What is commodity?

A commodity is a product which has a value and can be traded,bought,sold or produced.

What is commodity futures trading ?

Commodity futures trading is a contract to buy or sell a product at a predetermined quality and price for a future date on a specified exchange where the trade was executed.

What is long position ?

A long position is buying of a commodity with expectations that the asset will rise in value.

What is short position ?

A short position is selling of a commodity which is pre owned or in expectation of buying again when the price of that commodity falls to create value.

What is a commodity exchange ?

A commodity exchange is a platform which facilitates trade by market participants with defined set of rules and all the regulatory requirements from the Government.

What is initial margin requirements ?

Initial margin money is the minimum value or a percentage of the total value of the traded contract which a market participant has to deposit to the exchange or broker in order to manage risk for future price fluctuations on the traded contract.

What do you mean by ‘ CONTANGO ‘ in commodities?

Contango is a situation where futures price of a commodity is above the expected future spot price of the same commodity.

What do you mean by ‘ BACKWARDIAN ‘ in commodities ?

A backwardian simply means that the spot price are trading at a premium to the future price.

What is spot price ?

The spot price is the current market price at which an asset is bought or sold for immediate delivery.

What is future price ?

Future price is the value of goods which two participants agree to transact on a pre determined future date.

What are the costs involved in trading of commodities ?

While trading in commodities with a registered broker clients has to pay Brokerage, exchange transaction charges, and taxes as applicable by the government other than the initial margin requirements.

What is a option contract ?

A futures option contract gives the holder the right with some margin deposits to buy or sell a futures contract at a certain price for a limited time.

What is hedging ?

Hedging is used in futures market for safeguarding against price fluctuations for goods taken in cash market and executing the opposite trade of cash market in future market with price and quantity being the same.

What is speculating in commodities ?

Speculation is buying or selling of futures contract in anticipation of profits without actually paying for the total value of the commodity.

What is a ‘ BULL ‘ market ?

A bull market is a period when the prices of commodities is rising.

What is a ‘ BEAR ‘ market ?

A bear market is a period when the prices of commodities are declining.