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Commodities Briefing - Category | Futures and Options more

China curbs commodity futures speculation

Posted on 05 May 2016 by VRS  |  Email |Print

Chinese regulators appear to have successfully popped a mini-bubble for now in steel and other commodity futures, scaring off speculators who piled in last month to drive steep gains in the prices of raw materials from coal to cotton.
China has vowed that it won’t allow its commodity futures markets to become a “hot-bed” for speculators, fearing that price movements not based on fundamentals could skew investment decisions and hamper efforts to rein in overcapacity………………………………………..Full Article: Source

Indian regulator Sebi may allow options in select commodities

Posted on 04 May 2016 by VRS  |  Email |Print

The Securities and Exchange Board of India (Sebi) is in talks with leading commodity exchanges about allowing options trading in select commodities. According to sources, the Multi Commodity Exchange might be allowed to introduce options in two metals, while the National Commodity & Derivatives Exchange (NCDEX) could be permitted options in two commodities from the oil complex.
“There is a vital need in the interest of the Indian economy to deepen the commodity derivatives market to attain the basis objectives of price discovery and provision of a platform for risk mitigation. The structural characteristics of options make them significantly attractive as a tool for price risk management.”……………………………………….Full Article: Source

Agricultural Commodities Egged On by China’s Futures Frenzy

Posted on 03 May 2016 by VRS  |  Email |Print

The recent fevered commodities trading in China hasn’t been limited to iron ore. Investors have piled into futures for everything from wheat and cotton to eggs and asphalt. As with industrial metals, analysts reckon much of the interest is coming from speculative investors who have been turned off to China’s stock markets by tighter rules over trading.
“Chinese speculators didn’t want to buy into the equity market with all the curbs, so they jumped into the commodity markets and it seems they’ve done so in massive style,” said Michael Coleman, managing director at RCMA Asset Management Pte………………………………………..Full Article: Source

China securities regulator orders major commodities exchanges to control futures speculation

Posted on 29 April 2016 by VRS  |  Email |Print

China’s securities regulator ordered the country’s major commodity futures exchanges this week to control speculative trading activity, sources told Reuters, after a surge in prices sparked fears of a boom-and-bust cycle.
In response, commodity futures exchanges in Dalian, Shanghai and Zhengzhou ordered major institutional investors that lack a commodities background to rein in their trading, three people with direct knowledge of the situation said. The sources didn’t define what was meant by a lack of background in commodities………………………………………..Full Article: Source

Speculative Bubble in China Commodity Futures Rattles Industry Players

Posted on 28 April 2016 by VRS  |  Email |Print

A surge of volatility in China’s once placid commodities futures markets has rattled industrial players who use them for hedging, with some taking losses or cutting exposure, driven out by a flood of speculative money from hedge funds and retail investors.
A herd of financial investors charged into commodities futures markets this year, throwing money into iron ore, rebar, cotton, and even egg futures, causing rapid spikes and leading many to warn of similarities with last year’s boom and bust in Chinese stocks………………………………………..Full Article: Source

Chinese commodity curbs hit iron and steel futures

Posted on 27 April 2016 by VRS  |  Email |Print

China’s heavily traded iron ore and steel futures slid Tuesday after curbs aimed to cut speculation came into effect. The most active iron ore contract on the Dalian Commodity Exchange closed down 6 per cent at 450.5 yuan a tonne, while steel rebar futures dropped 3.8 per cent to close at 2,554 yuan a tonne.
A wave of money has entered China’s commodities markets this month, on improved demand in the steel industry and expectations that China’s government would boost property and infrastructure construction………………………………………..Full Article: Source

Commodity futures lead charge in exchange-traded derivatives

Posted on 19 April 2016 by VRS  |  Email |Print

Exchanges hope to capture a larger share of derivatives trading, on demand from emerging markets. Trading in commodity and currency derivatives surged on the world’s exchanges last year as traders in emerging economies used futures to hedge themselves against rising market volatility.
Overall volumes for exchange-traded derivatives rose 12 per cent to 23.4bn contracts in 2015, the first increase in four years, according to annual data collated by the World Federation of Exchanges, a trade association for 200 market infrastructure operators………………………………………..Full Article: Source

