A Commodity market has its own set of rules and laws like all different market however it's clearly not a share market as physical style of goods ar listed here. It may be same that the weather plays an enormous role during this market as most agricultural products are dealt Commodity market.
Commodity and commodity market
A wordbook would show you the term “commodity” as a product or a stuff that has value, which means it may be bought or sold in financial transactions. The term “commodity market” denotes the place wherever commodities or merchandise are bought or sold . A Commodity market has its own set of rules and laws like all different market however it's clearly not a share market as physical style of goods ar listed here. It may be same that the weather plays an enormous role during this market as most agricultural merchandise ar dealt within the trade goods market.
Forward contracts and Futures contract:
These terms are quite usually employed in the commodity market.
Forward contract: Forward contract is associate agreement between 2 parties to sell or get an explicit trade goods at a set value within the future. This contract hedges the chance for the customer against value fluctuations and also the vendor will get a bonded value for his product at a specific date.
For example, if A has the has machinery that produces ten bales of cotton, then he will secure associate agreement with B to sell the bales at an explicit value when associate year regardless of the worth that's trending. this is often referred to as hedging the chance. “A” hedges the chance by securing the worth and “B” speculates by pre-booking the worth expecting that costs would go up within the close to future which might profit him.
Futures contract: derivative is associate agreement between 2 parties World Health Organization comply with get or sell a selected plus at a specific date and at a pre-determined value. The payment and delivery of the plus is created on the long run date termed as delivery date. the customer within the derivative is thought to carry an extended position. the vendor within the futures contracts is claimed to be having short position.
On reading the meanings of future and forward contract, you will realize that the which means is that the same. however there ar some points of difference:
Forward contracts ar listed over the counter, whereas futures contracts ar listed on the exchanges.
Forward contracts may be in camera negotiated.
Futures contract have the same approach of execution and also the dealings is bonded by the financial institution that results in lesser defaults on the agreement.
Forward contracts are largely employed by hedgers (they attempt to eliminate the worth risk).
Futures contracts are employed by speculators. (who predict the approach the plus value moves).
Major trade goods Exchanges in India:
The place wherever all the dealings or contracts relating to commodities happen is named the exchanges. In India the these are
Multi commodities exchange of India Ltd, urban center (MCX) –Non-agricultural merchandise like gold, silver, aluminum,copper, nickel, lead, metallic element and energy merchandise like fossil fuel and gas ar listed on this exchange.
National trade goods and by-product Exchange, urban center (NCDEX) - in Agricultural merchandise like pulses, cereals, sugar etc ar listed on this exchange.
Contracts are dead on the exchanges. MCX is that the main exchange wherever all trade goods commercialism takes place. there's associate another style of contract licensed by the financial institution referred to as the Over The Counter (OTC) contract wherever dealings is completed in camera by the acquiring parties while not the necessity of involving the exchanges.
Types of commodities listed within the trade goods market:
There ar essentially 2 categories of commodities as seen higher than, the laborious trade goods and also the soft trade goods. it's any divided into four classes namely;
Energy- gas and fossil fuel.
Agriculture – cereals, pulses, potato, oil and oil seeds, rubber, fibers, sugar, and spices.
Metals – Aluminium, Lead, Zinc, Nickel, Copper
Bullions – Gold, Silver
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