Aniket Aroskar Roll No.

33193

 Commodity Market is a place where trading in commodities takes place. These are the markets where raw and primary products are exchanged. These raw commodities are traded on regulated commodity exchanges, in which they are bought and sold in standardised contracts. It is similar to an equity market, but instead of buying or selling shares one buys or sells commodities. The commodities markets are one of the oldest prevailing markets in the human history. In fact, derivatives trading started off in commodities with the earliest records being traced back to the 17th century when rice futures were traded in Japan.

 Precious Metals: Gold, Silver, Platinum, etc. Other Metals: Nickel, Aluminum, Copper, Zinc, etc. Agro-Based Commodities: Wheat, Rice, Corn, Cotton, Oils, Oilseeds, etc. Soft Commodities: Coffee, Cocoa, Sugar, etc. Petrochemicals: High Density Polyethylene, Polypropylene. Live-Stock: Live Cattle, Pork Bellies, etc. Energy: Crude Oil, Natural Gas, Gasoline, etc

 There are over 2,000 brokers and 10,000 active traders along with 6,000 operating terminals. The commodity markets are running very successfully under them and it has been reported that on the very first year of its commencement, there was an annual turnover of Rs.1,40,000 crores This particular amount is expected to be crossed by over Rs.10,00,000 crores in the near future. The success and promotion of these commodity markets in India is tremendous and is leading to remarkable progress.

Government set up a Committee in 1993 to examine the role of futures trading. The Kabra Committee recommended allowing futures trading in 17 commodity groups. It recommended certain amendments to Forward Contracts (Regulation) Act 1952, particularly allowing options trading in goods and registration of brokers with Forward Markets Commission. The Government accepted most of these recommendations and futures trading was permitted in all recommended commodities. The next decade is being touted as the decade of commodities.

An agreement to buy or sell a set amount of a commodity at a predetermined price and date. Buyers use these to avoid the risks associated with the price fluctuations of the product or raw material, while sellers try to lock in a price for their products. Like in all financial markets, others use such contracts to gamble on price movements.

For an initial margin of $5,000, an investor can enter into a futures contract to buy 1,000 barrels of oil valued at $50,000 on June 12. On that day, the oil price increases to $60 a barrel. In this case, the investor has saved $10,000 by buying the futures contract. Given this large amount of leverage, even a very small move in the price of a commodity could result in large gains or losses compared to the initial margin. Unlike options, futures are the obligation of the purchase or sale of the underlying asset.

The commodity options market is simply a market in which producers may purchase the opportunity to sell or buy a commodity at a certain price. there are actually two basic types of commodity options: a call option and a put option. The call option gives the holder the right, but not the obligation, to buy the underlying commodity from the option writer at a specified price on or before the option's expiration date. The put option gives the holder the right, but not the obligation, to sell the underlying commodity to the option writer at a specified price on or before the option's expiration date.

Trend Following This is a commodity trading strategy that most professional traders use and recommend. The theory is that prices that are in a trend have a higher probability of continuing in that direction. Trend following strategies are dependent on having a couple of big movers each year. It is imperative that you do not miss one of these big moves.

Range Trading Under a range trading strategy, you would sell the market when it gets to the top of its range and buy the market when it gets to the bottom of its range. This strategy can work very well for a long period of time, but you have to be careful when the market breaks out of its range. An investor may feel that the market will stay in its range. Eventually, one of the markets will break out of its range and have a big move. This is usually the situation where range traders lose big. They hold onto a position thinking the commodity market will fall back into its range and it just keeps moving against them. Or worse, they add to their positions and really make things bad.

 Multi Commodity Exchange (MCX) is an independent commodity exchange based in India. Established in 2003 and Based in Mumbai. Its turnover in 2009 was USD 1.24 trillion Sixth largest commodity exchange. MCX offers futures trading in bullion, ferrous and non-ferrous metals, energy, and a number of agricultural commodities (menthol oil, cardamom, potatoes, palm oil and others).

 MCX is India's No. 1 commodity exchange with 83% market share in 2009. Its competitor is National Commodity & Derivatives Exchange Ltd Globally, MCX ranks no. 1 in silver, no. 2 in natural gas, no. 3 in crude oil and gold in futures trading. The highest traded item is gold. MCX has several strategic alliances with leading exchanges across the world. The normal daily turnover of MCX was about US$ 6 to 8 billion MCX now reaches out to about 800 cities and towns in India with the help of about 126,000 trading terminals MCX COMDEX is India's first and only composite commodity futures price index.