A

Study on

Functioning of Multi-

Commodity Exchange (MCX)

In India and trading pattern in the

Exchange and its benefits

Submitted to: Submitted By:

Dr. Jyothi Badri Pankaj Kumar
Scientist PGDMA1011
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 Certificate
This is to certify that Pankaj Kumar, a bonafide student of Post
graduate Diploma management in Agriculture (2010-2012), NAARM,
Hyderabad participated as a summer trainee of your company for the
period April15th - June12th. He has successfully completed his summer
project titled “Study of functioning of Multi-commodity Exchange
and trading pattern in the exchange and its benefits” towards the
partial fulfillment of requirements for the course.

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 Acknowledgement

I am grateful to MCX for providing me the opportunity to work on this

project. It was a great experience for me to learn the real life situation in
commodity exchange. My experience from this project is ineffable and it
has certainly broadened my knowledge arena by introducing me to the
practical problems that one faces in the industry, which is so different
from the classroom learning that we are subjected to in the institutes. It
has also helped me to learn how to tackle problems and also how to deal
with people, in different spheres.

I feel indebted to my guides Mr.Tripurari Pathak and Mr. Surendra kumar

Pandey and for their wholehearted guidance throughout my project work.
I am also thankful to the farmers and dealers of districts surveyed for
their support and cooperation in making my project a successful one.
Last but not the least; I take the opportunity in expressing my sincere
gratitude to Director Dr.P.K.Joshi, Joint Director Dr.N.H.Rao and Course
coordinators Dr.G.P.Reddy, Dr A.Dhandapani and my project mentor
Jyothi Badri who were instrumental in facilitating my association with
MCX for carrying out the projects as per the schedule.

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 History of commodity exchange in India:

Organized commodity derivatives in India started as early as 1875, barely

about a decade after they started in Chicago. However, many feared that
derivatives fuelled unnecessary speculation and were detrimental to the
healthy functioning of the markets for the underlying commodities. As a
result, after independence, commodity options trading and cash
settlement of commodity futures were banned in 1952. A further blow
came in1960s when, following several years of severe draughts that
forced many farmers to defaulted forward contracts (and even caused
some suicides), forward trading was banned in many commodities
considered primary or essential. Consequently, the commodities
derivative markets dismantled and remained dormant for about four
decades until the new millennium when the Government, in a complete
change in policy, started actively encouraging the commodity derivatives
market. Since 2002, the commodities futures market in India has
experienced an unprecedented boom in terms of the number of modern
exchanges, number of commodities allowed for derivatives trading as
well as the value of futures trading in commodities, which might cross the
$ 1 Trillion mark in 2006. However, there are several impediments to be
overcome and issues to be decided for sustain abled development of the
market. This paper attempts to answer questions such as: how did India
pull it off in such a short time since 2002? Is this progress sustainable and
what are the obstacles that need urgent attention if the market is to realize
its full potential? Why are commodity derivatives important and what

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could other emerging economies learn from the Indian mistakes and
experience? The Indian economy is witnessing a mini revolution in
commodity derivatives and risk management. Commodity options trading
and cash settlement of commodity futures had been banned since 1952
and until 2002 commodity derivatives market was virtually non-existent,
except some negligible activity on an OTC basis. Now in September
2005, the country has 3 national level electronic exchanges and
21regional exchanges for trading commodity derivatives. As many as
eighty (80) commodities have been allowed for derivatives trading.

About MCX:
Overview:
Headquartered in Mumbai, Multi Commodity Exchange of India Ltd
(MCX) is a state-of-the-art electronic commodity futures exchange. The
demutualised Exchange set up by Financial Technologies (India) Ltd
(FTIL) has permanent recognition from the Government of India to
facilitate online trading, and clearing and settlement operations for
commodity futures across the country.

Having started operations in November 2003, today, MCX holds a market

share of over 80% of the Indian commodity futures market, and has more
than 2000 registered members operating through over 100,000 trader
work stations, across India. The Exchange has also emerged as the sixth
largest and amongst the fastest growing commodity futures exchange in
the world, in terms of the number of contracts traded in 2009.

MCX offers more than 40 commodities across various segments such as

bullion, ferrous and non-ferrous metals, and a number of agri-
commodities on its platform. The Exchange is the world's largest
exchange in Silver, the second largest in Gold, Copper and Natural Gas
and the third largest in Crude Oil futures, with respect to the number of
futures contracts traded.

MCX has been certified to three ISO standards including ISO 9001:2000
Quality Management System standard, ISO 14001:2004 Environmental
Management System standard and ISO 27001:2005 Information Security
Management System standard. The Exchange’s platform enables
anonymous trades, leading to efficient price discovery. Moreover, for
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globally-traded commodities, MCX’s platform enables domestic
participants to trade in Indian currency.

The Exchange strives to be at the forefront of developments in the

commodities futures industry and has forged strategic alliances with
various leading International Exchanges, including Euronext-LIFFE,
London Metal Exchange (LME), New York Mercantile Exchange,
Shanghai Futures Exchange (SHFE), Sydney Futures Exchange, The
Agricultural Futures Exchange of Thailand (AFET), among others. For
MCX, staying connected to the grassroots is imperative. Its domestic
alliances aid in improving ethical standards and providing services and
facilities for overall improvement of the commodity futures market.

Key shareholders

Promoted by FTIL, MCX enjoys the confidence of blue chips in the

Indian and international financial sectors. MCX's broad-based strategic
equity partners include NYSE Euronext, State Bank of India and its
associates (SBI), National Bank for Agriculture and Rural Development
(NABARD), National Stock Exchange of India Ltd (NSE), SBI Life
Insurance Co Ltd, Bank of India (BOI) , Bank of Baroda (BOB), Union
Bank of India, Corporation Bank, Canara Bank, HDFC Bank, Fid Fund
(Mauritius) Ltd. - an affiliate of Fidelity International, ICICI Ventures,
IL&FS, Kotak Group, Citi Group and Merrill Lynch.

Future trading:
Future trading is an investment and like all investments, there is a decent
amount of risk involved. However, many people over look this risk
because of the profit that is involved with future trading. The fact is,
according to some of today's most experienced investors, futures can be
one of the largest profit makers for an investor, when done
correctly. There are examples of people turning a few thousand dollars
worth of profit into a few million over a few years time. There is money
to be made in futures trading, though the amount is really up in the air.

When you consider futures trading, you must consider your experience
and abilities. For most people, reaching this level of success is going to
be difficult to do. You should realize that the money you invest could be
wiped out. Yet, even as there is this risk, once you understand how to
invest in futures, you do have the ability to make money there. The key
is to know where the money is and how to invest in it.

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 Another of the differences between the futures market and the stock
market is that they are not tied to each other. Futures are not traded on
the stock market as stocks are. There are futures markets throughout the
world that are used regularly for investment opportunities. Some of the
most well-known include the New York Cotton Exchange, the Chicago
Mercantile Exchange, and the Chicago Board of Trade, just to name a
few. There is also a variety of types of markets that you can invest
in. Some of those include:

 Agriculture: One of the largest futures markets, usually in the soybean,

corn, and wheat areas
 Interest rate futures: A growing market that focuses quite a bit on
financial transactions, on bonds and on interest rates themselves

 Current trading: Perhaps the largest of all of the futures markets, the
current trading market is lucrative but hard to learn. The most common
here is FOREX or foreign exchange trading

 Foods futures: Food markets are wide, they do regularly include orange
juice, sugar and coffee, as well as many other foods

 Energy futures: A lot of talk in recent months has been on energy
futures, which take into account the prices of oil and gas, as well as other
fuel sources.

Futures trading are a wide field that takes time to learn and get to
know. Nearly all investors caution against just jumping in without a
knowledge base in this financial sector. Study the market for some time
to understand how it works and what makes it profitable, or not. Also,
invest time in finding futures that work for your specific goals and
interests. Learning more about futures trading can help you make better
investment decisions in this growing field.

One of the biggest differences between future trading and stock market
trading (or even bond buying and trading) is that you do not own
anything with futures. With the stock market, you own a small piece of
the company, which you are buying, selling or holding on to. With future
trading, you are looking at and speculating on the future direction the
commodity's price will head. Consider it like a bet. You are placing a

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bet on where the commodities price will move, up down, or stay the same
in the future. You will hear the terms buying and selling used with
futures trading. When you buy or sell with futures, you are indicating the
direction you expect the prices will go.

In order to get involved with futures trading, you will need to open
a brokerage account and invest money into the account to work as your
deposit. If you make money, money is added to your account, while if
you lose money, this deposit is used to pay the losses that you have made
on the "bet" or trade you have made. You may ask, why should anyone
invest in such a simple bet? There are many reasons for this but it is
often best to use an example. A farmer, for example, may be looking to
sell futures on his next crop. He would do this if he thinks that the price
of the crop will drop before the harvest of it comes. The manufacturer of
that crop may plan to buy futures if they believe the price of the crop is
going to rise before the crops are harvested. Consider future trading to be
like an insurance protection for the investors. It helps them to manage
what they believe is going to happen with the commodity. In this
example, no matter which way the price moves, the farmer and the
manufacturer are guaranteed their price will be met.

There is also the investor who plays a role in this scenario. The investor is
working to make good decisions on what he believes will happen with the
prices. The investor in futures is looking for future market changes that
are happening. When he notices how the prices are change, he or she can
take advantage of this by either buying or selling at a profit.

Future Traders :
One of the biggest differences between future trading and stock market
trading (or even bond buying and trading) is that you do not own
anything with futures. With the stock market, you own a small piece of
the company, which you are buying, selling or holding on to. With future
trading, you are looking at and speculating on the future direction the
commodity's price will head. Consider it like a bet. You are placing a
bet on where the commodities price will move, up down, or stay the same
in the future. You will hear the terms buying and selling used with
futures trading. When you buy or sell with futures, you are indicating the
direction you expect the prices will go.

In order to get involved with futures trading, you will need to open

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a brokerage account and invest money into the account to work as your
deposit. If you make money, money is added to your account, while if
you lose money, this deposit is used to pay the losses that you have made
on the "bet" or trade you have made. You may ask, why should anyone
invest in such a simple bet? There are many reasons for this but it is
often best to use an example. A farmer, for example, may be looking to
sell futures on his next crop. He would do this if he thinks that the price
of the crop will drop before the harvest of it comes. The manufacturer of
that crop may plan to buy futures if they believe the price of the crop is
going to rise before the crops are harvested. Consider future trading to be
like an insurance protection for the investors. It helps them to manage
what they believe is going to happen with the commodity. In this
example, no matter which way the price moves, the farmer and the
manufacturer are guaranteed their price will be met.

There is also the investor who plays a role in this scenario. The investor is
working to make good decisions on what he believes will happen with the
prices. The investor in futures is looking for future market changes that
are happening. When he notices how the prices are change, he or she can
take advantage of this by either buying or selling at a profit.
Hedgers
Hedgers are investors who have an interest in the underlying asset being
traded (gold, oil, metal, farm products, etc.). Speculators are investors
who are looking to profit by predicting market fluctuations and opening a
derivative contract -- or trading the asset on paper, in popular parlance.
Typical hedgers include people involved in a variety of businesses,
including commercial farming. Market values for various farm products,
including corn, wheat and other products are in constant flux as the
supply and demand for these products rises and falls, with sporadic big
moves up or down. Based on existing prices and predictions made around
harvest time, a commercial farmer may determine that he should plant
corn one season.
However, forecasted prices are only predictions, and there is no surety
that they'll come true. Once a farmer decides to plant corn, he is stuck
with that corn for that growing season, regardless of how price may
change. If corn prices rise between planting and harvest, he'll reap a big
profit. If prices plummet, he could face heavy losses.
To offset this risk, the farmer could sell corn futures contracts at planting
time, which locks in the price of corn at the time the contract is sold. The

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futures contract obligates him to deliver a set number of bushels of corn
at a specified future date for the specified price. While the farmer gives
up the opportunity to make a big profit at harvest time, he also eliminates
the chance that he'll be ruined by a large dip in the corn price.
Speculators
On the other hand, speculators seek to profit from rises and falls in the
price of the underlying commodity. A speculator who believes a
commodity's price will increase will buy futures contracts on the premise
that he'll be able to sell them later for a higher price. In trading parlance,
this is called going long. A trader who thinks a commodity's price will
decline will sell futures contracts, hoping to buy identical commodities
later at a decreased price. This is called going short. Because money can
be made from buying or selling, futures trading that is particularly
attractive to investors.
Both hedgers and traders rarely take delivery of their contracts. Most
speculators have no desire to take or make delivery of 10,000 barrels of
oil, or 2,000 bushels of corn. Most speculators take their profits and their
losses by selling or buying offsetting futures contracts before the
expiration date of their futures contract. Selling off a contract that was
purchased earlier closes out a futures position in pretty much the same
manner that selling off 1,000 shares of a stock liquidates the prior
purchase of 1,000 shares of the same stock. A futures contract that was
sold earlier can be liquidated by offsetting it with the purchase of another
futures contract. The trader's loss or profit is in the difference between the
buying and selling price.
Delivery rare
Hedgers also rarely take or make actual delivery. Most hedgers instead
find it more convenient to close out their positions, and if they profit, to
then use that money to offset any adverse price change transpiring in
the cash market for the underlying asset. When delivery does occur, it's in
the form of a receipt or voucher that documents the holder's ownership of
the underlying asset.
Delivery does occasionally happen, and the provision exists primarily to
help ensure that futures prices accurately reflect the value of the
underlying asset in the cash market when the contract expires. This
convergence is important to the purpose of the futures market, which is to
help set realistic prices and to allow a means to obtain protection against
adverse changes in cash market prices.

