Trade Beyond 3.30 PM in Commodity Derivatives

The Indian financial market gives ample opportunities to investors to trade in different asset classes with varied trade timings. The Indian equity market operates from 9.15 AM - 3.30 PM and commodity derivatives from 9.00 AM - 11.30 / 11.55 PM depending upon daylight savings. Extended trading hours in commodity derivatives is a boon for the traders to take advantage of the market movements and also capture trends of the global markets. 

Major advantage of trading in different asset class is portfolio diversification. The english proverb, "Don't Put All Your Eggs in One Basket," indicate that don't rely on one investment vehicle because any unforeseeable occurrence can undermine the entire investment. As a result, diversification of your portfolio among several asset classes such as equities, commodities, bonds, etc. protects you against the unanticipated market movement in one or more asset classes. Various studies have shown that equity ad commodity are less correlated. Similarly, a low correlation has been observed between equity and non-equity asset classes.

With volatility usually being higher during an evening trading session in the commodities and particularly after opening of the U.S. markets, you may get an opportunity to trade on price movement in commodity derivatives. Commodity contracts available at Indian exchanges are designed on the basis the contracts traded at global exchanges however with some modifications, for e.g. size of the contracts are smaller, that  are designed to suit the domestic market participants such as investors, hedgers and abritrageurs. Hence, the movement in the global benchmark commodities are captured on the same day. More importantly,  volume in the commodity segments such as bullion, energy and base metals at Indian exchange takes place during evening trading sessions. Commodity Futures were introduced in 2003 and Commodity Options in 2017.

If you are trading in the equity cash segment and plan to start trading in derivatives—Futures and Options—you are required to activate the segments by submitting your income proof such as financial statement i.e., IT Returns or Demat Statement or Bank Statement of last 6 months. 

Advantages of trading beyond 3.30 PM

• Commodity segment one gets an addition trading window of approx. eight hours after 3:30 PM.
• Since all three segments, i.e. Equity and Commodity are regulated by SEBI, you are allowed to trade in all these three segments with a single Unique Client Code and same bank account.
• Unutilized amount from the equity segment could be used for trading commodity derivatives. With just one click, amount could be transferred to commodity segments.
• Commodity trading hours:

      1. Internationally linked non-agri commodities (Bullion, Energy and Base Metals) - 9.00 AM to 11.30 / 11.55 PM
      2. Internationally linked agri commodities(CPO, Cotton)-9.00 AM to 9.00 PM
      3. Other agri commodities (Mentha Oil, etc.)-9.00 AM-5.00 PM

• Since commodity derivatives are low margin, high leverage products, it facilitates investors and traders to   hold their positions by paying smaller amount as margin and premium in Futures and Options respectively.
• Availability of different variants of contracts in commodity derivatives provide an opportunity to different participants, like retail traders, manufacturing units, corporates, etc. One can take a position in gold by just paying Rs 500 as margin per lot in 1 gm of GOLD Futures. A jeweller may take position in higher value contracts like 100 gms or 1 Kg as per the requirement. Other variants in gold include 8 gms, 100 gms and 1 Kg contracts. Similarly for silver, there are three variants, viz; 1 Kg, 5 Kgs and 30 Kgs contracts.

Advancement in technology and usage of UI and UX has provided a state-of-art trading platform. Now investors can trade from anywhere, any device, i.e. from laptop, desktop or mobile. To start trading, open demat account with ICICI Direct.

Also Read: Exchange trading derivatives - ETD meaning types and features

Summary

The Indian financial market is one of the best examples of giving good opportunities to traders and investors to leverage on different asset classes. Few unique features like extended trading hours, variants in contracts, global demand and supply and other factors have been catalyst in reposing confidence of retail traders in commodity derivative segments.

Disclaimer: ICICI Securities Ltd. registered office of is at- ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. ICICI Securities is a Member of National Stock Exchange of India Ltd (Member Code :07730), BSE Ltd (Member Code :103) and Member of Multi Commodity Exchange of India Ltd. (Member Code: 56250) and having SEBI registration no. INZ000183631. Name of the Compliance officer (broking): Mr. Anoop Goyal, Contact number: 022-40701000, E-mail address: complianceofficer@icicisecurities.com. Investment in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents herein above are solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments or any other product. Investors should consult their financial advisers whether the product is suitable for them before taking any decision. The contents herein mentioned are solely for informational and educational purpose.