Posted on 7th Jun 2018
Commodity trading is nothing but trading in commodity spot and derivative Futures and Options. Commodity Options trading on MCX is recently launched in India. Retail investor should understand that the returns from commodity trading depends on price change of the respective commodity and it a variant of demand and supply. As the demand of any product increases, the price also increases and over supply of any product leads to fall in its price.
Commodity Trading in India can be done on the Commodity Exchanges. Multi-Commodity Exchange (MCX) and National Commodity and Derivative Exchange (NCDEX) are two major commodity exchanges in India along with other exchanges. Gold, silver, agri-commodities including grains, pulses, spices, oils and oilseeds, mentha oil, metals and crude oil are some of the commodities that these exchanges deal in. Gold is the most traded contract on MCX. There are different gold contracts available to trade in. Gold (The Big Gold),Gold Mini, Gold Guinea and Gold Petal.
Commodity Derivative market in India is regulated by SEBI. Margin money is required upfront to take positions in commodity future contracts. Margin percentage varies between 4% to 10% depending upon various factors.
You need a broker who is members of these commodity exchanges to trade in commodities. You have to open a separate account or request specifically ( in case of new account) separately (in case of existing account) to trade in commodity. Most full service brokers (like Sharekhan, Angel Broking, IIFL etc) offer commodity trading and add on services like research reports, tips & recommendations and relationship managers to facilitate your trading. Brokerage charge by them is percentage based on lot size. Discount brokers (like Zerodha, Upstox, Tradingbells, SAMCO etc) charge flat fee whether you buy 1 lot or 10 lots.
Commodity trading is not available with the brokers that are associated with Banks or providing 3 in 1 accounts. ICICIDirect, HDFC Securities, SBI Securities, Axis Direct doesn’t offer commodity trading.
Below you will see the best commodity brokers in the industry but we will recommend you to choose wisely based on your preferences:
Zerodha is the leading broker at present who you can trust and bank on for all your commodity trading needs. They have education to well designed trading platform to low brokerage, all you need for trading smoothly. Zerodha doesn’t allow you to get into the physical delivery of commodities. So you will be forced to close the position before 1st of the expiry month.
Benefits of commodity trading with Zerodha:
Angel Commodities Broking Pvt Ltd is a member of MCX & NCDEX and allows trading in all the commodities. Angel is a full service broker and provides all basic services like online trading, call and trade, tips and recommendations by special team of research analysts.
Benefits of commodity trading with Angel Broking:
ShareKhan is the leading full service broker offering equity and commodity trading on one platform. The broker offers commodities trading facilities on MCX and NCDEX at the brokerage of .1%.
Benefits of commodity trading with ShareKhan:
Tradeplus provide commodity trading in non-agri products at the lowest brokerage cost with monthly plan but doesn’t provide any RM, research, tips or recommendation.
Benefits of commodity trading with Tradeplus:
In contrary to equity settlement, in commodities the settlement is physical and therefore ‘delivery’ is compulsory. However you can square off your position on 1st of the expiry month to avoid physical delivery of commodity. In order to get the delivery of the commodity, one has to express his intention to do so. This has to be done any time before 4 days to expiry. So given that the expiry is on 5th, one has to express his intent to take delivery anytime on or before 1st.
Key Advantages of Commodity Trading: