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  • Can the loss incurred on the futures market be set off against normal business profit?

    The loss incurred on account of speculative transactions in futures market cannot be set off against normal business profit. This loss is however allowed to be carried forward for eight years, during which it can be set off against speculative profit.
  • 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.
  • What is convergence?

    The difference between spot and futures contract theoretically should have declining trend over the life of a contract and tend to become zero on the date on maturity.
  • 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.
  • What is 'Contango'?

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

    It is a document issued by a warehouse indicating ownership of a stored commodity and specifying details in respect of particulars, like, quality, quantity and, some times, indicating the crop season.
  • What are the trading hours?

    The trade timings of the Exchange from Monday to Friday are IST 10:00 a.m to 11.30 p.m. / 11.55 p.m.* (*during US day light saving period).
  • What are the commodities Suitable for Futures Trading?

    Commodities suitable for Future trading should be with Suitable demand and Supply conditions. The commodity should be free from substantial control from Govt. regulations, imposing restrictions on supply, distribution and prices of the commodity.Commodities Should be homogeneous, storable.
  • 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.

commodities glossary

  • 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.