12.1 – The contract
Crude oil is the most actively traded commodity on MCX. The combined value of crude oil (across all contracts) traded on MCX, on average, exceeds Rupees 3000 crores daily. This translates to roughly 8500 barrels of crude oil traded daily. Active market participation in crude oil comes in from both corporate and retail individual traders. On any given day, you can expect both upstream companies (ONGC, CAIRN, Reliance) and downstream companies (IOC, BPCL, HPCL) placing orders on MCX. If I were to guess, these institutional orders are mainly to hedge their exposure in the spot (physical) market. On the other hand, retail traders mostly speculate on crude oil prices.
I’d encourage you to check the MCX ‘Bhav Copy’. This gives you a perspective on a particular contract’s liquidity and volume.
There are two main Crude oil contracts which are traded on the MCX –
- Crude Oil (the big crude or the main contract)
- Crude Oil Mini (the baby version)
In this chapter, we will learn how these contracts are structured – right from expiry to margins to P&L per tick.
12.2 – Crude Oil, the big contract
With an average daily traded value of Rupees 2500 Cr, the big crude oil contract is certainly one of the biggest contracts (value-wise) that gets traded on MCX. Without wasting much time, let’s get straight to the contact details of the big crude.
The contract details are as follows –
- Price Quote – Per barrel
- Lot size – 100 barrels
- Tick Size – Rs.1/-
- P&L per tick – Rs.100/-
- Expiry -19/20th of every month
- Delivery units – 50,000 barrels
- Physical Delivery – Mumbai / JNPT Port
Let’s understand this information in better detail. The crude oil on MCX is quoted on a per-barrel basis (one barrel is equal to 42 gallons or about 159 litres). Have a look at the image below; this is the snapshot of Crude oil’s market depth –
As you can see, the Crude Oil contract expiring on 19th Dec 2016 is trading at Rs.3197/- per barrel, quite obviously as we know price quote is on a per-barrel basis.
The lot size is 100 barrels, which means to say that if you want to buy (or go long) on crude oil, the value of such a contract will be –
Lot size * price quote
= 100 * 3198 (offer price to go long)
= Rs.319,800/-
This is the contract value of the crude oil, but what about the margins? Unlike the margins on other commodities, the margin on crude oil is slightly higher. If you wish to carry the position forward overnight, then the margin requirement is roughly 9%.
This means, 1 lot of crude oil (100 barrels) requires a margin deposit of –
9% * 319800
= Rs.28,782/-
In fact, you can use the margin calculator on Zerodha’s website to get a ready reference of approximate margin requirement. Here is the snapshot of the same –
The margin requirement under NRLM (for an overnight position) is Rs.29,114/-, assuming the price of Crude is Rs.3,253/-. However, if you wish to make an intraday trade using MIS, then the margin requirement is roughly 4.5%. Clearly, as you can see from the snapshot above, margin under MIS is just Rs.14,557/-.
12.3 – Selecting the right contractor to trade (expiry logic)
New crude oil contracts are launched every month. The newly introduced crude oil contracts have an expiry scheduled six months later. For example, the contract introduced in November 2016, will have its expiry in 6 months, i.e., May 2017. MCX puts up this information regularly in their circulars, but I find it a little confusing to interpret the expiry table. Here is what MCX intends to convey –
| Current month | Contract Introduced | Expiry on |
|---|---|---|
| November 2016 | May 2017 | 19th May |
| December 2016 | June 2017 | 19th June |
| January 2017 | July 2017 | 19th July |
| February 2017 | August 2017 | 21st August |
| March 2017 | September 2017 | 19th September |
| April 2017 | October 2017 | 18th October |
| May 2017 | November 2017 | 17th November |
And this is how the table in the circular reads –
So, as I write this, its November 2016, which means to say the November 2016 contract must have been introduced in May 2016.
Anyway, the point to note here is this –
- Every month a new contract, 6 months in advance is launched (long-dated contracts).
- These contracts expire on or around 19th of the expiry month, 6 months later.
- Given this, each contract lasts for 6 months in the market.
For active trading, always choose the near month contract. Now, assuming today is November 5th 2016, I’d choose the November 2016 contract expiring on 19th November to trade. Maybe around 15th or 16th November (as we progress closer to expiry), I’d shift to the December 2016 contract. The reason for this is simple. Liquidity is highest for the current month contract (November 2016 in this example). Liquidity picks up in the next month’s contract (i.e. December 2016) as we move closer to the expiry of the current month’s contract.
