Commodity options trading lot size and margin

As the price of the commodity goes up or down, so does the margin required accordingly. MCX Commodity Futures list with lot size and margin required to trade 1 lot of the same. NRML with margins mentioned below. MIS positions get squared off. Once a position taken as NRML, it can be held till the expiry provided the requesite NRML margin present in the trading account. Dow Jones Industrial AverageSM Index. So, taking 1 lot of reliance futures would involve 250 shares. The difference is called spread.

The value of one lot would be the price of the share x lot size. One the next day after the maturity, a new 3 month contract will be introduced. October futures may be trading at Rs 750 per share and reliance December futures may be trading at say, Rs 765. That payment is called margin money. The exchange specifies a particular lot size for each type of derivatives. The underlying asset that gives value to a futures contract could be shares, share market indices, commodities, currency, interest rates, weather etc. So, settlement takes place by taking an opposite position to the one you have. If the price of reliance has dropped below Rs 750, the trader will have to pay the difference to the exchange.

Unsettled or open purchase position at any point of time is called a long position and unsettled sales position at any time point of time is called a short position. Thus, a seller and a buyer combine to create only one contract. The total number of open contracts x lot size is called open interest. Futures are cash settled. The exchange specifies the lot size. It should be understood in the context in which it is used.

Futures are used by traders for hedging price risks or by speculators for betting against price movements. Generally nobody is interested in taking delivery of the underlying asset. Hence, Futures prices are marked to market. In live futures market, for each seller of a futures contract there must be a buyer of that contract. Rs 750, the exchange will pay the difference plus the initial margin as settlement value. The near month contracts are listed first. The life of one contract is 3 months. Futures contracts are monitored regularly by the authorities. Near month contract expire on the last Thursday of that month.

In case of unforeseen circumstances the maturity date may be shifted to another day by the SEBI through a notification. Future contracts are displayed in alphabetical order. Futures are displayed on the trading screen just like equities. On that date the contract ceases to exist and all the obligations must be fulfilled and the rights, if any, become invalid thereafter. The trading screen would also show the open price, high, low, traded quantity etc. An increase in open interest may mean that more money is flowing in. This lot size is not divisible. Each future contract will be in a coded form just like equities.

Any futures contract would expire on the last Thursday of a month. This process would keep going until you settle the contract. The actual margin money required to be maintained changes every day, specified by the NSE. The open interest cannot exceed the number of shares a company has. In most futures markets, actual delivery never takes place. Futures price will be greater than the spot price in a normal market. Not all stocks traded in the exchange have equivalent futures contract. In fact, spread is a general term.

Ie, there must be a pair. The term spread used to describe the difference between two prices. Euro, Pound, Yen and USD are traded with INR. We will assume that current prices of USDINR, EURINR, GBPINR, and JPYINR are 55, 70, 80 and 60 rupees respectively. Expiry Date: The date when the future contract or option contract expires. The following NSE CURRENCY REPORT has been taken on 22 nd March 2013 from www.

Our main focus on this page is to make you understand about Lot Size, Tick Size and Margin needed to trade on USDINR, EURINR, GBPINR and JPYINR. Your margin may be around 1650 rupees and you buy 1 lot of USDINR at 55. This table is a sample which explains the different underlying, their contract cycles and price movements. Underlying: You can see EURINR, GBPINR, JPYINR, and USDINR. Or you can calculate this in another way. Instrument: You can see Instruments FUTCUR for FUTURES CURRENCY and OPTCUR for OPTIONS. Options trading on USDINR NOW. MTM Settlement PRICE: Settlement price of EURINR, GBPINR, JPYINR, and USDINR.

Contract Trading Cycle: 12 months trading cycle. Whether you are a hedger or a speculator, remember that trading involves substantial risk and is not suitable for everyone. Only the price is variable. Silver also has two contracts trading at the eCBOT and one at the COMEX. What Are Precious Metals Futures Contracts? The primary function of any futures market is to provide a centralized marketplace for those who have an interest in buying or selling physical commodities at some time in the future.

Like gold, the delivery requirements for both exchanges specify vaults in the New York area. The contracts are standardized by a futures exchange as to quantity, quality, time and place of delivery. There are different position limits for hedgers and speculators. They also provide speculators with an opportunity to participate in the markets without any physical backing. For example, a jeweler who is fearful that she will pay higher prices for gold or silver would then buy a contract to lock in a guaranteed price. The market may not trade in a smaller increment, but it can trade larger multiples, like pennies. Gold is traded in dollars and cents per ounce. The minimum price movement or tick size is 10 cents.

Examples of hedgers include bank vaults, mines, manufacturers and jewelers. To maintain an orderly market, the exchanges will set position limits. Financial leverage is the ability to trade and manage a high market value product with a fraction of the total value. The dollar value of this contract is 100 times the market price for one ounce of gold. Silver, like gold, also has position limits set by the exchanges. Speculators come in all shapes and sizes and can be in the market for different periods of time. For example, one futures contract for gold controls 100 troy ounces, or one brick of gold. The exchange acts as a buyer to every seller and vice versa, decreasing the risk should either party default on its responsibilities.

