Option trading in gold in india

In a fashion similar to shares, gold is an asset class by itself. In fact, in many villages and small towns of India, gold is preferred to bank deposits as a savings and investment instrument.

Till a year ago, to gain from price volatility, one would have to hoard and trade in gold physically.

Not any more, however. With the commodity futures market operating in full swing, one has the option of not physically stocking gold to gain from its price movements. Let us see how trading in futures is better than the option of hoarding gold. Firstly, there are several costs associated with the process of physically stocking gold.

The costs include the cost of the gold itself, the cost of carrying, cost of physical storage, finance cost and last, but not the least, the safety element. While futures might have some advantages, there is also a danger of losing big as your risks are also magnified and hence, one must tread carefully in this area. In this context, if the going cost of gold is Rs per 10 grams, with an investment of Rs 6 lakh, one can buy 1kg of gold. Now, suppose, three months hence, when the going price of gold is Rs 6, per 10 grams, the person decides to sell the gold.

The gross profit made by the person is Rs for every 10 grams and hence, for 1 kg, it stands at Rs 50, To arrive at the net profit, one would have to deduct the cost of financing; the cost of storage in a bank and transaction costs, including sales taxes.

In Indian exchanges, currently, futures contracts up to four months are available. Let this price be Rs Since a futures contract is an obligation to buy or sell a specific quantity of the commodity, one does not have to pay for the entire value of the commodity. Buying futures obligates one to take delivery of the underlying commodity at a particular date in the future. This is also known as taking a long position.

To trade in gold futures, one easy ways to make money with stocks to go to a option trading in gold in india house and open a trading account.

A trading account involves keeping an initial deposit of Rs 50, to Rs 1 lakh. Part m/s weizmann forex ltd the money accounts forex trader testimonials the margin money, which is required by the exchange when one enters trading.

For a high amount, however, the deposit amount is usually waived by the brokerage house. The whole investment is then generally treated as margin money. For commodity futures, there is usually a lot size or the minimum volume of option trading in gold in india commodity of which one has to buy a futures contract.

Thus, if the going futures rate is Rs 6, per 10 grams, the minimum trade spread forex of a contract is Rs 6,05, The beauty of a futures contract is that to trade in them, one has to only invest the margin money. Add to that, a brokerage amount, which is usually.

Applying these rates, which are prevalent in the market currently, a single lot of gold futures contract should come at around Rs 32, Thus, with Rs 6 lakh, one can buy 19 lots of gold futures.

Now, suppose that at the end of 3 months, the spot price of gold actually reaches Rs 6, per 10 grams. The novelty of the futures market is that as long as there is sufficient liquidity in the markets, the futures price always converges to the price of the under lying. Such is the leverage of futures, that with the same investment of Rs 6 lakh, one is work from home pune vishrantwadi commanding 19 lots of gold futures or in effect, 19 kgs of gold.

Thus, at the end of three months, assuming the above-mentioned course of events, on an investment of Rs 6 lakh, one can make a gross profit that is almost 17 times the profit made by physically stocking gold. At the same time, the downside risk is also multiplied.

To avoid the hassles of delivery, one must offset the futures contract just forex brokers by leverage the maturity date is reached.

Delivery would entail gold certification and accreditation by an exchange-appointed assayer and increased transaction costs in general, as various taxes come into the reckoning.

About Futures Trading in India

The above example is about a case of taking a bullish view on the price of gold and hence, gaining from the price rise by buying futures. One can gain from a futures market even by having a bearish view on the price of gold. This aspect of gain is absent in the physical market for gold. If one believes that the spot price of gold is going to fall in the near future, all he needs to do is to sell gold futures.

While all this seems pretty rosy, there are some things to be kept in mind. Firstly, any transaction in the futures market is possible only if a counter-party to the buy or sell order that is placed, exists.

For unusually large investments, the exchange may find it difficult to find a counter-party and so it may take some time to match it.

Also, with any futures, there may be a problem in exiting from a position by buying or selling when one would like to. Day Trading Day Trading is a process of capturing Intra-Day Volatility in highly liquid Stock and Index Futures!

List of securities permitted for futures and option trading in India

Any action you choose to take in the markets is totally your own responsibility. This information is neither an offer to sell nor solicitation to buy any of the securities mentioned herein. The writers may or may not be trading in the securities mentioned. All names or products mentioned are trademarks or registered trademarks of their respective owners. How to Trade Indian Gold Futures in India.

How to Trade Gold Futures in India The price of gold depends on a host of factors, which makes it very difficult to predict. Day Trading is a process of capturing Intra-Day Volatility in highly liquid Stock and Index Futures!

Capture short-term trends in Commodity Futures traded on both the NCDEX and MCX Commodity Futures Exchanges.