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Hedging and speculation are the yin and the yang that keep the futures
market moving, helping it fulfill its purpose in helping offset potential
losses and to help establish accurate prices for commodities. Futures
trading is not for newbie investors, so if you're a farmer or producer
who's looking to hedge, or an investor who is looking to make profits
trading, make sure that you understand the intricacies of the futures
market before wading into it.

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Commodity Ecosystem:

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 Commodity Market Structure:

Spot Market
Quality
Certification
Agencies Hedger
Warehouses (Exporters/
Millers/

Producers
m Commodities (Farmers/
Clearing Ecosystem Co-
Bank MCX

Traders
Transporters (Speculators
/ )
Support
Consumers
Retail

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Indian commodity market – set for paradigm shift

• Four licenses recently issued by Govt. of India to set-up

National Online Multi Commodity Exchanges – to ensure a
transparent price discovery and risk management mechanism
• List of commodities for futures trade – increased from 11 in
1990 to over 100 in 2003
• Reforms with regard to sale, storage and movement of
commodities initiated
• Shift from administered pricing to free market pricing – WTO
regime
• Overseas hedging has been allowed in metals
• Petro-products marketing companies have been allowed to
hedge prices
• Institutionalization of agriculture

India’s Place in World Market:

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Business Potential:

Futures trading are becoming increasingly popular among investors as the

rising price of commodities and volatility in commodities markets make
futures trading an attractive investment option. The futures market has
grown in the past few decades as investors have become more
sophisticated and as information technology has made futures trading
more accessible to the investing public.

Another key attraction to the futures markets are their ability to allow
someone with limited capital resources to earn a lot of money in a
relatively short amount of time. The market is also fraught with risk, and
many who have bet their nest egg on it have ended up severely
disappointed. In the late 1970s only about 14 million futures contracts
were traded per year. In 2009, more than a billion futures contracts
changed hands worldwide. These numbers are a testament to the growing
popularity of the futures market.

There are a vast number of commodities that are traded on the futures
market. Some of the more popular futures traded include oil, currency,
metals and farm products.
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While futures trading may appear rather arcane to the weekend warrior
investor, the market can be understood once you grasp some basic
fundamental concepts. Futures trading are basically a clearing house and
auction market for real time information about the supply and demand of
various commodities.

Commodities are goods which are in demand, but which is supplied

without qualitative differentiation throughout a market. This means that
no matter who produces it, the product is the same. Some examples of
fungible products that would fit this definition are oil, wheat or lead. The
price of lead is the same no matter who produces it, and the price
fluctuates up and down daily based on worldwide supply and demand.
Plasma televisions, on the other hand, are qualitatively different in that
their price and perceived quality varies according to the producer (A
Sanyo television may sell for a different price than an RCA.)

The purpose of trading futures is to provide a means for managing price

risks in the commodities being traded. When a trader buys a futures
contract, he is helping the overall market to set a price level for items that
will be delivered at a date in the future. This helps various other interests
insure against changes in price that would be detrimental to their bottom
line. The futures market is beneficial to consumers and producers overall
because it helps establish timely information about supply and demand
and reduces the costs of production, marketing and processing.

There are generally two groups of futures traders. Traders who seek to
make profits by predicting how the market will move, upward or
downward, and then purchasing a contract on a commodity in line with
this prediction. The trader does not intend to make use of the commodity,
nor will he make or take delivery.

