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Commodities trading in India

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  1. Introduction.
  2. Derivatives.
  3. Derivatives existing in India.
    1. Financial derivative.
    2. Commodity derivatives.
  4. Indian derivatives market: Looking ahead.
  5. Trading instruments.
    1. Forward contract.
    2. Futures contract.
    3. Options.
    4. Swaps.
  6. Participants in derivatives market.
    1. Hedgers.
    2. Speculators.
    3. Arbitragers.
  7. Trading of commodity derivatives In India.
    1. Exchange trading.
    2. Over the counter.
  8. Commodity markets.
    1. Global perspective.
    2. Indian perspective.
  9. Company profile.
    1. Anagram Stockbuilding Ltd.
  10. Project profile.
    1. Commodity for the study-gold.
    2. Objectives.
    3. Analysis and interpretation of the data.
  11. Suggestions and recommendations.
  12. Bibliography.

Commodity Futures trading in India has a long history. The first commodity futures market appeared in 1875. But the new standardized form of trading in the Indian capital market is an attractive package for all the people who earn money through speculation by trading into FUTURES. It is a well-known fact and should be remembered that the trading in commodities through futures' exchanges is merely, ?old wine in a new bottle?. The trading in commodities was started with the first transaction that took place between two individuals. We can relate this to the ancient method of trading i.e., BARTER SYSTEM. This method faced the initial hiccups due to the problems like: store of value, medium of exchange, deferred payment, measure of wealth etc.. This led to the invention of MONEY. As the market started to expand, the problem of scarcity piled up.

The farmers / traders then felt the need to protect themselves against the fluctuations in the price for their produce. In the ancient times, the commodities traded were ? the Agricultural Produce, which was exposed to higher risk i.e., the natural calamities and had to face the price uncertainty. It was certain that during the scarcity, the farmer, realized higher prices and during the oversupply he had to loose his profitability. On the other hand, the trader had to pay higher price during the scarcity and vice versa. It was at this time that both joined hands and entered into a contract for the trade i.e., delivery of the produce after the harvest, for a price decided earlier. By this both had reduced the future uncertainty.

[...] Today we have an active derivatives market in the segment of stocks and foreign currency, while the trading in the commodities is just standardized. The OTC derivatives in India are well established and the Indian capital markets have acquired the international flavor and the volumes in the derivatives market in at a pace to climb up. A contract bought by paying an upfront margin is calculated as value added risk (VAR) basis, which traces the volatility in the underlying assets (stock or commodities) prices to arrive at margin that is reflected of this volatility. [...]

[...] Chapter-2 Volume Used in conjunction with open interest, volume represents the total number of shares or contracts that have changed hands in a one-day trading session in the commodities or options market. The greater the amount of trading during a market session, the higher the trading volume. A new student to technical analysis can easily see that the volume represents a measure of intensity or pressure behind a price trend. The greater the volume the more we can expect the existing trend to continue rather than reverse. [...]

[...] Provide trading limit finance to Traders in commodities Exchanges. OPTIONS CONTRACT Options have existed over a long period but were traded over the counter (OTC) only. These contracts are fundamentally different from that of futures and forwards. In the recent years options have become fundamental to the working of global capital markets. They are traded on a wide variety of underlying assets on both, the exchanges and OTC. Options like the futures are also available on many traditional products such as equities, stock indices, commodities and foreign exchange interest rates etc., options are used as a derivate instrument only in financial capital market in India and not in commodity derivatives. [...]

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