Gold scores biggest quarterly gain in nearly 30 years

Posted on 01 April 2016 by VRS  |  Email |Print

Gold futures settled higher Thursday, scoring their best quarterly performance since 1986—a year when “Top Gun” was the most popular movie. Bullion has benefited as the Federal Reserve’s dovish stance on policy has softened the highflying U.S. dollar.
Prices for the most-active contracts saw a monthly gain of less than 0.1%—the smallest of the year, but gold jumped 16.4% in the first three months of 2016, its strongest quarterly showing since the third quarter of 1986, according to FactSet………………………………………..Full Article: Source

Sebi allows commodity derivatives trading in bourses at IFSC

Posted on 18 March 2016 by VRS  |  Email |Print

India’s markets regulator Sebi has allowed trading in commodity derivatives at stock exchanges operating in International Financial Services Centre (IFSC). The move comes after amendment was made under Securities Contracts Regulation Act to include commodity derivatives as securities.
The Securities and Exchange Board of India (Sebi) last year began regulating the commodity derivatives market as well. In a circular today, Sebi said “commodity derivatives shall be eligible as securities for trading and the stock exchanges operating in IFSC may permit dealing in commodity derivatives”. ……………………………………….Full Article: Source

India: Budget signals introduction of new commodity derivatives products

Posted on 01 March 2016 by VRS  |  Email |Print

While the FM did not specify products likely to be introduced, market participants expect the introduction of option contracts in commodity derivatives, similar to those available in equities. Finance minister Arun Jaitley on Monday indicated that the government plans to allow the launch of new commodity derivative products to help deepen the markets.
While the finance minister did not specify the products likely to be introduced, market participants expect the introduction of option contracts in the commodity derivatives market, similar to those available in the equities market. They also expect a wider range of indices to be introduced………………………………………..Full Article: Source

Lawmakers Urge Commodities Agency to Keep Plan to Limit Futures Contracts

Posted on 26 February 2016 by VRS  |  Email |Print

Lawmakers heaped criticism on an advisory committee report to the Commodity Futures Trading Commission recommending that the agency scrap its proposed rule on position limits in derivatives trading. The report and a dissenting opinion were presented at a meeting of the commission on Thursday.
The report, which was approved 8 to 1 by the Energy and Environmental Markets Advisory Committee, says that federally mandated position limits are not necessary and that the C.F.T.C. should not enact the rule it has been working on. It adds that if the agency goes ahead with the rule, it needs substantial changes………………………………………..Full Article: Source

Indian Regulator puts rider for commodity derivative reforms

Posted on 12 February 2016 by VRS  |  Email |Print

At an event here, P K Bindish, chief general manger at the regulatory body, the Securities and Exchange Board of India (Sebi), said: “We want the commodity futures market to bring risk management at par with the equity market before allowing new instruments and a new set of participants for hedging on commexes.”
This implies Sebi might not allow instruments like options and indices to trade on a commodity exchange till these mitigation facilities are in place. While the commexes claim to already have a strong risk management system already in place, the recent suspension of castor seed futures by the National Commodity & Derivatives Exchange (NCDEX) has restirred the issue………………………………………..Full Article: Source

Euronext Expands Commodity Derivatives

Posted on 29 January 2016 by VRS  |  Email |Print

Euronext is launching sugar futures this autumn, before quotas are abolished in the European market, as the exchange continues to grow its commodity derivatives franchise. The pan-European exchange operator is launching sugar futures, subject to regulatory approvals, ahead of the European Union abolishing sugar production quotas on 30 September 2017.
The European Union is the third largest sugar producer and the second largest consumer in the world according to Euronext. Sugar futures can already be traded on rival exchange ICE, the former owner of Euronext………………………………………..Full Article: Source

2016 to be a year of turnaround for commodity futures market

Posted on 28 December 2015 by VRS  |  Email |Print

After a stressful 2015, the coming year is likely to be one of turnaround for commodity exchanges, through introduction of new instruments and new classes of traders. The biggest event the comexes witnessed in 2015 was merger of its relatively less powerful regulator, the Forward Markets Commission, into the much stronger equity markets regulator, the Securities and Exchange Board of India (Sebi), effective September 28.
Right after, Sebi chairman U K Sinha said introduction of instruments like options and indices would be prioritised, to enhance depth in commodity derivatives market. Perhaps possible in the near future, he said………………………………………..Full Article: Source