All the other contracts, even though exist in the market, pretty much lead a meaningless life, until they become current.
12.3 – The Crude Oil Mini contract
The Crude Oil mini is quite a favourite amongst the trading community. The reason for this is straightforward –
- The margin required is lesser
- The P&L per tick is a lot lesser – did you know people prefer to see lesser loss than seeing higher profits?
Here are the contract details –
- Price Quote – Per barrel
- Lot size – 10 barrels
- Tick Size – Rs.1/-
- P&L per tick – Rs.10/-
- Expiry -19/20th of every month
- Delivery units – 50,000 barrels
- Physical Delivery – Mumbai / JNPT Port
Have a look at the quote below –
The Crude Oil Mini, December future is trading at Rupees 3,210/- per barrel. The contract value for this would be –
Rs.3,210 * 10
= Rs.32,100/-
The margin required in percentage terms is a little higher – around 9.5% for NRML and 4.8% for MIS.
This puts the margin requirement for NRML at Rs.3,049/- and Rs.1,540/- for MIS. Clearly, way lower compared to the margin required for the big Crude oil.
Except for lot size, and therefore the margins, the other remaining features don’t change for both the crude oil contract contracts.
12.4 – Crude Oil Arbitrage
Have a look at the image below –
The first part of the snapshot captures Crude Oil December future (big crude contract) along with its market depth. The second part of the snapshot captures the Crude Oil Mini December contract, along with its market depth.
All else equal, both these contracts at the same time should trade at the same price. They are not supposed to trade at different prices, since the underlying is the same. In fact, this is what we notice here – both Crude oil contracts trade at Rs.3,221/-.
But what if they don’t?
Let’s say, for whatever reason, both these contracts trade at different prices? For example, Crude Oil is trading at Rs.3,221/- and the Crude Oil Mini is trading at Rs.3,217/-. Do we have a trading opportunity here? Yes, of course, we do have an arbitrage opportunity here, and here is how we can trade this.
Crude Oil – 3221
Crude Oil Mini = 3217
Risk free profit potential (arbitrage) = 3221-3217 = 4 points
Trade Setup –
We know the rule of thumb in any arbitrage trade – always buy the cheaper asset and sell the expensive one. So in this case –
We buy the crude oil mini at 3217 and sell the crude oil at 3221. However, please note, for a perfect arbitrage opportunity, we should always trade similar values.
The contract value of Crude oil is – 3221 * 100 = Rs.3,22,100/-
The contract value of Crude oil mini is 3217 * 10 = Rs.32,170/-
Given this, one should buy 10 lots of Crude oil mini at 3217 and sell 1 lot of crude oil at 3221. By doing so, the contract sizes are similar, and therefore the arbitrage holds.
Once we execute this trade (efficiently), the arbitrage profit is locked in. Remember, in all arbitrage cases, and the price will converge to a single price point. So assume the price finally converges to 3230 –
We make +13 points on the crude oil mini, and we lose -9 points on crude oil, and on a net basis, we make 4 points.
In fact, irrespective of where the price heads the 4 points are guaranteed.
It is unlikely you will find such sweet opportunities daily, and even if you do, algorithms grab them. However, I have occasionally witnessed such opportunities lasting for several minutes.
So do watch out for such trading opportunities, and if it indeed comes by, you know what to do.
This brings us to the end of our conversation on Crude Oil. Over the next few chapters, we will focus our attention on ‘Metals’.
Key takeaways from this chapter
- There are two crude oil contracts available – Crude Oil and Crude Oil mini.
- Both the contracts vary in the lot size. Lot size of the big crude is 100 barrels while the crude mini’s lot size is 10 barrels.
- Price quote is on a per-barrel basis.
- Every month new crude oil contracts are introduced which expire 6 months later.
- Expiry is on the 19th of every month.
- The current month contract attracts maximum liquidity.
- Arbitrage between the two crude contracts can be executed – but one has to ensure contract values are similar.
Its really refreshing course! Arbitrage Option is really wonderful.
Thanks!
I really very much like this chapter, it’s very interesting.
We are lucky to have a teacher like you.
Thanks for the kind words 🙂
Hi Karthik,
I’m a fan of your writing especially the chapters on Options Strategies.
Request you to kindly suggest books on options trading for enhancing my knowledge.
