1. Is physical delivery mandatory in commodity trading?

No, in most of the retail commodities derivatives trading in India, physical delivery is not compulsory. The vast majority of contracts are cash-settled, or squared off before their expiry. Physical delivery only happens if traders hold a futures contract until expiry and decide to opt for it, or only if it is a specific type of options contract that results in physical delivery upon exercise.

2. What is a margin call, and how can I avoid it?

A margin call in commodity trading occurs when a trader's trading account equity falls below the broker's minimum maintenance margin due to adverse price movements in open positions. In order to avoid margin calls, traders must either make additional deposits in their accounts or reduce the size of their positions by squaring off a portion of the contracts in their accounts. The key is to have a sufficient buffer above the initial margin.

3. What are the trading hours for commodity markets on MCX?

On MCX, the commodities are traded in two sessions, which are in operation from Monday to Friday. The morning session is from 9:00 AM to 5:00 PM for all the commodities, and an evening session is from 5:00 PM - 11:30/11:55 PM for the internationally linked agricultural commodities.

4. What is the difference between margin and lot size in commodity trading?

In commodity trading, the lot size is the fixed quantity of a commodity that has to be traded in a contract. Margin is the amount of collateral required to open or maintain that position. The lot size is standardised by the exchange and cannot be changed, while the margin requirements are updated regularly by exchanges.

5. Do I have to pay for the entire value of the contract initially to trade commodities?

No, this is a popular misconception. When you are trading commodities through the exchanges like MCX, NCDEX, etc., you do not need to pay the full value of the contracts in advance. Instead, you only have to pay a margin, which is a small percentage of the total value, to take a position.