Gold Futures Hold Near Three-Month Low on December Fed-Rate Bets

Posted on 12 November 2015 by VRS  |  Email |Print

Gold held near a three-month low on growing expectations that the Federal Reserve will increase interest rates in December. Odds that the central bank will raise rates next month have climbed to 66 percent, from 39 percent a month ago, according to Fed-fund futures data. A gauge of the dollar rose on Tuesday to the highest since at least 2005, curbing the appeal of bullion as an alternative asset.
Gold posted the biggest weekly drop in a year on Friday after a report showing U.S. payrolls surged in October, boosting the case for the Fed to raise rates. Chicago Fed President Charles Evans said on Tuesday he’d like the central bank to get back to a point where the federal funds rate is “trading comfortably at its neutral rate well above zero.”……………………………………….Full Article: Source

Gold logs lowest settlement in about 5 years

Posted on 12 November 2015 by VRS  |  Email |Print

Gold finished lower on Wednesday, closing at its worst level in about half a decade, as intensifying concerns about a rate increase weighed on the precious metal. December gold lost $3.60, or 0.3%, to $1,084.90 an ounce, after settling marginally higher on Tuesday at $1,088.50 an ounce. The yellow metal’s settlement Wednesday represents its lowest for a most-active contract since early 2010, according to FactSet data.
Expectations that next month the Federal Reserve will raise rates for the first time in nearly a decade have proved a drag on the price of commodities, particularly dollar-denominated assets like gold. Jim Wyckoff, senior market analyst at Kitco, said that the market has become “obsessed” with the prospect of the Fed raising rates in December………………………………………..Full Article: Source

Oil futures edge up to settle above $46 a barrel

Posted on 30 October 2015 by VRS  |  Email |Print

Oil prices edged higher to settle above $46 a barrel on Thursday, extending the more-than-6% rally they saw a day earlier, as bets on a slowdown in production grow. Natural-gas prices, meanwhile, ended lower as supplies moved closer to a record level.
December West Texas Intermediate crude tacked on 12 cents by the close, or 0.3%, to settle at a more-than-one-week high of $46.06 a barrel on the New York Mercantile Exchange. Prices jumped 6.3% on Wednesday, as a rise in crude stockpiles wasn’t quite as large as some expected and supplies of gasoline fell………………………………………..Full Article: Source

The Cost of Physical Gold vs. Futures

Posted on 23 October 2015 by VRS  |  Email |Print

Suppose you plan to buy gold, hold it 10 years, and sell it at the end. Is it more cost-effective to buy physical metal, store it, and sell it at the end? Or are you better off buying futures? It’s easy to calculate the cost of physical metal. If you buy at $4 over spot, that’s about 35 basis points (bps). You will also pay for storage an insurance, say 30 bps per year. In 10 years, you sell it at the spot price. Your total cost is about 3.3%.
If you started with enough to dollars to buy 400oz of gold, then at the end you would have dollars equal to about 386.8oz at the then-current price of gold. Futures contracts are more complicated. When you buy, there is almost no premium (10 or 20 cents). However, there is a commission of around $0.25 an ounce. So initially, you get more gold. See the graph above, zoomed in to show the small difference in cost between the two approaches to holding gold for 10 years and then selling it………………………………………..Full Article: Source

Oil suffers a loss of 24% for the quarter

Posted on 01 October 2015 by VRS  |  Email |Print

Oil futures tallied a loss of 24% for the third quarter, after ending Wednesday lower on the back of a report revealing the first U.S. crude-supply increase in three weeks. The report also showed a modest decline in domestic production, helping prices limit losses for the session.
November West Texas Intermediate crude settled at $45.09 a barrel, down 14 cents, or 0.3%, on the New York Mercantile Exchange, trading between a high of $45.85 and a low of $44.68, according to FactSet data. WTI prices, based the front-month contracts, lost 8.4% for the month and were 24% lower for the quarter. Year to date, they’re down by more than 15%………………………………………..Full Article: Source

CME sees first trades on European aluminum premium futures contract

Posted on 25 September 2015 by VRS  |  Email |Print

CME Group’s new Aluminium European Premium Duty-Unpaid (Metal Bulletin) futures contract saw its first trades on Tuesday, the day after the contract launched, the US exchange group said Thursday. A total of 10 futures contracts were traded at a price of $72.50/mt by Crunch Risk, CME said.
“We’re pleased to see early support for our new Aluminium European Premium futures, which are an outgrowth of our existing suite of aluminium risk management tools,” said Young-Jin Chang, CME Group senior director of metals products, in a statement………………………………………..Full Article: Source

U.S. regulators revise proposal on commodity position limits

Posted on 23 September 2015 by VRS  |  Email |Print

U.S. derivatives regulators are revising their proposal to limit the positions that traders can hold in commodity markets to make it easier for some hedge funds and banks to keep large trades. The Commodity Futures Trading Commission wants to allow financial firms to count their market positions separately from subsidiaries if the parent company says it does not control trading at the affiliate, according to a proposal issued on Tuesday.
Under revised rules, a company would simply be able to file a notice with the CFTC saying that it has no control over trading at a subsidiary and that firewalls are in place to prevent access to information, CFTC Chairman Timothy Massad said………………………………………..Full Article: Source

Sebi considers proposal on cross-currency futures pairs

Posted on 14 September 2015 by VRS  |  Email |Print

Punters could soon get to trade in cross-currency futures pairs at a much cheaper cost on local bourses. Capital market regulator the Securities and Exchange Board of India ( Sebi), which regulates currency derivatives jointly with the Reserve Bank of India (RBI), is mulling a proposal by stock exchanges to offer these pairs in addition to dollar- and eurorupee futures they currently offer.
“We are considering the proposal as we want to introduce new products and are in discussions with the RBI,” said a regulatory official aware of the development. “Once the central bank approves it, exchanges could launch cross-currency pairs like dollar-euro, dollar-pound and dollar-yen.” ……………………………………….Full Article: Source

Martin Currie long/short manager eyes commodities after sell-off

Posted on 11 September 2015 by VRS  |  Email |Print

Martin Currie’s European long/short manager Michael Browne is eyeing opportunities in commodities following the strong sell-off across global markets in August. The manager in charge of the Legg Mason affiliate’s European long/short strategy said the volatility during the summer months has presented buying opportunities and he has the flexibility to boost exposure.
Prior to the sell-off, the team adopted a cautious stance on expectations of a global slowdown, having cut net exposure in the fund to 26% in mid-August, in time to weather the market storm………………………………………..Full Article: Source

Get used to cheap oil, derivatives markets say

Posted on 20 August 2015 by VRS  |  Email |Print

Oil prices will stay low for years to come, derivatives markets say, keeping a lid on inflation and helping boost global growth. Oil has more than halved in value over the last year, thanks to huge oversupply, and many oil companies, particularly in the United States, say they may soon have to rein in production, tightening supply, unless the market recovers.
That has led many analysts to predict that oil - on average around 5 percent of companies’ costs - will see price rises later this year or in 2016, pushing up inflation. But oil derivatives tell another story………………………………………..Full Article: Source

Does gold have a future?

Posted on 11 August 2015 by VRS  |  Email |Print

Had gold peaked at $1,200-1,400 per ounce in 2012, its fall since then might not have been so hard to swallow for gold bulls. As I write this, gold spot price is being quoted at around $1,095 per ounce. The peak about three years ago was around $1,800 per ounce.
Gold bulls, such as yours truly, have been wrong for three years. Many bulls are frustrated and are ready to give up. Of course, capitulation on the part of remaining bulls will always mark a true bottom in any asset price. It is very evident that gold is the anti-dollar. Things are always clearer after the fact………………………………………..Full Article: Source

Oil Futures Signal Weak Prices Could Last Years

Posted on 10 August 2015 by VRS  |  Email |Print

The oil market is signaling that prices could stay lower for longer, delivering a fresh blow to hard-hit energy exploration-and-production companies. Benchmark U.S. oil futures for September delivery are nearing the six-year low hit in March. But contracts for delivery in later years have taken an even bigger hit, with prices for 2016 and 2017 already trading below their March lows. That indicates that investors, traders and oil companies see the global glut of crude oil persisting beyond this year.
Companies making long-term investment decisions rely on the prices of futures contracts one or more years in advance. Producers trade futures and options contracts for coming years to lock in prices for the oil they plan to sell in those years………………………………………..Full Article: Source

