1.What are gold futures and options?
Gold futures are bi-monthly contracts that result in compulsory delivery. The contract start day is normally from the 16th day of the contract launch month and contract end day is on the fifth day of the expiry month. A futures contract facilitates the purchase of sale of an underlier for a preset price on a future date. Delivery could happen or the client may square off his position before the tender period, which in gold runs normally from the first to fifth day of the contract expiry month A futures contract facilitates the purchase of sale of an underlier for a preset price on a future date.
2. What futures contracts on gold does MCX offer?
The base futures contract is 1 kilogram of gold. The gold mini lot is 100 grams, the gold Guinea lot is 8 grams and gold petal
is 1 gram. The trading unit of kilo and mini gold is 10 gm while that of Guinea is 8 gm and petal is 1 gm. Maximum lot size by one client in gold futures (1 kilo) is 10kg. See contract specs for other contracts on mcxindia.com. The underlier for an option is the gold futures 1 kilo contract.
3. Which is more liquid, gold futures or options?
Gold futures. However, gold options, which were launched from November 17 on MCX, are slowly gaining traction.
4. What is the margin to trade a gold futures contract and what is premium of gold options contract?
The margin to trade a kilo gold contract is 5%. So, if kilo gold quotes at ₹33 lakh, margin is ₹1.65 lakh. However, price for trading a put option on gold expiring on March 27 with strike price of ₹33,000 was just ₹14,600 on Friday.
5. How do I benefit by trading futures on gold?
If you’re an informed speculator you can buy or sell gold futures and square off before expiry. For the uninformed, it’s a risky bet. For e.g., you buy a gold futures contract (1 kilo) expiring on April 5 at say ₹33,000 per 10 gm. Margin placed is ₹1.65 lakh. If futures, taking cues from spot gold ex Ahmedabad, rises to ₹33,200 you make a gross ₹20,000 on one lot. But If it falls to ₹29,800, you lose ₹20,000.
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