To be a successful investor, it is essential to have a diversified portfolio which can help you manage inherent risks in stock market investments better. However, for those who are not satisfied with dealing in equities only, commodities market offers a viable alternative for trading which presents some excellent prospects for making profits. Still, before investing in commodities, it would be essential to understand what commodity market is all about and how can you deal in it. To begin with, commodity market functions through regulated commodity exchanges in India which offer an electronic trading platform for buying and selling different types of commodities.
Major commodity exchanges in India include Multi-Commodity Exchange (MCX) and National Commodity and Derivative Exchange (NCDEX) which offer electronic trading and settlement systems along with a nationwide presence. There are several categories of commodities which can be traded through these exchanges including precious metals, base metals, energy resources and a wide variety of agricultural commodities. Both of these exchanges offer cash and delivery mechanisms and you have to indicate at the time of placing the order if you wish to settle in cash or to deliver the item. It is possible to change the option for settlement in cash or delivery as many times as you wish before the expiry of the contract.
Major commodity exchanges in India include Multi-Commodity Exchange (MCX) and National Commodity and Derivative Exchange (NCDEX) which offer electronic trading and settlement systems along with a nationwide presence. There are several categories of commodities which can be traded through these exchanges including precious metals, base metals, energy resources and a wide variety of agricultural commodities. Both of these exchanges offer cash and delivery mechanisms and you have to indicate at the time of placing the order if you wish to settle in cash or to deliver the item. It is possible to change the option for settlement in cash or delivery as many times as you wish before the expiry of the contract.
One can deal in either physical or futures market in commodities. In the physical market, you can enter either a spot or cash contract which involves ready delivery and payment within a period of 11 days. These cash and spot contracts are essentially ready delivery contracts which include physical delivery of goods. Another type of contract is forward contract, in which delivery of goods or payment of price is made after a period of 11 days. Forward contracts can be of two types, specific delivery contracts or futures contracts. Specific delivery contracts differ from futures contracts in that they pre-specify the date of delivery and the amount and nature of goods.
Futures contracts are primarily exchange-traded contracts for selling or buying physical commodities at a pre-specified price on a future date. It is not necessary to have a commodity in physical form for trading in futures market which is mostly used for risk management through hedging. Those interested in speculation in commodities market can also deal in commodity futures which offer some exciting opportunities for making gains by buying and selling with a keen understanding of price movements for a commodity.
If you have any queries about trading in commodities, you can ask us. Ashlar Online offers expert advice on trading in commodities and can help you grow as a trader in the commodity market. You can open a free demat account with us and get started with trading in commodities of your choice. We will be glad to assist you with your trading activities.
Futures contracts are primarily exchange-traded contracts for selling or buying physical commodities at a pre-specified price on a future date. It is not necessary to have a commodity in physical form for trading in futures market which is mostly used for risk management through hedging. Those interested in speculation in commodities market can also deal in commodity futures which offer some exciting opportunities for making gains by buying and selling with a keen understanding of price movements for a commodity.
If you have any queries about trading in commodities, you can ask us. Ashlar Online offers expert advice on trading in commodities and can help you grow as a trader in the commodity market. You can open a free demat account with us and get started with trading in commodities of your choice. We will be glad to assist you with your trading activities.