Oil Market Embraces Lower-for-Longer Price View as Futures Sink

Posted on 31 July 2015 by VRS  |  Email |Print

The global oil surplus increasingly looks like a problem that’ll take years rather than months to solve — and the market is pricing that in. U.S. crude futures for delivery in five years have broken below levels seen during the financial crisis. With leading OPEC members pumping at a record, supplies from elsewhere holding up and Iran close to reviving exports, the market is signaling the glut will persist.
The global oversupply has already prompted oil companies to warn that the price rout will continue. Royal Dutch Shell Plc said Thursday it’s braced for a “prolonged downturn,” echoing a forecast from BP Plc Chief Executive Officer Bob Dudley that prices will stay “lower for longer.”……………………………………….Full Article: Source

Chinese magnesium spot export offers slip on weak buying, domestic prices

Posted on 24 July 2015 by VRS  |  Email |Print

Spot export offers for Chinese magnesium ingot on a FOB basis slipped on prevailing weak overseas demand and lower domestic prices, industry sources said Thursday. Platts lowered its magnesium ingot (minimum 99.8%) price assessment to $2,120-$2,160/mt FOB China Thursday, down from $2,120-$2,180/mt on lower indications heard from the market.
The Chinese magnesium die-cast alloy price assessment was also lowered to $2,400-$2,440/mt FOB China from $2,400-$2,480/mt last week. “After weeks of holding steady at the floor price of Yuan 13,000/mt ($2,094/mt) ex-works, the domestic price finally gave in to pressure from weak demand and slipped to Yuan 12,900-Yuan 13,320/mt,” said a north China-based analyst………………………………………..Full Article: Source

Gold extends losing streak to four sessions

Posted on 15 July 2015 by VRS  |  Email |Print

Gold futures settled lower Tuesday. Disappointing U.S. retail sales data failed to keep prices from extending their losing streak to a fourth straight session. “Today’s gold price action is a case of the path of least resistance pointing to lower prices,” said Mike Armbruster, principal and co-founder at Altavest.
“Gold is approaching critical support around $1,150 and our expectation in the medium term is that gold is heading even lower,” he said. “Fundamental arguments for a longer-term bull market in gold are strong, but now is not the time to be overweight gold. Gold bugs need to be patient.”……………………………………….Full Article: Source

India: After 2 years, commodity futures market back in black

Posted on 13 July 2015 by VRS  |  Email |Print

After a gap of two years, the commodity futures market turned positive in the first three months (April-June) of the current fiscal, spurred by news about a deficient monsoon. However, bullion and other metals saw a bad quarter due to global factors. According to data on various commodity exchanges prepared by the Forward Markets Commission (FMC), total commodity futures trading grew by 15.8 per cent during April-June.
During the quarter, the maximum volumes were generated in energy items, such as crude oil, followed by agricultural and metal items. Food items such as chana, refined soya oil, jeera and rapeseed/mustard seed contributed a major share to the total value of trade in agricultural commodities, in non-food items, castorseed and guarseed contributed a big share in the commodity futures trading………………………………………..Full Article: Source

Gold marks highest settlement in over a week

Posted on 11 June 2015 by VRS  |  Email |Print

Gold futures finished higher for a third session in a row on Wednesday, marking a more than one-week settlement high as investors look toward upcoming U.S. economic data for clues on the timing of the Federal Reserve’s interest-rate hike.
Gold for August delivery on Comex rose $9, or 0.8%, to settle at $1,186.60 an ounce. That was the highest settlement for a most-active contract since June 2. July silver ended at $15.959 an ounce, little changed from a day earlier………………………………………..Full Article: Source

Brazil’s central bank reduces rollover pace of currency swaps

Posted on 11 June 2015 by VRS  |  Email |Print

Brazil’s central bank decided on Wednesday to reduce the rollover pace of currency swaps that mature early next month, a move that is likely to weigh on the Brazilian real.
The bank said in a statement it will auction on Thursday as many as 6,300 currency swaps to roll over similar contracts that mature on July 1. Since the beginning of the month, the central bank had been offering as many as 7,000 contracts per day………………………………………..Full Article: Source

