COMMODITY FUTURESCOMMODITY FUTURES

AGENDA

INTRODUCTION - Understanding Commodity Futures Trading (‘CFT’).

TYPES OF COMMODITIES TRADED.

VARIOUS PARTIES INVOLVED.

BENEFITS TO PARTIES INVOLVED.E-SERIES

UNDERSTANDING COMMODITY FUTURES TRADING (‘CFT’)

GROUND REALITIES Its a financial contract The underlying commodity is bought or sold at a future date. It is a tool used by Investors, Hedgers, Arbitrageurs, Day

Traders, etc.. The commodities are traded on Exchanges, which are

Screen based and Online, transparent,having counter party guarantee, andhaving large settlement guarantee funds

FACTORS DRIVING CFTDemand and supplySeasonal patternsIndian economic data/ policiesWeatherImport/ export parity and government

policiesForex/ currency movement against USD

and INRGlobal political/ economic events and dataGlobal benchmark commodity IndicesGlobal commodity prices

MAJOR COMMODITIES TRADEDEdible oilseed complex - Mustardseed,

Soybean seed.Food grains – Barley, Maize, etc.Fibres - Cotton, Jute, etcSpices - Turmeric, Pepper, Cardamom,

etc.Metals - Gold, Silver, Copper, Zinc, Aluminum etc.Energy _ Crude Oil, Natural Gas etc.Others - Castorseed, Sugar, Jaggery,

Rubber,

PARTIES INVOLVEDSpeculators

Arbitragers

Hedgers (Farmers, Producers, Processors, Exporters etc)

BENEFITS TO PARTIES INVOLVEDEffective Price Discovery Platform

A farmer can do crop planning by looking at prices prevailing in the futures market

Efficient Price Risk management Tool A farmer can sell futures to ensure better

price realization and hedge against seasonal price volatility

A processor / manufacturer can buy futures to hedge against volatile raw material costs

An exporter can buy / sell futures to commit a price to his foreign clients and thus do better financial planning

A stockist can hedge his carrying risk to ensure smooth prices of the seasonal commodities round the year

COMMODITY DERIVATIVES -BENEFITS TO HEDGERSHedgers

Can use futures as protection or insurance, against unfavorable price fluctuations Risks)

Hedgers can protect themselves by taking an opposite position in the futures market to their exposed position in cash commodity

An Effective Risk Management Tool

Types Of HedgingLong Hedge•This requires taking a long (buy) position in the futures contract. •Appropriate when a certain asset or commodity would be purchased in the future and one is interested in locking in the price.

•Short Hedge•This requires taking a short (Sell) position in the futures contract. •Appropriate when a certain asset or commodity would be sold in the future and one is interested in locking in the price now

Think and Act!Now you have seen how Commodities market is evolving worldwide especially the Commodity Derivatives market in terms

• Profits• Risk Mitigation Tool• Risk Diversification• Expansion• Globalization• In all Economic Savior

Let’s Begin!