Thanks for the kind words Prasanna 🙂
Check out this book –
Option volatility and pricing strategies
Book by Sheldon Natenberg
Hi Karthik,
Thanks for the suggestions.After going through your text on Short strangle ,I have become more of a short seller.Nowadays I’m just writing Bank Nifty weekly expiry targeting 2% profit.
Hope its working well for you. Good luck 🙂
Sir please tell me , how to rollover current contract to the next month contract in crude oil . Not cleared
Rollover is just about closing the contract that you hold and initiating the position in the next month contract. For example, if you hold a long Crude position in Oct series, then rollover is squaring off Oct Contract and buying Crude in Nov contract.
hi Karthik,
can you please tell if we trade crude in PI ?
Thanks
Anoop
Of course, you can.
its very silly question but yet i want to clear my self, please answer
in commodity if we dint sell till expiry, the commodity we need to to purchase physical commodities ? like in mcx document they shown port details
Thats right. Check the product page on MCX – https://www.mcxindia.com/products/bullion/gold
Hi kartik
While using option calculator
It asks for
1) underlying price
2) strike price
3)Days to expiry
4) annual interest rate
5) implied volatility(call)
6) implied volatility(put)
From option chain I got IV(call) and IV(put)
I want to know how to get annual interest rate.
NSE assumes 10% annual interest rates.
Shouldn’t the interest rate be risk free rate as announced by RBI? what is the logic behind the 10% rate assumed by NSE?
Well, it should ideally be the RBI risk free rate. Not sure why NSE considers 10%.
Have u ever observe the diff in price of two month contract increses and decreases ??
If u know why it happens how v can earn from dat please share
Yes, that is a common phenomenon. Check this chapter – http://zerodha.com/varsity/chapter/the-usd-inr-pair-part-2/
Not related to this module.
I read statements here n there that ‘this stock price will go up because of short covering’.
In indian equity market ,we can not keep overnight position of shorted equity stock ,we have to square off it same day.
Ofcourse for F&O we can keep overnight position.
As Futures price is driven by underlying not vice-versa ,So I am confused how above quoted statement is correct. Why would undelying price would go up in upcoming days ? Why such statement is made up for equity stocks ?
Recent Example: Crompton Greaves .
Short covering is mainly used in the context of F&O. At times, F&O prices exerts its influence on spot…especially during short covering and long unwinding.
When crudeoil options are introduced in India & Zerodha ???
I guess MCX introduced Crude oil when the started the exchange.
yet again you have explained these topics magnificently. Though this is off topic was just wondering if you can explain in another module or so abut INTRA day trading, about selection of stocks for intraday. Is there any book where one can refer for intra day trading and selection of stocks for intra day.
Thanks for the kind words Vivek.
We will be taking up trading strategies as a separate module soon.
Today on 12th Dec 16, Crude oil Dec fut is @ 3473 and Crude oil Mini Dec Fut @ 3470 at 16:26, Is it a same trading opportunity ?
Yes, provided you can efficiently capture all the 3 points.
Thanks for the “Chapter on crude”…
next chapter must be on “NATURAL GAS”.. 🙂
The next one is on Copper and Aluminium. Should be up tomorrow.
Karthik, can you please recommend a good book which talk/analyses about Indian stock market history mostly 2000-2012 .
I have many books about investing but they all carry US stocks examples . I am looking for a book in terms similar to “The Intelligent Investor” or “India After Gandhi” .
Not sure about such books Deepak. Let me think through and get back soon.
Thumbs up for Zerodha for Writing such Topics. Now a days brooking firms are taking only brokerage.
Cheers!
Sir, if one executes the above arbitrage of 4 points in zerodha, say 1 big lot and 10 small lots. 4 points would result in a profit of 400rs. Out if this how much do the brokerage and taxes amount to? In other words, what is the minimum difference between crude big and small lots for arbitrage to be profitable?
Subbu – I’d encourage you to use the calculator here – https://zerodha.com/brokerage-calculator
hi karthik ,
is the brent crude not traded in mcx (b’cos the quote is showing zero in mcx)
Thanks®ards
I’ve been told that MCX has withdrawn this contract.
Hi karthik,
The expiry date for crude oil is19th of expiry month. Cash settlement can be done on 19th OR for cash settlement we have to square off the position 4-5 days before the expiry???
Thanks&Regards
Its best if you square off 4-5 days before. Else, you will enter the delivery obligation zone.
In last month, I did not know the expiry date being new to the commodity market. I had a open buy position in crude mini in the expiry date. I can not not find that position in the next day. Will there be any delivery obligation in future?
