Commodities Trading

Ans. Similar to other securities like shares, commodity prices fluctuate depending on various factors: Demand supply equation: The commodity prices rise or fall depending on the demand and supply. Market conditions: Commodities are good used for specific purpose and the demand and price can vary due to external factors e.g. energy consumption may rise in winters or go down in specific regions due to local factors. Global factors: Geo political factors impact commodity prices e.g. during a war energy and metal prices go up or recession can lower demand for agri products or precious metals.

Ans: Commodity Derivatives are securities contracts, futures and options with commodities as underlying security and traded on recognised commodity exchanges. Commodity Derivatives allow investors to earn profit from commodities without a physical purchase or trading.

Ans: There is no minimum amount required to begin commodity trading. You can allocate an amount depending on your portfolio allocation and risk appetite. In certain commodities there could be a minimum quantity to be purchased, for those you may have to start with the minimum quantity or invest in commodities that do not have a minimum quantity specified

Ans: Commodity trades deal in less number of products and securities as compared to stock trading. The commodity market works in business cycles but stocks have no such time frames. On the other hand, commodity prices are more volatile as compared to stocks. There are pros and cons to both the markets. As an investor you can diversify your portfolio with stocks as well as commodities.

Ans: Crude oil, gold and metals are considered to be the safest commodities to trade. Crude oil is a commodity that is in demand globally due to its use in various forms e.g. fuel, industrial petroleum based products, chemicals, consumer products. Due to high demand and usage, crude oil is a highly traded commodity with liquidity and price movements. Gold is a universal commodity of value by central banks and governments for holding currency. Gold is equally in demand for personal investment, jewellery and for commercial purposes. This makes it an in-demand highly traded commodity and offers price variations for arbitrage. Base metals like aluminium, zinc, copper etc are abundant in supply and have a high demand due to uses in industries like electronics offering good liquidity and volume.

Ans: Trading commodities is an avenue available to investors online, to add another asset class in their investment basket. Commodities can act as a hedge against volatility in other asset classes e.g. stocks. You can allocate a percentage of your portfolio depending on your financial goals and risk appetite.

Ans: Commodity Futures: Brokerage: Rs 20 per order STT/CTT: 0.01% on sell side (Non-Agri) Exchange transaction charge: 0.0026% GST: 18% on (brokerage + transaction charges + SEBI charges) Commodity Options: Brokerage: Rs 20 STT/CTT: 0.05% on sell side Exchange transaction charge: 0.05% GST: 18% on (brokerage + transaction charges + SEBI charges)