What are commodity derivatives?

Commodities derivatives contract is an agreement between two parties where the value of the contract is derived from the underlying commodity.

Where are commodity derivatives traded in India?

Exchanges such as the MCX India and the NSE Commodity Market are used to trade commodity derivatives. Agricultural commodity derivatives are primarily traded on platforms like the NCDEX India.

Do all commodity derivative contracts involve physical delivery?

No. Delivery depends on contract type and exchange rules. Futures and forwards may result in delivery if held till expiry, but options have no delivery obligation for buyers. Swaps are cash-settled only and do not involve physical delivery.

How are commodity derivatives taxed in India?

Commodity derivatives profits are treated as business income and taxed according to the trader’s applicable income tax slab. (GST, CTT, and other charges may apply depending on broker and contract segment.)

What is price hedging in commodity derivatives?

Hedging is a technique employed to guard against the risk of price fluctuations. For instance, a wheat farmer can sell wheat futures on an exchange such as NCDEX to stabilise prices and ensure income in the face of potential declines in price.

Commodity Derivatives

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Commodity Trading

Commodity Derivatives

Commodity Trading

Commodity Derivatives

Commodity derivatives are helpful instruments for traders to hedge or make a profit while doing commodity trading. Let's learn about the commodity derivatives.