Also can you please explain the significance of negative crude inventory data?
I guess the contract would have been settled. Delivery obligation requires some sort of paperwork.
Not sure about ‘Negative inventory data’. Are you referring to a situation where in the demand outstrips supply?
I am talking about the inventory data that comes every Wednesday. I see in some site the data is classified as “actual forecast and previous” columns. I interpret if actual no. Is less than previous then supply is less, more demand. But i don’t understand what a negative no. signifies there.
I’m not sure, but if I were to guess, then the -Ve number could indicate a situation where the supply is lesser than demand.
Which is best advisory firm in india
I believe the best advice comes from within, especially in markets.
Hello Karthik – If the open position is not closed on expiry day then one has to take the physical delivery of commodity or it is cash settled the way it happens in options. Thanks
It’s cash settlement. But best if you can square off yourself.
It’s explained in module 1.
Thanks for the clarification..!!
Welcome!
Are the commodity chart that are available continuous charts or expiry based charts in kite?
As of now its expiry, but will have it continuous soon.
Are continuous futures for CRUDE OIL available now? If not, may I know if it is planned to go live anytime soon? Thanks!
Not yet, Mihir. Hopefully sometime very soon.
Hi Karthik,
Why crudeoil futures from one month to another month are at premium? How the fair premium for rollover can be calculated?
Check this – http://zerodha.com/varsity/chapter/futures-pricing/
Hi Karthik,
The link you provided explains theoretical futures pricing in general. I would like you to explain how the crudeoil futures month to month premium is calculated. Thanks in advance.
Its not theoretical. Its the actual formula traders use. Premium or discount is a outcome of demand and supply, not sure of this is quantifiable.
Hi Karthik,
I need help on this urgently, i have bought 30 lots of CRUDEOILM17AUGFUT and the expiry for that is 21st August but i am in loss at the moment, with just two days to go how can i rollover the Aug contact to Sept one, please guide me, thank you in advance for the help.
Dipesh, rollover requires you to close the August contract and initiate the same position in Sept contracts.
Hi karthik,
Excellent explanation, as usual
I have been trading in stock market for the last 3 -4 years. But I had zero knowledge about commodity trading (before reading of these module).
I was never interested in commodity because there is no option trading
But I have heard SEBI is going to start options trading in commodity, please let me know in which commodity options trading will be started.
Thanks
Yes, SEBI has approved options trading on commodities. I guess exchanges are putting up a framework around this and soon make it available for traders to trade. Please do check this – http://www.sebi.gov.in/sebi_data/attachdocs/1475059335825.pdf
Is short selling allowed in commodities trading?
Yes, you can short commodities.
Hello Karthik,
If the two crude oil contracts are trading at the same price because they depend on the same underlying, why is it not the same with other commodities too?
For example GOLD and GOLDPETAL.
Gold prices vary depending on the purity of the metal, suggest you check the contract specifications.
Thanks sir for such a explanatory materials
I have two Doug’s
1:- while trading crude oil volume on minute chart shows 504 units as the lot size is of 100 barrels is it 50400 barrels or only 504 barrels.
2:- volume for crude oil on minutes chart on 12/06/2017 15:48 shows 504 and crude oil mini shows 519 units,. Suddenly after three minutes at 15:51 volume of crude oil jumps to 5.19K and crude oil M jumps to 4.80K. my question is how in a single minutes institutional buyers come in both contract at a same time. Please explain as it happens all the time in both contracts
1) Its 100 barrels. Are you using Pi for this?
2) This could be purely co incidental – maybe an institutional client has placed a huge order.
When compared with Index futures like nifty and bank nifty, commodity futures have very low number of Open Interest. Of all commodities only Crude oil and Nickel has decent Open Interest but still far low when compared with Nifty futures. Is it worth to trade?
Well, OI is just a reflection of the liquidity in the scrip. What you need to ascertain is if you have enough liquidity for your trading size For example if you want to buy 10 shares out of the total 1000 shares, then you do have ample liquidity. However, if you want to buy 500, then it may not be a good enough.
Thank you
In previous comment you specified i need to square off before 5 days else i will enter delivery obligation zone. What is meant by that? Do i face any problems if i keep my position open till expiry? Please explain.
Yes, in commodities, there is a concept of compulsory delivery where in you will have to take delivery of the commodity. So its best to avoid this situation by squaring off earlier.