India: Forward contracts in commodities find few takers

Posted on 10 June 2015 by VRS  |  Email |Print

Forward contracts in commodities launched in September 2014 to reduce speculative activity in the commodity market and draw genuine investors to the exchange platform have found few takers. Market participants blame it on structural issues in the product as it does not offer full trade guarantee and zero counter-party default risk, two essentials for any product traded on the exchange platform.
The fraud at the National Spot Exchange Ltd (NSEL) too has made entities wary of trading in any product where the bourse does not guarantee the trade, market participants say. According to the Forward Contracts (Regulation) Act, 1952, which regulates commodity trading in India, a “forward contract” is a contract for the actual delivery of goods unlike futures contract, wherein the buyer can opt for the contract to be settled in cash………………………………………..Full Article: Source

Should You Invest in Managed Futures?

Posted on 10 June 2015 by VRS  |  Email |Print

Investors who understand the benefits of diversification know that different asset classes often move in opposite directions. The very point of a diversified portfolio is to avoid making bets on a particular type of investment, like large-cap U.S. stocks, to the exclusion of others. Instead, the idea is to own different types of stocks, as well as bonds and alternative investments.
Alternatives, which include real estate and commodities, often show low correlation to stocks and bonds. Many advisors include alternatives in client portfolios to smooth returns and hedge against poor performance in more traditional investments………………………………………..Full Article: Source

Commodity futures traders making cautious bets through ’spread contract’

Posted on 09 June 2015 by VRS  |  Email |Print

Amid fears of poor monsoon and depletion of old stocks, a few wealthy investors have begun taking cautious bets in commodity futures like castorseed, jeera and coriander through a relatively new product to benefit from price volatility on farm bourse NCDEX.
Called a spread contract, the product lets a trader lock in a spread or price difference between a near and mid-month futures contract.If she believes the spread would widen, she simply buys the spread and if it’s expected to narrow, she sells the spread.Once the spread widens she offsets the position -sells and captures the difference………………………………………..Full Article: Source

Shackles off commodity derivatives trade

Posted on 07 May 2015 by VRS  |  Email |Print

China has more than tripled the number of central government-owned firms that are allowed to trade commodities derivatives overseas without needing the approval of regulators. The move will give the nation more clout in global markets for metals, energy and agricultural products.
About 100 more large government- backed firms are set to be permitted to trade in international futures, swaps and options markets the biggest expansion of the list in nearly 10 years. “This is one more step toward capital account opening,” said Grace Tam, a markets strategist at JPMorgan Asset Management in Hong Kong………………………………………..Full Article: Source

Gold Speculators Net Bullish Positions Virtually Unchanged Last Week

Posted on 04 May 2015 by VRS  |  Email |Print

Gold speculator and large futures trader positions were virtually unchanged last week as gold bullish bets hovered above +100,000 net contracts for a second week, according to the latest Commitment of Traders (COT) data released by the Commodity Futures Trading Commission (CFTC) on Friday.
The non-commercial futures contracts of Comex gold futures, traded by large speculators and hedge funds, totaled a net position of +101,257 contracts in the data reported through April 28th. This was a weekly change of just +12 contracts from the previous week’s total of +101,245 net contracts that was registered on April 21st………………………………………..Full Article: Source

Gold futures top $1,200 to settle at a two-week high

Posted on 28 April 2015 by VRS  |  Email |Print

Gold futures settled at their highest level in about two weeks on Monday, buoyed by weakness in the U.S. dollar as talks between Greece and its international creditors dragged on and investors awaited the outcome of this week’s Federal Reserve meeting.
Gold for June delivery on Comex GCM5, jumped $28.20, or 2.4%, to settle at $1,203.20 an ounce. Prices, which ended Friday at their lowest level in five weeks, haven’t settled at a level this high since April 10, based on the most-active contracts………………………………………..Full Article: Source

