Commodity Trading

Bullion (gold, silver), base metals (copper, zinc, aluminium, lead), energy (crude oil, natural gas), and agricultural commodities (cotton, spices, castor seed, etc.) — mainly via MCX, NCDEX, and NSE Commodity.

Same KYC as equity (PAN, Aadhaar, bank proof) plus income proof, since commodity futures involve leverage similar to F&O.

• High leverage risk Since you only put up a margin (often 5–15% of contract value) rather than the full amount, both gains and losses are magnified — a small adverse price move can wipe out a large chunk of your margin quickly.
• Global/geopolitical price volatility Commodity prices are driven by international supply-demand dynamics, weather, geopolitics, and currency (USD-INR) movements — factors largely outside any individual trader’s control or predictability.
• Expiry/rollover risk Unlike equity delivery holdings, futures contracts can’t be held indefinitely — you must actively square off or roll over your position before expiry, or risk unwanted physical delivery obligations (see below).
• Margin calls: If the market moves against your position, your broker can demand additional margin on short notice; failure to add funds can lead to forced square-off at a loss.
• Physical delivery risk Several MCX contracts (like Gold, Gold Mini, Silver) are compulsorily physically settled if not closed before expiry — this brings added obligations like full payment, GST, warehousing charges, and logistics that many retail traders aren’t prepared for.
• Liquidity risk Some commodity contracts, especially in agri-commodities or far-month expiries, can have lower trading volumes, making it harder to exit a position at a fair price.
• Overnight and gap risk Commodity markets (especially crude oil, driven by international events) can gap significantly overnight or over weekends when global markets move but Indian exchanges are closed.
• Complexity Successful commodity trading generally requires understanding global macro trends, seasonal patterns, and supply-chain factors — a steeper learning curve than plain equity investing.

Given these risks, commodity futures are generally considered suited to traders with risk capital and market experience, rather than as a core long-term wealth-building tool — those wanting simple commodity exposure (e.g., gold) often prefer Gold ETFs or Sovereign Gold Bonds instead.

ComRIS stands for Commodity Receipts Information System — an electronic system set up by MCX’s clearing corporation (MCXCCL) that maintains the official record of commodities physically deposited in MCX-accredited warehouses/vaults. Think of it as the “demat account” equivalent for physical commodity holdings: your ComRIS account reflects details like the quantity of commodity you hold, its storage location, ownership/lien status, and any transfers — all tracked electronically instead of through paper warehouse receipts.

You typically need a ComRIS account only if you intend to actually take or give physical delivery of a commodity (like gold) through your futures position — for someone who only trades intraday or always squares off before expiry, a ComRIS account usually isn’t required. Many brokers now offer simplified gold/silver buying features (e.g., “Gold Vault”-style products) that handle the underlying ComRIS-linked delivery mechanics for you, so you don’t need to open or manage it manually.

Unlike equity/index futures (which are cash-settled), commodity contracts like Gold Mini (100 grams per lot) are physically settled if carried to expiry, and MCX allows delivery on such contracts. Here’s the general process:

1. Decide before the tender period, not on expiry day The intention to take/give delivery must be submitted at least 4 working days before expiry (during what MCX calls the “tender period”) — you can’t decide this on expiry day itself.
2. Submit a delivery intention through your broker, in multiples of the deliverable lot size (Gold Mini = 100g per lot), specifying that you want to take delivery rather than square off.
3. Ensure full funds are available Since this moves from a margin-based position to an outright purchase, you’ll need to pay the full contract value (not just the margin you were trading with) — for Gold Mini, that’s the full price of 100 grams at the settlement rate.
4. Additional charges apply on top of the settlement price
   • GST (currently around 3%) on the settlement value
   • Making/conversion charges (for converting the demat-held contract into a physical bar/coin)
   • Warehousing and logistics/handling charges from the MCX-approved vault
5. Ownership transfer Once your intention is matched with a seller’s delivery intention, MCXCCL transfers the warehouse receipt/warrant into your name — reflected in your ComRIS account — typically a couple of working days after the tender notice.
6. Physical collection or storage You can then either collect the physical gold from the MCX-approved warehouse/vault (locations like Mumbai, Delhi, Ahmedabad), or continue to hold it electronically in the vault and pay ongoing storage charges if you don’t need immediate physical possession.
7. Quality assurance The gold delivered will meet MCX’s purity standard (minimum 995 fineness / 99.5%) with an accompanying assay certificate.