Bullion 1920 in Mumbai Jute 1927 (Calcutta Hessian Exchange ltd) After 1940s, futures trading faced rough weather as governments wanted to curb inflation. Resurgence after 2003 IIFL Training Team
  11. 11. Structure of Indian Commodity Market Ministry of Consumer Affairs & Public Distribution Forward Markets Commission (FMC) Other regional NCDEX MCX NMCE exchanges IIFL Training Team
  12. 12. Leading Commodity Exchanges IIFL Training Team
  13. 13. Commodities Traded on Exchanges Commodities MarketPrecious Metals Base Metals Energy Agriculture- Gold - Copper - Crude Oil - oil seeds- Silver - Zinc - Natural Gas - Spices- Platinum - Nickel - ATF - Cereals - lead - Others - Aluminum - Tin IIFL Training Team
  14. 14. Lot Size and Margin - MCX CONTRACT MARGINMCX SYMBOL %MARGIN Price Quotation Lot LOT SIZE PRICE SIZE RS.ALUMINIUM 5.00 1 KG 5 MT 5000 109.65 548,250 27,413CARDAMOM 10.25 1 KG 500 KG 500 1581.1 790,550 81,031COPPER 5.00 1 KG 1 MT 1000 429.6 429,600 21,480CRUDE OIL 5.00 1 BARREL 100 BARREL 100 4144 414,400 20,720GOLD 4.00 10 GM 1 KG 100 20511 2,051,100 82,044GOLDGUINEA 4.00 8 GM 8 GM 1 16289 16,289 652GOLDM 4.00 10 GM 100 GM 10 20514 205,140 8,206LEAD 5.00 1 KG 5 MT 5000 110.55 552,750 27,638LEAD MINI 5.00 1 KG 1 MT 1000 110.55 110,550 5,528MENTHAOIL 8.00 1 KG 360 KG 560 1134.4 635,264 50,821NATURALGAS 6.25 1 MMBTU 1250 MMBTU 1250 186.2 232,750 14,547NICKEL 6.00 1 KG 250 KG 250 1076.5 269,125 16,148POTATO 5.00 100 KG 30 MT 300 668.9 200,670 10,034SILVER 5.00 1 KG 30 KG 30 44370 1,331,100 66,555SILVERM 5.00 1 KG 5 KG 5 44361 221,805 11,090ZINC 5.50 1 KG 5 MT 5000 103.75 518,750 28,531ZINCM 5.50 1 KG 1 MT 1000 103.7 103,700 5,704 IIFL Training Team
  15. 15. Lot Size and Margin - MCX CONTRACT MARGINNCDEX SYMBOL %MARGIN Price Quotation Lot LOT SIZE PRICE SIZE RS.CHARJDDEL 5.00 100 KG 10 MT 100 2542 254,200 12,710CHLL334GTR 10.00 100 KG 5 MT 50 8034 401,700 40,170GARGUMJDR 9.00 100 KG 5 MT 50 6430 321,500 28,935GARSEDJDR 8.00 100 KG 10 MT 100 2463 246,300 19,704GURCHMUZR 5.50 40 KG 10 MT 250 993 248,250 13,654JEERAUNJHA 9.00 100 KG 3 MT 30 14583 437,490 39,374POTATO 5.50 100 KG 15 MT 150 624.8 93,720 5,155PPRMLGKOC 7.00 100 KG 1 MT 10 22836 228,360 15,985RMSEEDJPR 5.00 20 KG 10 MT 500 578.3 289,150 14,458SUGARM200 5.50 10 KG 10 MT 1000 3044 3,044,000 167,420SYBEANIDR 5.50 100 KG 10 MT 100 2370.5 237,050 13,038SYOREFIDR 5.25 10 KG 10 MT 1000 623.45 623,450 32,731TMCFGRNZM 16.50 100 KG 5 MT 50 10880 544,000 89,760 IIFL Training Team
  16. 16. Market Timings of Indian ExchangesMonday to Friday Bullion/ Metals Trading: During May – October :10.00 am to 11.30 pm During November – April :10.00 am to 11.55 pm Agro Commodities: 10.00 am to 5.00 pmSaturday All Commodities: 10:00 am to 2:00 pm IIFL Training Team
  17. 17. Order ManagementTime Conditions Price Conditions • Day • Market Order • Good Till Cancel (GTC) • Limit Order • Good Till Date (GTD) • Stop Loss Order • Immediate or Cancel (IOC) IIFL Training Team
  18. 18. Clients can trade on both on Exchanges Online Offline DEMO IIFL Training Team
  19. 19. Brokerage Brokerage Structure ChargesRegistration fees Rs.500 (adjustable against brokerage generated by end of the next month)Minimum Initial Margin Rs.10,000Trading Brokerage 0.05%Delivery Brokerage 0.25%Exchange/Transaction Rs.4.00 per Lac for NCDEXCharges Rs 2.50 per Lac for MCXStamp Duty NilService Tax 10.30% on brokerage and Exchange/Transaction charges IIFL Training Team
  20. 20. Intention Matching In case of Intention matching, request from both the buyers and sellers are sought The Intentions should match for • Quantity – only the minimum quantity of the request will be matched • Warehouse Location If the intentions do not match both the request are cash settled with the final settlement price IIFL Training Team
  21. 21. Sellers Option In case of sellers option the seller can opt to deliver at the warehouse location of choice Seller has the following options • Warehouse Location • Quantity The buyer can give the intention for preferential warehouse The buyer is not guaranteed of delivery at the warehouse given as preference if there are no sellers available It is obligatory for the buyer to take delivery, failing which buyer will be charged penalty as specified by the exchange IIFL Training Team
  22. 22. Compulsory Delivery In case of compulsory delivery all the open position on the expiry needs to be settled through physical delivery • Sellers need to deliver • Buyers need to accept the delivery IIFL Training Team
  23. 23. 1 kg gold 1 kg SilverDemat of a Commodity IIFL Training Team
  24. 24. Process of Demat of a Commodity CreditsMCX/NCDEX NSDL/CDSL DP Commodity R & T AgentsWarehouse Deposits Commodity Depositor QCA IIFL Training Team
  25. 25. Websites for More information Relevant websites for commodity For Energy: – www.basemetals.com – www.wtrg.com – www.metalsplace.com – www.oilspace.com – www.international.standardbank.co – www.naturalgas.org m – www.futuresource.com – www.kitcometals.com – www.gcitrading.com  Other sites – www.futiresource.com – www.Livecharts.co.uk – www.forexfactory.com – www.easy-forex.com For Bullion: – www.commodityoline.com – www.gfms.co.uk – www.bloomberg.com – www.gold.org – www.reuters.in – www.thebulliondesk.com – www.fxstreet.com – www.kitco.com – www.kitco.com – www.goldseek.com – www.kitcometals.com – www.thebulliondesk.com – www.123jump.com` For Base metals: IIFL Training Team
  26. 26. Thank You IIFL Training Team

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