Thank you
Hi Karthik, Thanks for the wonderful explanation.
Can you please let me know the ZD MIS timing (by what time will the trades be Auto squared) for MCX Commodity Trade, given that the market timings is from 10:00 am to 10:30 pm
Say i bought a stock crudeoilm today at 2917.
1) Is crude oil traded world wide at same price?
2) If yes for above, crudeoil is traded after 11.30 pm in usa almost all day. What if the crude oil market goes down by the start of tommorow market?
3) Can i short and carry it forward to next day using NRML?
Some understanding on these will help in going long or short on a commodity.
1) Yes, but in the $ equivalent
2) Well, there is nothing much you can do if it goes down
3) Yes, you can.
Thanks for clearing that up.
Was there any scenario in history where it fell by a huge price before market started?
Yup, happens quite often.
does the same arbitrage principle hold true for Gold and Gold M contract also since underlying asset gold is similar.
today gold aug contract is 28156 and goldm aug contract is trading at 28170
Yes, it does.
Do you really think IOC and Reliance hedge on MCX??
Yes, at least to some extent.
Hello Karthik,
Thank you for these detailed articles on Versity. I trade Crude Oil and Natural Gas contracts through Zerodha. I have the following questions for you:
1. Since I trade multiple times a day, I exclusively trade current month contract. Since crude oil and natural gas contracts are settled in cash and also zerodha does not allow its clients to take delivery on MCX; is there any risk of physical delivery situation in crude oil, crude oil mini, and natural gas contracts under any circumstances?
2. We had problems on Monday on the NSE, suppose MCX faces some problems and remains shut for the rest of the day on an expiry day of Natural gas or Crude oil contract. What will be the penalty levied on traders? And how it is going to be calculated? In this extraordinary case will it be a physical delivery settlement or normal cash settlement?
3. Suppose overnight market gaps big, a trader needs to bring additional cash the next day. Are there any penalty and how much, if any, if short on overnight margin on MCX?
4. ITM option exercised by NSE leads to ‘STT Trap’, are there any huge tax risk when future contracts get exercised by MCX?
1) Not really as long as you ensure your contracts are squared off at least 5 days before the expiry
2) If the problem is from the exchange side, then most likely the trades will be considered null and void and you will have another trading window to settle the trades
3) Depends on the movement
4) Nope
Sir, what the term “quantity” means in the market depth window. Does it means no. of shares or no. of lots. As in bids column first quantity is 98. Does it mean 98 lots??
Number of shares for stocks and number of lots for a futures contract.
Thanks Karthik you had exactly the information i wanted.,, Thanks
Cheers! Happy trading.
Sir,
We hold position. What happens on the contract end day.
The contracts will expire.
ONE Suggestion For Every Trader Needs……..Hope Understand.
Pls pls pls work on price alerts in Zerodha Kite.. Kite has like everything, just for this 1 feature. @nithin
I m waiting for this feature. this will b a great help for part time traders/investors as u dont need to watch ur stocks every now n thn. right now price alert available with IIFL mobile app.(Just for Suggetion) but waiting for kite app to update this feature.
Example :- Buy Crude Oil @ 3100
Target 3110
SL-M 3090
Then I set alert Both Target & SL. If 1st Comes Target then I cancelled SL-M Order OR if SL-M Comes I cancelled Target Order.
Get Notification on Kite App && Kite.Zerodha.com. See IIFL App Price Alert Features…..
Please Add This Feature for me kind of Busy Trade who don’t live whole days.
Suraj, this is on the list of things to do. Hopefully we will have this sometime soon 🙂
Thanks for Reply…. I also mail to Zerodha…. Just for Client Suggestion….:)
Noted 🙂
Hello Sir,
I want to use different in chart & Want to back test it…..
BUT in Zerodha Kite Chart Only Current Series chart data is available…..
Need Crude Oil Chart Data for 5 to 7 years with 5 Min. To 1 Hour & EOD all data….. For Back Testing….
Suggestion:- Can you please suggest me Good Software for Crude Oil Back Testing or Accurate chart candle data last 5 to 7 years with 5 minute to 1 hour & EOD data also….
I’d suggest you check Pi.
Hello Sir,
I want to use different in chart & Want to back test it…..
BUT in Zerodha Kite Chart Only Current Series chart data is available…..
Need Crude Oil Chart Data for 5 to 7 years with 5 Min. To 1 Hour & EOD all data….. For Back Testing….
