COPPER

Lot size: One standard contract represents 2.5 metric tonnes (2,500 kg). The COPPERM mini contract is 250 kg.

Tick size: Minimum price changes in increments of ₹0.05 per kg. This equals ₹125 per tick for a standard lot.

Expiry: Contracts expire on the last day of the contract month.

Open Interest (OI): Total outstanding contracts across all participants. An increase in OI with an increase in prices indicates fresh long positions being built.

Margin: Collateral is needed to maintain a futures position. MCX changes margin during periods of high volatility, which can change position sizing.

Daily Price Limit (DPL): MCX applies a circuit breaker at 4%. If this is breached, it widens to 6% after a pause.

Basis: The difference between the MCX futures price and the LME-equivalent price adjusted for currency. Basis variations reflect domestic supply-demand factors independent of global price direction.

Macro participation without physical exposure: COPPER prices are influenced by macro drivers like energy policy, Chinese industry, currency, and global trade policy. Futures give participants direct access to these price effects without the need to source, hold, or manage physical goods.

Leverage through margin: Only a margin payment is required for futures. This equates to a smaller amount of funds being invested in the market. This also implies the risk of losses exceeding the margin if the positions are not handled properly.

Hedging for commercial participants.: Companies with COPPER price risk exposure, like the wire manufacturers, cable makers, and construction companies, can hedge their COPPER price risk with MCX futures. This operational hedging is made easy by the design of the contract.

Transparent, regulated infrastructure: MCX is a recognised exchange regulated by the Securities and Exchange Board of India (SEBI). Prices can be accessed on the public screen. Counting for settlement is carried out as per the rules. The rules minimise counterparty risks and provide execution standards.

Directional long or short: Long (buy) or short (sell) the futures in anticipation of a price increase or a price fall. The simplest approach and the one most retail participants begin with. Risk management in terms of position size relative to margin is critical.

Month-to-month spread: Buying one expiry month while simultaneously selling another. The profit or loss is based on the movement of the difference between the two months. Spreads generally require a lower margin and carry lower volatility than outright positions.

Producer or consumer hedge: A company buying physical COPPER can sell the same amount in futures to secure the price. If prices increase, the futures profit offsets the cost increase. If prices decline, the hedge reduces the gain, but the aim is not maximising profits.

MCX-LME basis play: Speculate on the difference between MCX and LME after adjusting for the currency. When the basis is significantly out of historical bounds, it could offer a reversion trade. This requires an understanding of both markets.

Watch LME copper alongside MCX: Domestic COPPER prices are not independent. LME direction gives the general direction. It is not unusual for MCX and LME adjusted for currency to trade at a premium or discount for only a few days.

Observe the trend of Rupee vs Dollar: Even when LME does not move up, MCX can move up in rupee terms with a depreciation of the Rupee. The positive movement of the Rupee could cap the gains on the MCX when the LME goes up.

Monitor stockpile reports: The LME report on warehouse stocks is a regular publication. Longer periods of price declines typically support prices. Taking note of a quick inventory construction is interesting prior to stacking lengthy positions.

Allow for daily margin calls: Mark to market is done on a daily basis at MCX. A position that is short against you may lead to a margin call. This is more robust than the minimum margin-based position sizing because it takes account of losses.

Look at several time frames on the chart: There could be a difference between what you see on the daily chart and the hourly chart. Align both before coming into position.

Close in advance of the time of delivery: Most retail traders have no intention of taking or giving physical delivery. To prevent any unnecessary complications, one should leave well in time before the last trading day.

Size positions within capital limits: Taking a big position with a small margin is no justification. Limit the risk of any one trade to a specific percentage of capital.