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Understanding Futures and Options in Commodities | Commodity Trading Guide for Beginners - YouTube
Channel: Abhishek Kar
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Imagine you long the crude oil means you buy it
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You buy all the metals like Gold,silver or aluminium whatever you buy all that
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and suddenly commodity market falls,you start fearing
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and you start thinking what to do? Definitely,but if I say all this downside
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you can limit that thing in fact you can make money from there.Well this is
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possible in commodities by using options & MCX.
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Oh yes,you can make money from here even when odds are against you
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when market falls badly then also you can make money and in today's video
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I'll tell you all thing about MCX options.So let' start it.
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Well you should've the first question that exactly what is option?
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On technical basis, option is something which gives right to buyer but not obligation
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in order to sell an underlying asset of specific price to a specific date.
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In simple way, if we say in simple language so basically option provides you 1 chance
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that irrespective of the move of the asset, you can make money on derivative class,
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its one type of derivative.Well if talk about its usage that how is this used?
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so it has mainly 2 uses.1st is Leverage.Because of this many trader and
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speculators make money and 2nd is Hedging.Oh yes
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where you protect your capital by wind fall move.For this I'll bring a video
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if you show your interest & write Hedge in comment H E D G E, is that right? Yeah.
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Here you've to understand when we talk about option so there are 2 type of option
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like in equity market same here is "CALL" & "PUT".If I say in simple way
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when you think this asset class will go up,think you say that gold I think will go up
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we are understanding for knowledge purpose,so what'll you do you'll buy its call option
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at same time you think that gold will go down so you'll buy put option
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when you buy call option, what do you do then,you buy one right purchase
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that righter of option means which put after selling in predetermine price its called
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strike price.As we saw in stock market's option of Nifty & bank Nifty
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there's different strike price like gold, silver, crude oil here also you'll get different strike prices.
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Here you've to know this thing,when you buy option,example you buy call option
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so you've to pay premium/fees this we called premium,
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basically when you say that you are buying 10 Rs option,then you're paying premium
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for holding that call option,in this hope that market price underline's asset
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whether it is gold or crude oil will increase in upcoming time
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so you pay a premium as you pay in insurance that way you're paying here
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and on the same this thing righter doesn't get.That's why the maximum loss
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of an option buyer its same as the premium he pays.
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its limited till that.But for an option seller that loss can be very unlimited.
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By the way you didn't like this video so do like it encourages to make more commodity videos.
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if I talk similarly about put option,so what it gives
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as we have right in call option same here also but here its a right to sell an underlying asset
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at the strike price.In simple language,whenever
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you feel negativity in market or any of your favorite commodity will fall
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you want to protect or make money from it so you buy its puts.
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so here you've to understand that here too there is put righter in this.
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When we talk about put righter or put seller,so they are usually bullish.
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A question must've come to your mind that if someone is bullish.why he do put right?
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Why doesn't he buy a direct call?Because of this you've to understand
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some factor like one of them is Time of expiring time value money comes in this.
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You've to understand this,first understand that,when we talk about option
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which are the factor who affect the price? So there is different things in it.
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Like Time of expiry,if its close means every contract has one expiry.
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if its close so time value will increase more its decay. Option prices decrease fast
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because of time value of money, then interest rates.What is interest rate?
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Whatever government or interest rate is set in economy it will be. Volatility,
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by the way to understand volatility vix which is also a barometer we already
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made video on our channel must check it out.So volatility like up & down we all know
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No traded asset class goes in linear fashion straight up or down, it goes up or down.
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So that thing.Plus current price also,if you understand it goes upside from there
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then you buy call or if goes down then put,so these are the factors.
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Now let's go back to that question,a person do put right because he feel
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that whatever happen in this month commodity won't goes down from this level
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that's why he sell put and he take benefit of time decay.
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Now question is that you told us many thing but
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how we can trade commodity option,What's the steps?So 1st step is
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you've to open commodity derivative Account with any broker
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with some basic things required.Like PAN card,Aadhar card,6 month bank statement
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ITR income proof and one photograph that's it. Only around 24 hrs almost broker
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open your commodity's derivative Account.After that,
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you can trade across the asset class. You've different option for trading
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where you can trade for example in MCX. You can trade in Crude oil,
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Natural gas,Gold,Silver,Copper,Nickle,Zink and we all have discussed in last video
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its link I'll put in description that how our commodity prices impact to stock market prices.
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So friends commodity is very exciting place specifically for those people,
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who is working class.Because they often say that we've to stay in office from 9-5
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so how can we trade?So brother commodities are opens till night
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so why are you there,almost you've 5-6 hrs if you come by 5 o'clock
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to trade easily when the commodity market is open.So definitely do check out
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and if you want to know more updates about commodity market
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so I'll put many MCX social media plugin in description also
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make sure you keep updating from where on your different social media platform
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do check out and you like this effort don't forget to like and share
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I'll make more commodities video depending on the response in this kind of
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videos.Till then keep learning,keep growing,keep investing & keep trading
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