Suggestion:- Can you please suggest me Good Software for Crude Oil Back Testing or Accurate chart candle data last 5 to 7 years with 5 minute to 1 hour & EOD data also….
” How to Check in Pi” –
“I’d suggest you check Pi.” – Karthik Rangappa says: ????
Process to Use Pi for Crude Oil Last 5 To 7 year data in 5 min, 15 Min , 1 H, 4 hour, daily etc…. Differance time frame. Pls suggest me Urgent Pls.
We do not yet have continuous charts for commodities, Suraj. However, you can use the expert advisor feature in PI and generate some back testing results – https://zerodha.com/expert-advisors/
It’s better to square off normal position 5 days before expiry but can we do intraday trading even 1 day before expiry without having to worry about delivery obligation ?
I’d suggest when you are close to expiry, trade the next month contract.
Sir if we trade intraday on the last 5 days before expiry what will happen? Does the physical delivery mean that we will actually be given oil barrels!?
Also if we have to trade in next month’s future are the volumes sufficient usually?
As long as its intraday its ok. Yes, liquidity increases in the next month’s contract as we approach expiry.
Today 14th Sept 2017 I am trying to trade on CRUDEOILM17NOVFUT but was not able to trade. why are we not able to trade in 2 month ahead contract
Please help
Vilesh
Nov contracts are illiquid and have large spreads. For this reason, at any given point, we allow only current and next month contracts to trade.
Sir,
Could you please explain me how to roll over Oct.17 cont. in crude oil mini to next month. I have to pay any extra amount or I have to take physical contract by paying full amount. Pl. explain me about roll over procedure and cost involved in it.
If your objective is to continue holding the same position for the next available contract, then simply close this months contract and buy the Nov contract. This is rolling over.
Can I hold short position in crude oil till expiry?
Yes, you certainly can.
When are u planing to allow Bracket order in commodity
This should happen sometime soon, Sandeep. Cant really assign timelines to this yet.
Hello sir,
What will happen if I have a short position on crude oil on delivery basis and I forgot to square off on expiry day
It will be squared off by exchanges and settled accordingly.
Hi Karthik,
I have mistakenly sort a crude oil mini Fab 2018 on Friday 16 Fab 2018 on the same day expiry. On 17 I found that my sort position is in expired contract so I come to your article. Read this comment “It will be squared off by exchanges and settled accordingly.” Is there any penalty or anything else regarding settlement. How do they sattled it. How zerodha can help into this to avoid delivery obligation. I have also send a mail to zerodha support. Please reply.
Contracts which have compulsory delivery and nearing expiry are squared off by our RMS Team.
Hi
I forget to square off crudeoilm Nov contract. Now what? Is there any panelty?
Pls reply soon.
Thanks
It will be sq off by the RMS team. Kindly double check.
Thanks but is there any panelty?
Not really.
Thanks karthik.
Cheers!
Yesterday, i sell a crude mini at nrml a overnight position, but now today morning it shows i shorted 2 crudemini with a loss of 38760… can u explain this…. and also it is irrelavent to my sell price
You need to speak to the support executives for this, I won’t be of much help here.
Dear Karthik,
I have a confusion in openprice showing in mcx bhavcopy and the actual openprice showing in chart for crudeoil
Today if we see on mcx bhavcopy it is showing openprice as 4083 but actual openprice in chart is showing as 4040. Here my question is whether any trades would have taken place at 4083 price or not and if so how can we check how many trades happened around this price from 4083 to 4075 because what i’m thinking is in this case of differences in open price if we put market open of after market order will my trades get picks anywhere betweek 4083 to 4060 or not which will give atleast 20 points profit in such gap up and gap down openings. kindlt advise and million thanks in advance
The intraday charts do not capture all the ticks that happen during the day. Hence there is a difference between what you see on the intraday chart and the EOD OHLC. Suggest you read this – https://tradingqna.com/t/why-are-the-ohlc-values-on-daily-and-hourly-charts-different/17495/2
Dear Karthik,
Million thanks for the kind reply
But my doubt is in this cases of huge gap down and open price difference in the chart if i put an AMO order with market order will my trade picks anywhere between 4083 to 4060 which will give me atleast 10 to 20 points profit
kindly advise because if this works i can track us markets and decide whether marets opens positive or negative and place AMO market order which should give me atleast 5 points in crude oil everyday
Yes, you can certainly do that but you always carry the risk of market orders.
