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Commodities
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Agenda
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Introduction to Commodities Markets Global Markets USD INDEX Vs Commodities USDINR Trading Current Outlook Agro Commodities 10 Golden rules for trading
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Introduction to Commodities Markets
Introduction
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One of the largest financial market in the world ADTV globally is over US$ 1 trillion Commodity derivatives accounts for 30% of ADTV Commodity as an asset class Main trading centres are London, NY, Tokyo & Singapore (and now..MUMBAI)
Commodity Trading in India
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Bombay Cotton Trade Association Ltd., set up in 1875 was the first organized futures market in India. In 1893, Bombay Cotton Exchange Ltd. Was established. National Multi Commodity Exchange (NMCE) started on 26-Nov-2002 Multi Commodity Exchange (MCX) started on 23Nov-2003 National Commodity and Derivative Exchange (NCDEX) started on 15-Dec-2003 All the three have electronic trading and settlement systems and a national presence. The exchanges are regulated by the Forward Markets 5 Commission. So it is a full fledged and reliable system.
Futures Market Structure
Ministry of Consumer Affairs, Food and Public Distribution(Government of India )
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Forward markets Commission(FMC)
Commodity Exchange ( NMCE, NCDEX, IPSTA, MCX) Trading Cum Clearing Members (TCM) -JRG Institutional Clearing Members (ICMs)
Trading Members (TM)
Sub -brokers
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Market Participants
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Hedgers, Arbitragers Market Makers Scalpers Jobbers Fund managers Pro- Traders HNIs Individuals
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Global Markets
Trading Hours at International Commodity Exchanges
Trading Hours at International Commodity Exchanges
Commodity Exchange Open Outcry (Pit Trading) Light Sweet Crude Oil Henry Hub Natural Gas Gold Silver Copper Aluminum Gold Silver Copper Aluminium Zinc Nickel Lead Copper Aluminium Zinc Timings (IST)
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CME Globex (Electronic Trading) Round the clock on weekdays Round the clock on weekdays Round the clock on weekdays Round the clock on weekdays Round the clock on weekdays Round the clock on weekdays
NYMEX NYMEX
COMEX
7:30 pm- 1:00 am 7:30 pm- 1:00 aym 6:50 pm 12:y00 am 6:55 pm 1y1:55 pm 6:40 pm 11:30 pm 6:20 pm 11:45 pm Electronic Trading 5:30 am- 12:00pm 5:30 am- 12:00pm Ring Trading
COMEX COMEX COMEX TOCOM TOCOM
LME LME LME LME LME Shanghai Shanghai Shanghai
Select (Electroninc Trading) 6:30 am- 12:30 am 6:30 am- 12:30 am 6:30 am- 12:30 am 6:30 am- 12:30 am 6:30 am- 12:30 am
5:15 pm- 10:30 pm 5:15 pm- 10:30 pm 5:15 pm- 10:30 pm 5:15 pm- 10:30 pm 5:15 pm- 10:30 pm Electronic Trading 6:30am- 12:30 pm 6:30am- 12:30 pm 6:30am- 12:30 pm
USD Index Vs Commodities
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o Globally all Commodities are Priced in terms of USD. o USD movements will affect the commodities
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June 2008 May 2009
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USD/INR
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How affecting the MCX prices
NYMEX AUG CRUDE FUTURES = $68.50 / BARREL. INDIAN RUPEES = Rs. 48.50 : MCX CRUDE FUTURES = $68.50 X 48.50 = Rs. 3322 / BARREL IF INDIAN RUPEES MOVES TO RS 48.75 : MCX CRUDE FUTURES = $68.50 X 48.75 = Rs. 33440 / BARREL
International Prices Are Unchanged
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Major Events in International and Indian Monetary System 1. Free float of currencies - 1973. 2. Oil crisis in 1973 - quadrupling of oil prices 3. European Currencies float against US$ - 1978 4. Post emergency years 5. Majority Govt. formed - 1984-85 6. Liberalization of Indian Economy: devaluation of INR - 1991 7. East and South East Asian Currency crisis - 1997 8. Nuclear tests by India - 1998 9. Robust economic growth in India 10. High crude oil and commodity prices
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Trading
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USDINR Global Prices Economic Indicators Major news Technical Levels 10 Golden rules for trading
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Bullions
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Spot Market- OTC TOCOM COMEX MCX/NCDEX
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Trading Months At Mcx
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# GOLD # FEBRUARY APRIL JUNE AUGUST OCTOBER DECEMBER
#SILVER# MARCH MAY JULY SEPTEMBER DECEMBER
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Bulls in Bullions
Investor sentiment towards Bullion has been positive for years Major factors favouring investment in bullion are: Demand and supply dynamics
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Increasing Disposable income in China and India to buy jewellery Hedge against the US Dollar weakness Safeguard against geopolitical and economic risks Hedge against Inflation The recent bull run was inspired by Weaker USD, Geopolitical instability in Middle East, Pakistan, etc. and ongoing credit crisis in the US economy
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Factors Influencing Bullions Price
Macro Economic Factors Dollar (inverse correlation) Inflation (direct correlation) Oil prices (direct correlation) Interest rates ( inverse correlation) Supply Factors Mine production Scrap / reclaimed from jewellery Central Bank sales / purchase
