Q. What Is Derivative?
A. It is a product whose value is derived from the value of one or more underlying assets or variables in a contractual manner.Assets can be equity, forex, commodity or any other asset.
Q. What is Commodity & Commodity Market?
A. Commodity are various products that are unbranded and traded commonly on the commodity market. Commodity market is place
where trading facilities in various commodity is provided. There basically two types of commodity market one is spot market
and another is derivative market. In a spot market, commodities are bought and sold for immediate delivery, whereas in a derivatives market, various financial instruments based on commodities are traded.
Q. Which is the Regulatory body of commodity market?
A. The regulatory body for commodity future/forward market is FMC (Forward Market Commission). FMC was setup under the Forward
Contracts (Regulation) Act of 1952. It is responsible for regulating and promoting futures/forward trade in commodities. The
FMC is headquartered in Mumbai while its regional office is located in Kolkata.
Q. Which Commodities are available for derivative market?
Many more commodities are likely to be added in due course of time.
- Agricultural Commodity
- Precious Metals
- Base Metals
Q. How many derivative contracts are there ?
A. Some of the popular contracts are:
In India, Futures are more popular on exchanges like NCDEX and MCX.
Q. Who can buy and sell Commodity ?
A. Commodity futures can be made use of by any investor, producer, trader etc.
Q. What is the date of Expiry ?
A. At NCDEX, generally the contracts will expire on the 20th day of each month. If the 20th, happens to be a holiday, the expiry
day will be the previous working day. At MCX, the expiry day will generally be the 15th, of every month. If the 15th happens
to be a holiday the expiry day will be the previous working day. Expiry Dates also vary depending upon commodity to
Q. Is there any margin requirement in commodity market?
A. Each futures exchange sets minimum margin requirements for all its products, and adjustments are periodically made to account
for factors like rising or declining volatility. Futures traders are required to maintain the prescribed margin levels in
their accounts to cover losses they might incur. The availability of such funds is what makes daily cash settlements possible
under all market conditions.