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Tuesday, March 26, 2013
A commodity futures contract is a type of derivative, or financial contract, in which two parties agree to transact a set of financial instruments or physical commodities for delivery at a particular price at later date. But participating in the commodity market does not necessarily means that you will be responsible for receiving or delivering large inventories of physical commodities. Gold and other commodity futures prices are quoted on the commodity exchanges in exactly the same way in which stock prices or stock futures prices are quoted on a daily basis in the stock markets.
Commodity trading is considered the pinnacle of the financial markets. Due to its complexity and liquidity of foreign exchange proceeds from a deep fascination. The profits are enormous opportunities in foreign exchange. More and more private investors are discovering this form of trading, which has long been reserved for professional traders. It has never been easier and more profitable to trade the volatility of exchange rates and trends independently and without high fees.
After reading this book, it is possible the private investors, opportunities and risks in the foreign exchange market to assess and develop a winning strategy.
The financial crisis is hardly overcome properly because of threatening a new global challenge to the recovery of the German Economy: The raw materials are scarce. Maybe not all, but just some of the need for electric vehicles and solar rare minerals and metals. According to a recent survey of German Industry and Commerce, most industrial companies complain of rising commodity prices. Every second, even feared, given the necessary resources at all any more. This swear the geologists of the Federal Institute for Geosciences and Natural Resources (BGR) in Hannover, for the foreseeable future that all metals are abundant in the earth's crust will be present, possibly at the oil it could be tight.
But it is precisely so that deposits are concentrated on a few regions in the world and countries. This allows the formation of cartels and monopolistic practices, especially as promoted under the geological world production possibilities, because the political context of resource-rich developing countries for investment in mining are often not particularly inviting. And that's no accident - rare and strategically important raw materials and civil wars drag on almost.
In this system, any issue of money is a consideration and with a guaranteed exchange for gold. Parities of two different currencies are fixed against gold, and exchange rates are stable between participating countries. Gold is an international currency used in trade settlement and as a reserve asset for central banks of countries that have adopted the system.
Supporters of the gold standard argue that this system provides resistance to the expansion of credit and debt. Unlike a fiat currency, a currency exchange to gold can not be arbitrarily issued by a State. This constraint prevents the devaluation and inflation rises in theory all uncertainty about the sustainability of the currency, allowing the monetary authority to have a healthy credit, and lend more easily. However, there are many examples of countries under the gold standard that experienced debt crises or depressions.
The system of gold standard is not currently used in any country, and gave way during the forced paper currency.
Well, let's suppose you want to buy gold because you believe that the price of gold will rise.
- You could then buy gold ingots, store them, wait for them to go up in price, and then sell them at a profit.
- But, you have to be sure that the gold you buy is pure, you have to find a place to store it, you have to provide the security, transport it to vault and other such hassles.
- A far better way to invest in gold would be to buy gold futures from the commodities exchange.
When you buy a Gold Futures contract, you undertake to do three things.
1. Buy the amount of gold specified in the contract.
2. Buy it at the price specified in the contract.
3. Buy it on the expiry of the contract. This could be after one month, two months, three months and so on. Of course, if you sell the Gold Futures contract before it expires, then you don't have to worry about actually buying the gold.
Let's say you buy the Gold Future contract at say Rs 7,200 per 10 gm.
Your hunch comes true and the gold prices rally to Rs 8,000 per 10 gm.
You can sell the Gold Futures any time before expiry of the contract.
Gold and other commodity futures prices are quoted on the commodity exchanges in exactly the same way in which stock prices or stock futures prices are quoted on a daily basis in the stock markets.
How it works
- Just like stock futures (Read How to trade in Futures to understand how futures work).
- When you buy a Futures, you don't have to pay the entire amount, just a fixed percentage of the cost. This is known as the margin.
- Let's say you are buying a Gold Futures contract. The minimum contract size for a gold future is 100 gms. 100 gms of gold may be worth Rs 72,000.
- The margin for gold set by MCX is 3.5%. So you only end up paying Rs 2,520.
- The low margin means that you can buy futures representing a large amount of gold by paying only a fraction of the price.
- So you bought the Gold Futures contract when it was Rs 72,000 per 100 gms.
- The next day, the price of gold rose to Rs 73,000 per 100 gms.
- Rs 1,000 (Rs 73,000, Rs 72,000) will be credited to your account.
- The following day, the price dips to Rs 72,500.
- Rs 500 will get debited from your account (Rs 73,000 - Rs 72,500).
MCX (Multi Commodity Exchange of India Ltd.): MCX presents futures trading defined in terms of type of contracts offered in 58 commodities, from various market segments including energy, bullion, iron and non-iron metals, oil seeds, and other agricultural commodities. It is the worlds first and fore most also one and only company acquired ISO 27001:2005 certification.
National Commodity & Derivatives Exchange Limited (NCDEX): It is a private limited company which has obtained Certificate for Commencement of Business in Mat 2003 and is online commodity exchange based in India.