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Economic indicators Data and official releases indicating the weakness of US Economy would increase the appeal of gold, and vice versa. Crisis situations, geopolitical tensions, uncertainties increase the appeal of gold 19
Base metals
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LME ( London Metal Exchange) SHFE ( Shanghai futures Exchange) COMEX MCX, NCDEX
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Inventories To Watch
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LME Inventory daily at 1.30 pm SHFE Inventory every Friday at 12.30 pm EIA Energy Inventory every Wednesday at 8.00 pm EIA [Link] Inventory every Wednesday at 8.00 pm Impact: Actual >Prior Negative or vice versa
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Data's To Watch
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GDP-last Friday of month ISM mfg. Index-first working day of month Home sales data - last week of month Industrial production-third week Trade deficit-third week of month Production price index-third week Retail sale-third week of month Durable goods order-last week of month
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MCX-Margin
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Commodity Contract Price *Margin Margin size quotation % Amt (appox) Gold 1Kg 10Grams 4 58000 Silver 30Kg 1Kg 5.5 37000 Copper 1MT 1 kg 7.7 18500 Lead 5MT 1 kg 8.63 34500 Zinc 5MT 1Kg 8.75 33000 Nickel 250 Kg 1Kg 9.01 16500 Aluminium 5MT 1Kg 7.15 28000 Crude oil 100 bp 1bp 6.54 22000 Natural gas 1250 1mmbtu 10.97 27000 mmBtu
Circuit Breaker (+/- %) 3+3+3=9 4+2+3=9 4+2+3=9 4+2+3=9 4+2+3=9 4+2+3=9 4+2+3=9 4+2+3=9 4 +2 +3 =9
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NCDEX-Margin
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Commodity Contract size Pepper Jeera Chilli Turmeric Soybean Soyoil RMseed Guarseed Channa 1MT 3MT 5MT 10MT 10MT 10MT 10MT 10MT 10MT
Price quotation 100Kg 100Kg 100Kg 100Kg 10Kg 10Kg 20Kg 100Kg 100Kg
*Margin % 5.94 7.24 6.32 9.44 8.05 5.07 5.09 6.14 5.34
Margin Amt (appox) 7600 23000 15300 49500 20000 24500 13500 11300 11600
Circuit Breaker (+/- %) 3+1=4 2+2 =4 2+2=4 2+2=4 3+1=4 3+1=4 2+2=4 3+1=4 3+1=4
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Current Outlook
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Base Metals
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Copper - 2009
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Other stocks
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Bullions
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Crude oil -EIA
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Agro commodities
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Agro Commodities
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Factors Affecting the Prices Season and Off Season Major Spot Centers Global Agro Market Trading strategies
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Factors Affecting the Prices
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Demand and Supply Production ( Domestic n Global) Weather Trade (Import n Export) polices Socio Economic Factors International Price Movements
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Type Castor Pepper Mustard Seed Turmeric Cardamom Chana Chilli Guar Jeera Maize Mentha Potato khariff crop Rabi khariff crop Rabi Rabi Summer Crop Autumn Crop Spring Soybean Sugar Tur Wheat Urad khariff crop Annual Crop Annual Crop Rabi khariff crop Rabi Rabi khariff crop
Planting Season July - Aug May - June Oct - Nov April - Aug Aug - Mar Sep - Nov April Augest July - Aug Oct - Nov Mid Apr - Mid May Oct - Nov
Harvesting Season December - January Dec - Feb Feb - May Dec - Mar Oct - Nov Feb - Apr Augest December Oct - Nov Feb -Apr Dec All months
Major Producing States Gujarat Kerala Rajastan & UP AP&TN Kerala MP AP Rajastan Rajastan & Gujarat Karnataka Punjab, Haryana
% Research 86% 96% 50%
70% 40% 49% 70% 90% 15%
Mar - Apr Aug - Sep Jan - Feb June Feb - Apr Jun - Jul Nov - Jan Feb
Aug - Sept Dec - Jan May - June Sept - Oct Oct - Mar Dec - Jan Mar - May Jul - Aug UP MP MH & UP MH & UP UP& PJ MP 75%
Spot Centers
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Pepper RM Seed Soybean Soyoil Turmeric Chana Chilli Guar Jeera Maize Wheat
Cochin Jaipur,Alwar,Delhi Indore,Nagpur Indore,Nagpur Erode, Nizamabad,sangli Delhi Guntur,Coimbatore Jodhur,Bikaner Unjha Nizamabad,Karimnagar Delhi
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Trading strategies
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Hedging Arbitrage Speculation
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10 GOLDEN RULES FOR TRADING
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Always do your analysis before trading. Always have a clear and reasonable idea of your objective. Never trade on emotions or other peoples forecasts. Buy at support and sell at resistance. Always trade with STOP LOSS. Never hold a losing position over night. Never add to a losing position. Never risk more than 5 % of your trading capital on one trade. Take responsibility for your own trades. If you are breaking any of the above rules STOP TRADING because you are out of control.
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Useful links
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[Link] [Link] [Link] [Link] [Link] [Link] [Link]
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Thank you
JRG Wealth Management Ltd. JRG House Ashoka Road Kaloor Cochin 682 017
Phone No: 0484 2409900
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