A Beginner’s Guide To Indian Commodity Futures Markets

Posted on 21 April 2015 by VRS  |  Email |Print

Skyrocketing food prices in 2007 and 2008 sparked riots in more than 40 countries and provoked a heated debate in academic and policy circles regarding the role of commodity futures markets in aggravating food price rise. In India, too, the government banned futures trading in several agricultural commodities in 2008 to control food inflation.
The Guide explains the rapidly changing and complex world of commodity futures markets with special emphasis on the Indian markets. It connects the dots, showing how the futures markets operate in India and globally. It aims to enhance the layman’s understanding of the intricacies of commodity futures markets in a historical and theoretical context…………………………………..Full Article: Source

Currency derivatives trading gains momentum

Posted on 30 March 2015 by VRS  |  Email |Print

Volumes in the currency derivatives space are up 80 per cent, compared with that at the start of the financial year. So far in March, the average daily volume for all exchanges combined stood at Rs 32,611 crore, compared with Rs 17,012 crore in April 2014. During this period, the open interest, too, has increased four-fold.
Market players attribute the lifting of trading curbs and stability in the currency as reasons for the gradual uptick in volumes seen in 2014-15. “We have seen a huge build-up of option positions. Regular trading interest in the currency derivatives has improved because of the expansion in the positional limits by the RBI (Reserve Bank of India). Volatility in the currency market has also been low,” said Kishore Narne, associate director and head (commodity and currency) at Motilal Oswal Commodity Broker………………………………………..Full Article: Source

The Beginner’s Guide to Natural Gas Futures

Posted on 26 March 2015 by VRS  |  Email |Print

Natural gas is often defined by its utilities. It generates electricity, heats homes, and fuels vehicles. Most investors are aware how natural gas is used. But not everyone understands how natural gas is traded. Today we’re going to break down what natural gas futures are and how they work in the commodities market. Knowing how it’s traded every day lets you understand how it’s priced and how to interpret movements in natural gas futures.
A natural gas future - like all commodities - is a contract obligating the buyer to purchase a specific quantity of natural gas at a future date and price. Delivery dates are set around the 15th day of the following month. Futures are priced per million British thermal units (BTUs) - one BTU is the amount of energy needed to change one pound of water by one degree Fahrenheit………………………………………..Full Article: Source

Currency derivatives’ turnover falls over 33% in February

Posted on 16 March 2015 by VRS  |  Email |Print

Currency derivatives turnover at the nation’s three bourses fell by more than 33 per cent to Rs 4.80 lakh crore during February over the preceding month. The three bourses - NSE, BSE and MCX-SX - together had recorded a currency derivative turnover of Rs 7.21 lakh crore in January 2015, latest data showed.
Currency derivative volumes on the three stock exchanges also plunged by nearly 33.45 per cent to 7.63 crore in February as against 11.46 crore in January, 2015. Currency derivative contracts allow investors to take position on change in the foreign exchange rates between pairs of two currencies, such as rupee and dollar………………………………………..Full Article: Source

Nasdaq Expands Global Commodities Initiative With Energy Derivatives

Posted on 13 March 2015 by VRS  |  Email |Print

Nasdaq announced the establishment of a new energy futures market with the support of leading commodities participants. Nasdaq Futures (NFX) will offer competitive pricing, an innovative clearing solution and high-performance technology for futures and options based on key energy benchmarks including oil, natural gas and US power, which will launch mid-2015 pending regulatory approval.
Nasdaq has secured support from prominent trading firms, inter-dealer brokers, and futures commission merchants (FCMs) to facilitate broad product distribution and early liquidity. Founding market participants include ABN AMRO Group, Advantage Futures, Goldman Sachs, JP Morgan, Morgan Stanley1 and Virtu Financial………………………………………..Full Article: Source

Speculators Continue To Shed Gold Futures But At Slower Pace — CFTC

Posted on 03 March 2015 by VRS  |  Email |Print

Speculative traders continue to be bearish the gold market but the pace of selling appears to be slowing, according to the latest data from the Commodity Futures Trading Commission.
According to the CFTC commitment of traders disaggregated report, futures gold net long positions declined for the fourth straight week, as of Feb. 24. Money-managed speculative gross long positions declined by 4,000 contracts, to 124,595. At the same time, speculative gross short positions increased by 2,205 contracts to 35,108. Gold’s net length now stands at 89,487 contracts………………………………………..Full Article: Source

How to Use Commodity Futures to Hedge

Posted on 26 February 2015 by VRS  |  Email |Print

Futures are the most popular asset class used for hedging. Strictly speaking, investment risk can never be completely eliminated, but its impacts can be mitigated or passed on. (Related: A Beginner’s Guide to Hedging) Hedging through future agreements between two parties has been in existence for decades.
Farmers and consumers used to mutually agree on price of staples like rice and wheat for a future transaction date. Soft commodities like coffee are known to have standard exchange-traded contracts dating back to 1882. Let’s look at some basic examples of the futures market, as well as the return prospects and risks………………………………………..Full Article: Source

How can options trading gain ground in commodities ?