A commodity futures contract is a type of derivative, or financial contract, in which two parties agree to transact a set of financial instruments or physical commodities for delivery at a particular price at later date. But participating in the commodity market does not necessarily means that you will be responsible for receiving or delivering large inventories of physical commodities. Gold and other commodity futures prices are quoted on the commodity exchanges in exactly the same way in which stock prices or stock futures prices are quoted on a daily basis in the stock markets.
Commodity trading is considered the pinnacle of the financial markets. Due to its complexity and liquidity of foreign exchange proceeds from a deep fascination. The profits are enormous opportunities in foreign exchange. More and more private investors are discovering this form of trading, which has long been reserved for professional traders. It has never been easier and more profitable to trade the volatility of exchange rates and trends independently and without high fees.
After reading this book, it is possible the private investors, opportunities and risks in the foreign exchange market to assess and develop a winning strategy.
The financial crisis is hardly overcome properly because of threatening a new global challenge to the recovery of the German Economy: The raw materials are scarce. Maybe not all, but just some of the need for electric vehicles and solar rare minerals and metals. According to a recent survey of German Industry and Commerce, most industrial companies complain of rising commodity prices. Every second, even feared, given the necessary resources at all any more. This swear the geologists of the Federal Institute for Geosciences and Natural Resources (BGR) in Hannover, for the foreseeable future that all metals are abundant in the earth's crust will be present, possibly at the oil it could be tight.
But it is precisely so that deposits are concentrated on a few regions in the world and countries. This allows the formation of cartels and monopolistic practices, especially as promoted under the geological world production possibilities, because the political context of resource-rich developing countries for investment in mining are often not particularly inviting. And that's no accident - rare and strategically important raw materials and civil wars drag on almost.
In this system, any issue of money is a consideration and with a guaranteed exchange for gold. Parities of two different currencies are fixed against gold, and exchange rates are stable between participating countries. Gold is an international currency used in trade settlement and as a reserve asset for central banks of countries that have adopted the system.
Supporters of the gold standard argue that this system provides resistance to the expansion of credit and debt. Unlike a fiat currency, a currency exchange to gold can not be arbitrarily issued by a State. This constraint prevents the devaluation and inflation rises in theory all uncertainty about the sustainability of the currency, allowing the monetary authority to have a healthy credit, and lend more easily. However, there are many examples of countries under the gold standard that experienced debt crises or depressions.
The system of gold standard is not currently used in any country, and gave way during the forced paper currency.
Well, let's suppose you want to buy gold because you believe that the price of gold will rise.
- You could then buy gold ingots, store them, wait for them to go up in price, and then sell them at a profit.
- But, you have to be sure that the gold you buy is pure, you have to find a place to store it, you have to provide the security, transport it to vault and other such hassles.
- A far better way to invest in gold would be to buy gold futures from the commodities exchange.
When you buy a Gold Futures contract, you undertake to do three things.
1. Buy the amount of gold specified in the contract.
2. Buy it at the price specified in the contract.
3. Buy it on the expiry of the contract. This could be after one month, two months, three months and so on. Of course, if you sell the Gold Futures contract before it expires, then you don't have to worry about actually buying the gold.
Let's say you buy the Gold Future contract at say Rs 7,200 per 10 gm.
Your hunch comes true and the gold prices rally to Rs 8,000 per 10 gm.
You can sell the Gold Futures any time before expiry of the contract.
Gold and other commodity futures prices are quoted on the commodity exchanges in exactly the same way in which stock prices or stock futures prices are quoted on a daily basis in the stock markets.
How it works
- Just like stock futures (Read How to trade in Futures to understand how futures work).
- When you buy a Futures, you don't have to pay the entire amount, just a fixed percentage of the cost. This is known as the margin.
- Let's say you are buying a Gold Futures contract. The minimum contract size for a gold future is 100 gms. 100 gms of gold may be worth Rs 72,000.
- The margin for gold set by MCX is 3.5%. So you only end up paying Rs 2,520.
- The low margin means that you can buy futures representing a large amount of gold by paying only a fraction of the price.
- So you bought the Gold Futures contract when it was Rs 72,000 per 100 gms.
- The next day, the price of gold rose to Rs 73,000 per 100 gms.
- Rs 1,000 (Rs 73,000, Rs 72,000) will be credited to your account.
- The following day, the price dips to Rs 72,500.
- Rs 500 will get debited from your account (Rs 73,000 - Rs 72,500).
MCX (Multi Commodity Exchange of India Ltd.): MCX presents futures trading defined in terms of type of contracts offered in 58 commodities, from various market segments including energy, bullion, iron and non-iron metals, oil seeds, and other agricultural commodities. It is the worlds first and fore most also one and only company acquired ISO 27001:2005 certification.
National Commodity & Derivatives Exchange Limited (NCDEX): It is a private limited company which has obtained Certificate for Commencement of Business in Mat 2003 and is online commodity exchange based in India.
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