Isnare Free Articles
Authors Contents [Add OpenSearch]
Distribute your articles to more than 6,000+ sites and 40,000+ email group publisher subscribers for as low as $2 / article...
Index  Article Directory  Finances
Embed this Article  
Kratika Sinha

Kratika Sinha x 1 articles

Liked the article? Consider buying me a beer!
$

Most Recent Videos Most Recent Videos

Commodity are the raw or primary agricultural product that could bought or sold such as gold, silver, copper, pulses etc. Derivative contract are the contract whose value is derived from underlying asset there are some types of derivative.

Forward

Swap

Future

Option

Concept of future or commodity derivative comes when the farmers have to travel a huge distance to sold there goods or agricultural produce at market place, there may be a probability that the produced may be rotted. and he could not sold that on accepted price due to some bad quality specification.

on other hand buyer and seller have risk of price uncertainty.

To avoid this farmer and buyer make a contract that at fixed future date will deliver the produced and will accept the delivery (Buyer) at fixed price. that is called derivative contract.

in this above case there are some limitation :

Buyer will make the payment or not

Seller will deliver the goods or not due to future price uncertainty

Seller will deliver the goods or not .

the above example that we have discuss that is forward contract a OTC (Over the Counter : the trade occur between the two parties only) contract in which above limitation are there because both buyer or seller doesn't have to pay any advance amount or margin as security in case any party default. but Future are the standardized from forward contract.

In commodity future contract a investor ( both buyer and seller) have to pay a margin amount.for this underlying asset is spot market price of that particular commodity future contract on the basis of which future contract price decided.

for ex. if a investor buy a Aug Future contract of gold buying by paying a initial margin to exchange, he is making a contract with a seller that before or on expiry will accept the delivery by paying a full amount.

and seller making a contract that will deliver the gold to buyer on execution of contract.

Commodity tips future contract are the Exchange Traded Security in which Exchange work as mediator. by chance if any party default some penalty will charged on it by exchange, to ensure a fair play. be cause in market there are so many buyer and seller are available .there may be a possibility that the person who is delivering may not be fulfill the quality specification of that particular commodity.

while in spot market instant delivery is possible and buyer and seller meet with each other to exchange the commodities.

In commodity future contract a investor ( both buyer and seller) have to pay a margin amount.for this underlying asset is spot market price of that particular commodity future contract on the basis of which future contract price decided.

for ex. if a investor buy a Aug Future contract of gold buying by paying a initial margin to exchange, he is making a contract with a seller that before or on expiry will accept the delivery by paying a full amount.

and seller making a contract that will deliver the gold to buyer on execution of contract.

Commodity tips future contract are the Exchange Traded Security in which Exchange work as mediator. by chance if any party default some penalty will charged on it by exchange, to ensure a fair play. be cause in market there are so many buyer and seller are available .there may be a possibility that the person who is delivering may not be fulfill the quality specification of that particular commodity.

while in spot market instant delivery is possible and buyer and seller meet with each other to exchange the commodities.

Rate this article:
Signature – Sadhna Tiwari [E-MARKETING EXECUTIVE] | Ways2Capital Provides MCX tips, intraday stock tips, NCDEX tips, forex tips, commodity tips . We also provide full support during market hours. | TO GET MORE DETAILS- VISIT US ON http://www.ways2capital.com | CONTACT US ON 0731-6554125
Important NoticeDISCLAIMER: All information, content, and data in this article are sole opinions and/or findings of the individual user or organization that registered and submitted this article at Isnare.com without any fee. The article is strictly for educational or entertainment purposes only and should not be used in any way, implemented or applied without consultation from a professional. We at Isnare.com do not, in anyway, contribute or include our own findings, facts and opinions in any articles presented in this site. Publishing this article does not constitute Isnare.com's support or sponsorship for this article. Isnare.com is an article publishing service. Please read our Terms of Service for more information.

Most Recent Articles

MLA Style Citation:
Sinha, Kratika "Trading in Commodity Derivatives." Trading in Commodity Derivatives. 10 Jan. 2017 Isnare.com. 26 Jun. 2017 <https://www.isnare.com/?aid=1962671&ca=Finances>.
APA Style Citation:
Sinha, Kratika (2017, January 10). Trading in Commodity Derivatives. Retrieved June 26, 2017, from https://www.isnare.com/?aid=1962671&ca=Finances
Chicago Style Citation:
Sinha, Kratika "Trading in Commodity Derivatives." Trading in Commodity Derivatives Isnare.com. https://www.isnare.com/?aid=1962671&ca=Finances
Copy and paste the code below to embed this article:
<a class="embedly-card" href="https://www.isnare.com/?aid=1962671&ca=Finances">Trading in Commodity Derivatives</a> <script>!function(a){var b="embedly-platform",c="script";if(!a.getElementById(b)){ var d=a.createElement(c);d.id=b,d.src=("https:"===document.location.protocol?"https":"http")+"://cdn.embedly.com/widgets/platform.js"; var e=document.getElementsByTagName(c)[0];e.parentNode.insertBefore(d,e)}}(document);</script>