How can we help you?

1. Overview

You are here:
< All Topics

What is commodity?

Commodity Definition

In the trading business, various commodities and their derivatives are bought and sold. A commodity is any raw material or primary agricultural product that can be bought or sold, such as wheat, gold, or oil. By trading commodities, such commodities can diversify your portfolio.

Commodities are naturally occurring materials or goods that are collected and processed for human activity – such as oil, sugar, and precious metals. They are the basis of our economy because we need raw materials to produce food, energy, and clothing.

Goods are often mass-produced and standardized in terms of quality and quantity, meaning that their price is the same regardless of who makes them.

Commodity Trading in India

Commodities can be traded on the spot market or usually on Indian stock exchanges. Traders can engage in trading by buying and selling commodities on the spot or by entering into derivative contracts such as futures and options. Here, traders enter into contracts to buy or sell certain goods at a fixed price on a predetermined date. Regardless of whether prices are falling or rising, trades must be made according to the given prices and dates of the contracts purchased by the traders. In the case of futures contracts, the trade is a mandatory part of the contract, and the trader must buy or sell regardless of whether a profit is to be made or not.

Commodities trading in options contracts, on the other hand, gives traders the right to buy or sell commodities, but there is no obligation to complete the transactions. Commodities prices generally tend to move in the opposite direction to stocks. Therefore, commodity markets are a good way to hedge against stock market volatility. Additionally, you will see more activity in commodity markets when the stock market has periods of extreme volatility. Commodity prices are almost always dictated by demand and supply factors, as well as the economic and political conditions of each country (of course, supply and demand would be related to such variables).

Please open an account with us to trade in Commodity.

Was this article helpful?
0 out Of 5 Stars
5 Stars 0%
4 Stars 0%
3 Stars 0%
2 Stars 0%
1 Stars 0%
How can we improve this article?
Table of Contents

• Beware of fixed/guaranteed/regular returns/ capital protection schemes. Brokers or their authorized persons or any of their associates are not authorized to offer fixed/guaranteed/regular returns/ capital protection on your investment or authorized to enter into any loan agreement with you to pay interest on the funds offered by you. Please note that in case of default of a member claim for funds or securities given to the broker under any arrangement/ agreement of indicative return will not be accepted by the relevant Committee of the Exchange as per the approved norms.
• Ensure that pay-out of funds/securities is received in your account within 1 working day from the date of pay-out.
• Be careful while executing the PoA (Power of Attorney) – specify all the rights that the stock broker can exercise and timeframe for which PoA is valid. It may be noted that PoA is not a mandatory requirement as per SEBI / Exchanges.
• Register for online applications viz Speed-e and Easiest provided by Depositories for online delivery of securities as an alternative to PoA.

• Do not keep funds idle with the Stock Broker. Please note that your stock broker has to return the credit balance lying with them, within three working days in case you have not done any transaction within last 30 calendar days. Please note that in case of default of a Member, claim for funds and securities, without any transaction on the exchange will not be accepted by the relevant Committee of the Exchange as per the approved norms.

• Check the frequency of accounts settlement opted for. If you have opted for running account, please ensure that your broker settles your account and, in any case, not later than once in 90 days (or 30 days if you have opted for 30 days settlement). In case of declaration of trading member as defaulter, the claims of clients against such defaulter member would be subject to norms for eligibility of claims for compensation from IPF to the clients of the defaulter member. These norms are available on Exchange website at following link: NSE, MCX

• Brokers are not permitted to accept transfer of securities as margin. Securities offered as margin/ collateral MUST remain in the account of the client and can be pledged to the broker only by way of ‘margin pledge’, created in the Depository system. Clients are not permitted to place any securities with the broker or associate of the broker or authorized person of the broker for any reason. Broker can take securities belonging to clients only for settlement of securities sold by the client.

• Always keep your contact details viz. Mobile number/Email ID updated with the stock broker. Email and mobile number is mandatory and you must provide the same to your broker for updation in Exchange records. You must immediately take up the matter with Stock Broker/Exchange if you are not receiving the messages from Exchange/Depositories regularly.

• Don’t ignore any emails/SMSs received from the Exchange for trades done by you. Verify the same with the Contract notes/Statement of accounts received from your broker and report discrepancy, if any, to your broker in writing immediately and if the Stock Broker does not respond, please take this up with the Exchange/Depositories forthwith.

• Check messages sent by Exchanges on a weekly basis regarding funds and securities balances reported by the trading member, compare it with the weekly statement of account sent by broker and immediately raise a concern to the exchange if you notice a discrepancy.

• Please do not transfer funds, for the purposes of trading to anyone, including an authorized person or an associate of the broker, other than a SEBI registered Stock broker.

• Do not deal with unregistered intermediaries (who are not registered with SEBI/Exchanges).

We are here to assist you !
Fill out the form and Start Trading...