Showing posts with label Learning Resource. Show all posts
Showing posts with label Learning Resource. Show all posts

Understanding Commodities - Part 4

Posted by Stockplusindia PRIS | 10:34 PM | | 0 comments »

Can I do an SIP in Commodities?
If you're trading in NSEL it is possible to do an SIP. If you?re trading in MCX you cannot invest through an SIP mode

How much margin is applicable in the commodities market? How is it arrived at?
As in stocks, margin in commodities is also calculated by VaR system. Normally it is between 5-10% of the contract value. The margin is different for each commodity. Just like in equities, in commodities also there is a system of initial margin and mark-to-market (MTM) margin. The margin keeps changing depending on the change in price and volatility
How does day to day and final settlement take place?
Daily MTM will be cash-settled by exchange on T+1 basis i.e., next working day after the trading day. However in case of delivery, the settlement date may be five to seven days after the expiry as per contract specifications and exchange rules. The settlement procedure is also available on the related exchange site.
Are options also allowed in commodity derivatives?
No. Options in goods are presently prohibited under Section 19 of the Forward Contracts (Regulation) Act, 1952. However the market expects the government to permit options trading in commodities soon.
I am already investing in stock markets, why should I invest in commodity futures?
Commodity markets work independently of the equity market and debt market. You must have heard of investment advisors asking you to diversify your portfolio. What they essentially mean is to put your eggs in various baskets so that you are saved from any catastrophe. The commodity market is one such a basket, which allows you to diversify your risks. For e.g., when the stock market returns go down it is not necessary that the Gold prices will also fall. So if you are equity or a debt market investor you have all the more reasons to invest in commodities.
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