Why traders like to trade commodities?
In commodity the margin money is less than NSE. So with less margin money the trader believe they can earn more profit and that too the scripts trading in NCDEX are better known by the traders such as agro product. Some traders expect volatility in the market believing that they can earn the profit easily. We are not saying no one should trade in commodity market, but it is a risky one. Whether a stock market or commodity market trading with seriousness and do not trade for time pass. Think it is a business and then learn more about the market and then trade.
In Indian Commodity market the future and options which are called as derivatives only future is getting traded. The trader who is trading in commodity does not have the chance to know about the option. If they trade in NSE they might know about the option. To eliminate the losses that might happen in future due to changes in prices of an asset and in the derivatives, which is used as insurance of the asset the future and option trading is very much important. Crisply the future and option is used for hedging. But in MCX and NCDEX only the future is getting traded. We are not sure why option trading has not been implemented in MCX and NCDEX. Surely one day option trading will be included in MCX and NCDEX. The future and option will be fondly called as husband and wife. As the volatility of the Indian commodity market is also based on the international market, there is a need of option trading in commodity markets. If this is not done, then the volume will get reduced in both the exchanges day by day. That too the trader’s position will be very much critical if the option trading has not been introduced in the commodity market.
Option trading will be the limited loss and unlimited profit. The traders are getting maximum losses in commodity market where only future is getting traded. If option trading is available in commodity, then there is a chance of getting minimum loss for the traders. Also the traders who are trading in commodity market directly will not get a chance to know about the option. We cannot blame the traders for this, but the fact is that they do not get the correct guidance. For instance, last year the crude oil rose up from 5000 to 7700. The traders who trade the crude oil with a short position suffered a heavy loss. If there is an option in crude oil, then the trader can buy a call option and they can go for short. If they did this then the loss will be minimal for the traders. In derivatives buying a call option and going for short in the future and buying a put option and going for long in future is the correct way of hedging. But we do not done hedge like this. Our way is totally different. We can see that in the training session.