Dear Karthik,
yesterday night natural gas was trading -3% so i thought of putting sell AMO limit order at 201 but somehow i slept. but if we see it opened at 202.2 and first candle closes at 198.6 somewhere. in this scenario my order could have easily picked between 202 to 201 and straight two points profit in natural actually i thought of taking 25 lots which could have given me 60k profit in 5 mins. so m gng to work on this on either crudeoil ir natural gas by tracking us markets and putting 10 points below or above for crudeoil and one or two points above or below to natural gas
What do u advise me karthik on this strategy. will this strategy works for me
I’m not sure about this, and also I dont think I can answer this for you 🙂
Here is what I think you should do – trade with smaller quantities till you get a hang of things. Given the volatility, it is possible that few trades can blow out and erode all the profits that you’ve made.
Good luck and all the best!
By when the MIS order in crudeoil fut will be squared off
MIS in commodities is squared off 25mins prior to market closure, so 11:30 PM is when the MIS square off happens.
i am new to commodity trading, if i am going to buy crude oil, can i able to buy one quantity.
but they say lot size is 100.
can i able to buy one quantity??
Yes, you can. 1 lot of crude is 100 barrels.
If I buy 1 lot of crude Feb Expiry and sell 1 lot of crude Mar expiry(expensive as compare to feb expiry) then can we say it is good change of arbitrage.
Kindly explain what should I do in case of Mar and Feb months future lot is trading at discount from underlying (in case of equity ).Which one is buy or which one is sell.
This makes sense if both the contracts are trading at expensive valuations wrt to their theoretical values. I’ll be discussing calendar spreads in this module – https://zerodha.com/varsity/module/trading-systems/ , stay tuned.
Thanks for your reply. Kindly elaborate calendar spread in case of futures trades is in discount amount.
Will do that here – https://zerodha.com/varsity/module/trading-systems/
I have observed on a number of occasions that crude oil is not as volatile as stocks in intraday timeframes..as in once a trend is established in crudeoil charts intraday it is more likely to continue and does not show any signs of high volatility as stocks do most times..is this true?
I’m not sure about this. If it were to be true than trading Crude would be very easy. I could be wrong, I’d suggest you backtest this thesis once. Good luck.
You said institutional players hedge their positions in spot market.. can you tell how it works in physically buying Barrel of crude oil? What is spot market?
There is in fact a spot market for Crude oil, although not present in India. So a serious player with wide market access (Olam, Cargill etc) can hedge their position.
Greetings Karthik, great job teaching beginners like us. Appreciate it!
I see most of the comments here are about physical delivery and trading near expiry. For repeat queries like these, You can just prepare a standard response and just link it. Saves your time.
I have started trading Crude, all thanks to you! Whetted my appetite.. Any plans on advanced Chapters on Crude?
Aditya, yes…doing something like that has always been on my cards. But somehow time just didn’t permit. Will give it a shot again.
Good luck with Crude, hope you stay profitable. Btw, I’m not sure if I would be writing anything more on Crude in the near future.
Hi Karthik,
Is continuous chart for Crude available on Kite/Pi now ? If yes, what script to search for ?
Yes, we’ve always had that.
Hi,
I had purchased Crude oil Mini and the square off date is passed. I want to enter a Cash settlement and not enter a delivery zone. Can I do this now. The contract expired yesterday.
If you are trading with Zerodha, then you need not worry about this. Everything is cash settled.
Dear sir
I want to know that suppose I sell CRUDEOILM according to down trend of market , but after a while market reverse bounce and goes high. In this condition can I buy CRUDEOIL , is it possible to trade both one is sell and another is buy simultaneously
No, that would net off the position. However, you can do this on two different contracts. Buy this month and sell next month.
thanx sir…
one more thing sir
today at 09:45 am , i was calling your 08040402020 numbers,
after asking my client ID and ZPIN number my phone was disconnected saying goodbye………
you are humbly requested that kindly improve your help line service to resolve clients
complaints because every client are bet his money in the market and one wrong step taken by
any novice lost his money.
hopefully an early favorable action would be taken by team zerodha on the matter
with warm regards
Ram Niwas ZL0791
Ram, apologies for this. Can you share the number you called from to – [email protected] . Meanwhile, you can look for support answers here – https://support.zerodha.com/, if you don’t find an answer, you can even create a ticket.