The purpose of futures trading is simple; it provides an effective and

efficient means of managing price risks in commodities. When you
purchase a futures contract, what you're essentially doing is setting a
price level now for items that will be delivered at a later date. This
effectively provides individuals and companies insurance against adverse
fluctuations of price, a practice known as hedging.

Hedgers are traders whose business may have an interest in the

commodity and are looking for a way to buy or sell it at a price that's
favorable to them. For example, an airline company seeing rising fuel
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prices may enter into a contract to buy fuel for the current going rate three
months from now, expecting that by then the going rate will actually be
much higher.

When you buy a futures contract, you're making an agreement to either

buy or sell a determined amount of a specific commodity at a pre-
determined price in the future. In a lot of futures contracts, the underlying
deal is based on the expectation that the terms of the contract will be
satisfied by the actual delivery of the commodity. Many futures contracts
instead ask for a cash settlement instead of delivery and these contracts
are usually liquidated before the contracts' due date.

There are also a number of refinements that can be purchased in futures

contracts. Investors can further limit their risk -- for a price -- by buying
options on futures contracts. When you buy an option on a futures
contract, you purchase the right, but not the obligation, to buy or sell a
futures contract during a certain window of time. Because you're not
obligated to the contract, your risk is less, but so is your potential for
profit because of the cost of the option.

Futures markets are a great investing opportunity for experienced

investors, but novice investors should seek experienced financial advice
or take steps to thoroughly educate themselves in the field before
venturing into futures trading because of the high level of risk involved.

To Open A Long Position:

If you believe a commodity or financial instrument's value is going to
increase, you can make a profit on the eventual rise of this underlying
asset by adopting a long position in the futures market. In simple terms, a
long position is a bet that the value of the underlying asset being traded
will increase. Like any other investment, adopting a long position in the
futures market involve some risk. But with experience and good research,
you can stack the odds more highly in your favour.

When you take a long position in the futures market, you're basically
buying a futures contract with the expectation that the underlying asset
will rise in value by the delivery date of the contract. Non-speculative
buyers also take up long positions. These traders buy futures contracts to
lock in a current price on a commodity because they believe that
commodity's price will jump by the time they take delivery on the
contract. For example, a trucking company, expecting a spike in gasoline

17
prices, may enter into a futures contract for fuel in order to lock in a
lower price than what they're predicting for the future.
To open a long position in the futures market, you need a trading account
on a futures exchange. There are several futures markets around the
country, with perhaps the most prominent one being the CME Group. The
CME Group was formed in 2007 after a merger of two other futures
exchanges. CME also recently acquired the NYMEX, or New York
Mercantile Exchange, the world’s largest physical commodity exchange.
Billions of dollars’ worth of agricultural commodities, energy products,
metals and other commodities are traded in the CME Group each year.
These commodities can be traded on the exchange floor or through
electronic trading systems.

Going long on futures:

An investor decides to go long on a near-month wheat futures contract
valued at about $20 per bushel. The contract is for 1,000 bushels, so the
contract is worth $20,000. If you're trading on margin, you won't be
required to pay the full value of the contract. Instead, you'll put up about
$5,800 on the contract to open a long position.

For our purposes, let's say that the price of wheat increases to $25 per
barrel in before the delivery date on your contract. Your contract is now
worth $25,000. If you sell, you can leave your long position and realize a
profit of about $5,000 before taxes. Although the price of wheat has only
bumped up about 20 percent, you've realized a much larger return on
investment because you only had to pony up $5,800 to get control of the
1,000 bushels of wheat.
However, let's say the market went against you. If the price of wheat had
dropped, you would have had to cover the margin requirements in order
for you to keep your long position open in a margin call.
How margin calls impact futures contracts:

When an investor has $10,000 in his trading account. The investor then
decides to purchase a wheat futures contract valued at about $15 per
barrel. The contract is for 1,000 bushels of wheat and the initial margin is
$8,000 and the maintenance margin is about $7,000. Because the investor
has $10,000 in his account, he has sufficient funds to open a long
position.

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Unfortunately for the investor, the price of wheat dips to $10 per barrel,
an open position loss of $5,000. Therefore the value of his account
balance dips. He may be subject to a margin call, which means he'll have
to top his account back to the maintenance margin requirement in order to
keep his position open.

As illustrated, taking a long position in futures is a high risk, high reward

investing strategy. This type of trading is not for novice investors, and
folks wishing to engage in this sort of trading should seek the advice of a
broker before venturing into the market. That said, for more experienced
investors, futures trading has spectacular potential for growth.

