Commodity Market: the basic point is that it deals in economic sector rather than manufactured products. Mainly there are two type of commodities soft commodities and hard commodities.
In Soft Commodities agriculture product comes like wheat, cocoa, sugar, coffee in hard commodities include mined like gold and oil.
The Government of India permitted initiation of National-level Multi-Commodity exchanges in the year of 2002 -2003 and according to this following exchanges have come into picture. They are
â€¢ Multi-Commodity Exchange of India Ltd, Mumbai (MCX).
â€¢ National Commodity and Derivatives Exchange of India, Mumbai(NCDEX).
â€¢ Indian Commodity Exchange (ICEX)
â€¢ National Multi Commodity Exchange, Ahmadabad(NMCE).
This commodity exchange is regional commodity exchanges and also functioning all over the country.
The most important query is why trading in commodity the most important two things are there first is Hedging and another is Speculation.
Hedging: Against the exposure towards physical trades -for risk management.
Speculation: Having no exposure in physical form.
Now the point comes in every new trader mind How to trade in commodities: Investors trade in commodities in the form of indexed futures contracts.
Futures contracts: It is a systematize contract which amounts to an agreement to sell or buy a specified capital of standardized quality and quantity at a specified future date (which is known as the contractâ€™s â€śexpiry dateâ€ť) at a cost agreed today (the futures price).
One of the most important factors in this market is commodity indices?
Commodity Index is a exact or average of selected commodity prices. This may be based on future price or spot price. Basically spot price of a particular commodity is current prevailing market cost of that commodity being quoted for immediate settlement. The purpose of design commodity index is to representative of the board commodity capital class, subset of commodities like metal or energy and to track a individual single commodity like gold.
Investor who would like to maintain its maintain position in a non-physical form could suffer some practical issues in this case investor can do rolling from one future to another means if investor wants to maintain a future position first past the expiry date of that future contract which investor is holding, they can also sell to its expiry date and purchase a future contract.
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Article Source: https://www.bharatbhasha.com
Article Url: https://www.bharatbhasha.com/finance-and-business.php/491407
Article Added on Tuesday, August 2, 2016
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