Posted on 24 February 2015 by VRS  |  Email |Print

The commodities futures market underwent changes in 2003 with many policy reversals. But option-based derivatives are yet to gain ground in commodities. Though the Forward Contract (Regulation) Bill, 2010, has provisions for option trading, its execution requires considerable attention from the regulator, commodity exchanges and market participants.
The government can replace the price support scheme with minimum guaranteed price (MGP). Policy makers are passive on the adoption of option-based trading despite the benefits. Option can be over-the-counter and exchange-traded. Similar to the futures, option requires at least two parties to exercise the contract. Exchange-traded option can help to mitigate counter-party credit risk as the contract will be more standardised in nature………………………………………..Full Article: Source

Futures Exchange-Traded Funds

Posted on 19 February 2015 by VRS  |  Email |Print

Investing in commodities has grown more popular in last few years and today they find a place in any well-diversified portfolio. Exchange-traded funds (ETFs) offer multiple benefits like diversification, professional money management of a mutual fund, and real-time trading of a stock listed on an exchange. Commodity ETFs provide an efficient mode of investing and trading commodities and come in three flavors:
Physical-based ETFs: Such funds invest directly in physical commodities like gold, crude oil, or grains, while bearing the additional cost of transport, storage, and security. Equity-based ETFs: These invest in stocks of commodity-based companies, such as shares in oil companies like Royal Dutch Shell (RDS-A). Such ETFs avoid the hassles of commodity storage and operational issues. However, they carry stock-specific and overall market risks………………………………………..Full Article: Source

Copper Futures Decline Most in a Week on Chinese Housing Data

Posted on 18 February 2015 by VRS  |  Email |Print

Copper futures fell the most in a week after a report showed declining property prices in China, the world’s largest metal user. New-home prices fell in 64 out of 70 cities in January, Chinese government data showed on Tuesday. That signaled an interest-rate cut in November, the first since 2012, hasn’t revived construction yet. Property accounts for about half of China’s copper demand, according to Goldman Sachs Group Inc.
“More and more reports are indicating that the slowdown is not getting any better,” Mike Dragosits, a senior commodity strategist at TD Securities in Toronto, said in a telephone interview. “Prices will probably remain under pressure until we see China taking some aggressive steps to boost growth.”……………………………………….Full Article: Source

Commodity ETFs Vs Futures: Different Exposure, Different Price

Posted on 18 February 2015 by VRS  |  Email |Print

Long Only Commodities as an asset class has been plummeting since around April last year, and the downtrend continues into 2015. The average move of commodity futures in January came out to be -5.02%, compared to ETFs -7.54%, with ETFs underperforming the futures markets they supposedly track by 2.52% {Past performance is not necessarily indicative of future results}.
Here’s our monthly look at: 1. How the numerous commodity ETFs which have sprung onto the scene the past few years are tracking a simple strategy of just buying the December futures market of that commodity, under the theory that the ETF will have to roll their positions periodically throughout the year, and in doing so take on costs the simple strategy does not have………………………………………..Full Article: Source

Gold Futures Approach $1,300 to Post Longest Rally in 11 Months

Posted on 21 January 2015 by VRS  |  Email |Print

Gold futures approached $1,300 an ounce to post the longest rally in 11 months as signs of slowing global economies boosted demand for the metal as a haven. Assets in the SPDR Gold Trust, the biggest exchange-traded product backed by the metal, last week rose 3.3 percent, the most since May 2010.
Economists expect European Central Bank President Mario Draghi to make his biggest push yet to steer the euro area away from deflation by announcing quantitative easing on Jan. 22, according to a Bloomberg survey………………………………………..Full Article: Source

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