Managing Risk:
Investors who are trading futures contracts should be fully aware of the
various risks these transactions carry. This is particularly important
because many novice investors get tripped up by misunderstandings
concerning margin. If you're trading futures, it is possible to lose not only
the initial margin amount, but also the full amount you've deposited in
your margin account.
Fortunately, there are a number of methods futures traders can employ to
reduce their risk of loss, but no futures trading strategy is 100 percent risk
free, however.
Picking the right contract:
Futures contracts are similar to stocks and bonds in that the investor is
exposed to varying degrees of probable risk and reward. Some
commodities may be more volatile than others because of various
fundamentals such as weather, labour conditions and geopolitics, among
other factors. Changes in these fundamentals can result in spikes and dips
in the price of the underlying commodity. Investors should be able to use
current information to evaluate and pick futures contracts that look like a
solid choice to help you meet your investing objectives. Neither past nor
present prices are reliable predictors of future prices, but from studying a
commodity's chart, certain patterns can be discerned.

Understanding liquidity and timing:

In the futures market, there are no guarantees that a liquid market will be
there to help investors offset a futures contract that he or she has

19
previously bought or sold. In short, there might not always be a buyer or a
seller for the futures contract you want to trade. When selecting a futures
contract, you should take a look at the volume of trading and open
interest to get a good idea of the liquidity in the specific commodity
you're trading. This information is often carried in newspapers and Web
sites.

Successful futures traders must be able to predict not only the direction of
prices, but also when prices will spike or dip. If a price dips just before
the contract is up, or spikes and you've predicted the opposite, it doesn't
matter if the price corrects later because you've already suffered a loss
because your timing was off.
Risk avoidance
There's a number of mechanisms you can use to limit your exposure to
risk:

Stop order: A stop order is an order placed with your broker to buy or
sell a futures contract at market price when that price crosses a certain
threshold. Futures traders use these orders to limit their losses if futures
prices move adverse to their open position. For example, if you bought a
wheat futures contract at $3 per bushel and wished to limit your potential
for loss to $1 per barrel, you would place a stop order compelling your
broker to sell the contract if the price fell to $2 per bushel. Conversely, if
you had opened a short position, betting on the price to drop, you might
set a stop order at $4 per bushel should the price of wheat appreciate.

Just because you've set a stop order at a certain amount, it doesn't mean
you'll get that price if your broker has to sell. Rapid dips may drag the
price under your stop order, and should that be the case, your broker is
only required to make the sale at the best immediately obtainable price.

Spreads: Spreads are basically the practice of buying one futures contract
and selling a similar one with the goal of profiting from a narrowing or
widening of the price between the two contracts. Profits and losses are
caused by changes in the price difference, rather than an overall increase
or decline in the price of the underlying commodity. This makes spreads
less risky than conventional long or short positions in the futures market.

Options: An option allows futures traders to purchase the right, but not
the obligation, to buy or sell a futures contract. This is less risky because
the trader is not obligated to buy or sell the contract. However, profits
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from this method of trading futures can be negatively impacted by the
price of purchasing the option.

There are two types of options, call options and put options. Call options
give the trader the right to purchase a futures contract at a set price at any
time during the length of the call option agreement. For example a call
option could give a trader the right to purchase corn at $4 per bushel at
any time during the life of the option. One motivation for placing a call
option is to profit from an anticipated spike in the price of the underlying
commodity. For example, a call option trader buying the right to purchase
corn at $4 per bushel would profit if during the option period the price of
corn jumped to $6 per bushel and the investor exercised the option.

Put options give the futures trader the right to take up a short position on
a futures contract at a set price. Investors buying put options seek to profit
from drops in the price of the underlying commodity. For example, a
trader seeking to profit from a decline in wheat prices might pay a
premium for the right to sell a wheat futures contract at $4 per bushel
in October. At expiration, the price of wheat has declined to $1 per
bushel, but because you have the option to sell at $4 per bushel, you
profit. However if the price rose, you wouldn't be obligated to sell the
contract, and your only loss would have been the premium price you paid
for the option.

With smart investing, and risk management tools such as options, spreads
and stop orders, futures traders can work to increase their odds of making
a profit and decrease their risk of a loss.

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References:
www.mcx.com
www.futuretrading.net
www.Commodityonline.com
www.ccs.in
www.2dix.com

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