A study on commodity futures as an investment
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Transcript of A study on commodity futures as an investment
A study on commodity futures as an
investment avenue
- Sairam Bathulla 11-E06
Research Objectives
• To examine the various risk factors in using commodity future.
• To study the influence of futures trading, on price and price variation
• To evaluate the effectiveness of the various measures of commodity futures as investment avenues in India
Literature Review
• Indian commodity exchange and progress• Rules governing commodity derivatives
exchanges • Use of commodity derivatives for-
HedgingSpeculation Arbitrage.
Research Methodology
• Data collection• Primary data – questionnaire• Secondary data - books, internet, newspaper articles
• Convenient Sampling• Sample size - 30
Analysis & Interpretation
13%
43%
43%
Age of Respondents
18 – 24 years
25 – 30 years
31 & Above
Analysis & Interpretation
23%
20%
30%
27%
1,00,000 – 2,00,000
2,00,000 – 3,00,000
3,00,000 – 5,00,000
5,00,000 & above
Annual income level
Analysis & Interpretation
100%
Yes No
Do you trade in commodity futures ?
Analysis & Interpretation
80%
20%
Regular Trader
Potential Customer
what is the frequency of trading?
Analysis & Interpretation
25%
33%
25%
17%
Trade on an organized exchange
Standardized contract terms
follows of daily settlement
location of settlement
Reasons behind regular trading:
Analysis & Interpretation
Yes
No
0
2
4
6
8
10
12
14
16
18
Is futures trading influence the price and price variation ?
Analysis & Interpretation
If influences then on which factors
Seasonal price variation Inter & intra seasonal price variation
Short term oscillation Average received by producer and paid by
consumer
0
1
2
3
4
5
6
Analysis & Interpretation
If dose not influence commodity futures then what influence among following?
By hedging By speculation By arbitrage0
1
2
3
4
5
6
7
8
Analysis & Interpretation
Satisfaction about future trading in commodity exchange –
0
2
4
6
8
5
8
5 5 5
2
Analysis & Interpretation
Satisfaction on current regulatory mechanism of commodity futures in India -
17%
30%
13%
20%
20%
a b
c d
e
a. Limit on net open position as on the close of the trading hours.
b. Limit on price fluctuation to allow cooling of market in the event of abrupt upswing or downswing prices.
c. Special margin deposit to be collected on outstanding purchase or sales when price fluctuate.
d. Minimum\maximum prices-these are prescribed to prevent futures prices from falling below as rising above not warranted prospective supply or demand.
e. Skipping trading in certain derivatives of the contract, closing the market for a special period and even closing out the contract.
Conclusion
• The risk can be eliminated by –
Speculation
Hedging
Arbitrage
Seasonal price fluctuation
• The beta calculation
• The weighting scheme
Suggestion & Recommendations
• A negotiable document• An agency is to be set up • A Clearing House • Commodities trading must be settled in
determined form • Widespread market awareness • Healthy competition• The market should be made broader
Thank You…..