March, May, July, September and December. This flexibility provides hedgers with an ability to protect their physical positions and for speculators to take positions based on market expectations. Both the eCBOT and COMEX specify delivery to New York area vaults. For example, this occurs when an investor with a long position initiates a short position in the same contract, effectively eliminating the original long position. The metal futures market helps hedgers reduce the risk associated with adverse price movements in the cash market. Silver is traded in dollars and cents per ounce like gold. The great majority of futures contracts are offset prior to the delivery date. All speculators need to be aware that if a market moves in the opposite direction, the position can result in losses. Hedgers take a position in the market that is the opposite of their physical position.

The market may have a wide range, but it must move in increments of at least 10 cents. Trading futures contracts is done with performance margin. Speculators include individual investors, hedge funds or commodity trading advisors. Although there can be significant profits for those who get involved in trading futures on gold and silver, remember that futures trading is best left to traders who have the expertise needed to succeed in these markets. Those who are in and out of the market frequently in a session are called scalpers. In the futures markets, it is just as not difficult to initiate a short position as a long position, giving participants a great amount of flexibility. But be forewarned: Trading in this market involves substantial risk, and investors could lose more than they originally invested. Hedgers use these contracts as a way to manage their price risk on an expected purchase or sale of the physical metal. February, April, June, August, October and December.

Due to the price correlation between futures and the spot market, a profit in one market can offset the losses in the other. Because they trade at centralized exchanges, trading futures contracts offers more financial leverage, flexibility and financial integrity than trading the commodities themselves. It requires considerably less capital than the physical market. These vaults are subject to change by the exchange. If you are looking for a hedge against inflation, a speculative play, an alternative investment class or a commercial hedge, gold and silver futures contracts might fit the bill. One at COMEX and two on eCBOT. Unlike hedgers, speculators have no interest in taking delivery, but instead try to profit by assuming market risk.

Enter the number of contracts. As a futures trader, it is critical to understand exactly what your potential risk and reward will be in monetary terms on any given trade. Use our dt Futures Calculator to quickly establish your potential profit or loss of money on a futures trade. Our margin calculator tool has a list of all stocks and the MIS leverage you get. CO margins are updated on our Equity futures margin calculator, Currency Futures Margin calculator and Commodity futures margin calculator daily. When you buy stock and hold it overnight, it is called a delivery trade. Futures is available with Ultimate Plans. Using cover orders, you can trade futures with lesser margins than NRML and MIS.

The product type CNC will show up on your order window only if you have a demat account mapped to your trading account since you would require a demat to take delivery of the equity that you purchase. When you take a trade in equity and square the position off before the end of day, it is called as intraday equity trading. Since there is a stop loss of money placed, the risk of the position reduces and hence the margin required to take it reduces as well. MIS is used by intraday traders as all open positions get squared off before the end of day. Futures as such are inherently leveraged which means that to buy X amount of futures you need only a small portion of it called as margin in your account. NRML you can hold the position till expiry. Wisdom Capital Margin Requirements.

But since no position is carried forward overnight the margin required is also lesser than the exchange stipulated margins. So approx 200 liquid stocks to trade for intraday. Presently Cover order facility is available for equity and currency futures only. This margin to buy futures is stipulated by the various exchanges. At Wisdom Capital, you need to use product type as CNC while placing a trade to take delivery of equity stock. Margin Plus or Cover orders is a unique feature where you can trade intraday using market orders but with a definite and compulsory stop loss of money.

Margin allows the exchange to become the buyer for every seller and the seller for every buyer of a futures contract. Exchanges calculate futures margin rates using a program called SPAN. When trading stocks, there is a simpler margin arrangement than in the futures market. Exchanges are regulated by the CFTC and have plenty of funds on hand to meet all obligations. The exchanges adjust their margin requirements based on market conditions. Since margin is only a small percentage of total contract value, there is a tremendous amount of leverage in futures markets.

Closing or liquidating a position eliminates the margin call requirement. Margin is a good faith deposit that a market participant posts with the exchange clearing house. In the world of futures contracts, the margin rate is much lower. The most critical variable is the volatility in each futures market. Initial Futures Margin is the amount of money that is required to open a buy or sell position on a futures contract. While the percentage profit in the futures market is high, remember that where there is the potential for rewards, there is always a risk. Those funds come from the margin collected by market participants. This program measures many variables to arrive at a final number for initial and maintenance margin in each futures market.

Margin is the glue that holds the futures markets together in that it allows market participates to trade with confidence that others will meet all obligations at all times. Additional leverage while trading commodities intraday can be availed by using the Cover Order or Bracket Order product with SAMCO. Check out our margin policies for details on these 2 products. To calculate the margins required for intraday commodity trading on the MCX, use the Intraday MIS product with SAMCO. Cover Order Product are not available for the commodity. To calculate the margins required for positional commodity trading on the MCX, use the Carryforward NRML product with SAMCO. This MCX Margin Calculator will help you calculate the amount of margin required for carryforward commodity trading and intraday commodity trading. The margins for intraday trading in the MIS product type are usually a percentage of the margins required for positional trading.

This chapter explains the framework of commodity options on MCX. Today MCX is introducing Gold option contract in India. Know how the contracts are stuctured before you trade options on commodities. Since this is a new product type at MCX which can potentially lead to compulsory physical delivery of the underlying, and is different from the cash settled options on NSE, we believe that it would be prudent to check all possible scenarios that may arise while you trade these options before going live.