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Faq

  • What is a Futures Contract?

    Futures are exchange - traded contracts to sell or buy standardized financial instruments or physical commodities for delivery on a specified future date at an agreed price.

  • How does futures market benefit farmers?

    World over, farmers do not directly participate in the futures market. They take advantage of the price signals emanating from a futures market. Price-signals given by long-duration new-season futures contract can help farmers to take decision about cropping pattern and the investment intensity of cultivation. The farmers also benefit by the dissemination of the futures prices of the Exchange traded products as it improves his bargaining capacity.

  • What is cash settlement?

    It is a process for performing a futures contract by payment of money difference rather than by delivering the physical commodity.

  • What is 'basis'?

    It is normally calculated as cash price minus the futures price. Unless otherwise specified, the price of the nearby futures contract month is generally used to calculate the basis.

  • Who Regulates Commodity markets?

    SEBI regulates Commodity Derivative Markets Since September 2015. Prior to that Forward Market commission, Overseen by Ministry of Consumer Affairs regulated Commodities.

  • How many commodities are permitted for Futures Trading?

    At present 113 commodities are in the regulated list i.e. these commodities have been notified under section 15 of the Forward Contracts (Regulation) Act. Forward trading in these commodities can be conducted only between, with, or through members of recognized associations. The commodities other than those listed under Section 15 are conventionally referred to as ’Free’ commodities. Forward trading in these commodities can be allowed.

  • What is 'Backwardation'?

    When the prices of spot, or contracts maturing earlier are higher than a particular futures contract, it is said to be trading at Backwardation.

  • What is 'Contango'?

    Contango means a situation, where futures contract prices are higher than the spot price.

  • Can one give delivery against futures contract?

    Futures contract are contracts for delivery of goods and one can give delivery of goods against futures contracts depending upon the delivery logic of the contract design. But most of the futures contracts, the world over, are performed otherwise.

  • Why do we need speculators in futures market?

    Speculators are participants who are willing to take risk of hedgers in the expectation of making profit. Speculators provide liquidity to the market, therefore, it is difficult to imagine a futures market functioning without speculators.
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commodities glossary

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A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

  • Acid Test Ratio

    It is the ratio indicated by dividing a company\'s current assets by current liabilities. It reflects the financial strength of a company and hence called Acid test ratio.

  • Alpha

    Alpha measures the difference between a fund\'s actual returns and its expected performance, given its level of risk (as measured by beta). A positive alpha figure indicates the fund has performed better than its beta would predict. In contrast, a negative alpha indicates a fund has underperformed, given the expectations established by the fund\'s beta. Some investors see alpha as a measurement of the value added or subtracted by a fund\'s manager. There are limitations to alpha\'s ability to accurately depict a manager\'s added or subtracted value. In some cases, a negative alpha can result from the expenses that are present in the fund figures but are not present in the figures of the comparison index. Alpha is dependent on the accuracy of beta: If the investor accepts beta as a conclusive definition of risk, a positive alpha would be a conclusive indicator of good fund performance. Of course, the value of beta is dependent on another statistic, known as R-squared.

  • Annual Fund Operating Expenses

    The expenses incurred, during a particular year, by Asset Management Company for managing the funds.

  • Asset Allocation

    The process of diversifying the investments in different kinds of assets such as stocks, bonds, real estate, cash in order to optimize risk.

  • Asset Allocation Fund

    A fund that spreads its portfolio among a wide variety of investments, including domestic and foreign stocks and bonds, government securities, gold bullion and real estate stocks. Some of these funds keep the proportions allocated between different sectors relatively constant, while others alter the mix as market conditions change.

  • Asset Management Company (AMC)

    A Company registered with SEBI, which takes investment/divestment decisions for the mutual fund, and manages the assets of the mutual fund.

  • Automatic Investment Plan

    A plan offered by most mutual funds where a small fixed amount is automatically deducted monthly from an investor\'s bank account and invested in the mutual fund of their choice.

  • Automatic Reinvestment

    An investment option for mutual fund unit holders in which the proceeds from either the fund\'s dividends or capital gains, or both, are automatically used to buy more units of the funds.
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