Welcome!
thanx sir
i was called on 02 april 2018 at 9:43 hrs and i was holded 4 minutes 38 seconds after that my phone was disconnected..
with warm regards
Ram Niwas
Will escalate this to our support team. I’ve noted your mobile number and deleted the same from your reply.
In case of physical delivery, one has to do some paperwork or something say 4-5 days before expiry.
What if I buy say Gold on expiry day ?
In this case I have to take physical delivery ? ( Brokers who allows physical delivery )
For knowledge purpose I asked this.
If you are with Zerodha, then we don’t deal with physical delivery. Anyway, in case you want to take physical delivery, then you need to ensure you express your intent to the broker 4 days before expiry, work with the warehouse receipts and take the delivery. A laborious process, you are better off with cash settlement, unless you have specified reasons to do this.
What if I buy on expiry day ? will I have to take delivery or this will be cash settled ? for delivery 4 days before we have to do some work but on last day we are not doing any work just leaving contract to expire and let exchange decide the price, what about this case ? delivery or not?
Yes, this will be cash settled. Btw, if you are trading with trading with the Zerodha, the contract closes before the delivery intention period.
dear sir Karthik
is it possible to implement option of BO in commodity trading. Other trading platforms
are providing Bracket Order in their intraday trading in commodity.
I was noticed that one of my friend trading in upstox platform with Bracket Order (with name of OCO order instead of BO)
if possible please implement.
with warm regards
Ram NIwas
No BO on commodities yet, Ram. Hopefully sometime soon.
thanx sir
Good luck, Ram!
I represent a group that has the capacity to deliver monthly for 12 months,2 million barrels BLCO of Nigerian Origin. We can give 2% PB. rovide some evidence of ability to deliver. Then buyer sends pre advice for total cost of cargo via swift MT760 SBLC and seller reciprocates with Pre advice for 2%pb. Buyer swifts non operative LC and buyer activates with 2%PB. Delivery via CIF to any of buyer’s POD. Final payment after Q and Q.
Kaba Martin
mailkaba [a] yahoo.com
Kaba, unfortunately, this may not be the right forum for this discussion.
Thanks for all the knowledge u r sharing I have been trading for some time in crude oil contract I have one question that does crude oil wti traded in us and crude oil traded in India have the same underlying value because both the contract trade at nearly same price all the time.
Yes, but the Indian counterpart has additional charges applicable.
Does it says that all the technical analysis that applies to US crude oil WTI will also applies for Indian crude oil contract.
And the volume that Indian crude oil contract shows affect it price
Hello,
Today I have bought 7 lots of crude oil mini july 18 future contract. I would like to know that when does this future contract will expire? Will it expire on 19 june 2018 or 19 july 2018?
Thanks.
It will expire in July.
Great article!. 1. Does Commodity training most suitable for working professionals? 2. On your experience, what do you think of trading between 8 pm to 11 pm as part time trading after office hours?
1) You can trade commodities as long as you can track and monitor your position
2) That’s perfect for commodities, but do you really want to trade after a day long of regular work 🙂
why does far month expiry contracts trade cheaper then near months contracts.Also what is the settlement price for it.Where can we get it.
They dont, in fact, they trade at a premium because of the cost of carry. If you have seen a difference then it is due to the short-term demand-supply situation.
Yes they should trade in premium but at current moment the more far the expiry less is it’s price for example July futures trading at 4858 augst at 4790 nov at 4700.
Does it imply that market is very bearish for the underlying and we should take a short trade for the same.
Also is there a way in zerodha Kite to see the historical continuous chart for commodities.
Thanks
Yes, there is continuous charts available on Kite (starting from 2015). I’m not sure why there is so much spread in these contracts, need to check if there is something brewing in the international market.
Hi Karthik.
When we see the Market depth of Nifty, Quantityis always in a multiple of 75 (Because lot size is 75).
But in case of crude, it is not in multiple of 100. Why so? Even in the screenshot above, we can see the quantities 98, 7, etc….
Kindly explain..
Pragya, commodities are measured in different units (Crude in barrels, Gold in kilograms, Aluminium in tonnes, etc) and the same can’t be used. Hence, 1 quantity of ‘X’ commodity is equal to the standard lot size of the commodity.
You can check the standard size of the commodities on our Margin Calculator
Sir,
Is it true that one cannot purchase more than 5 % of open interest? Does this apply to institutional investors also like lic?
Yes, there are restrictions on the size of the position, both at the client and trading member level.
To initiate a long or short position on crude … Should I use the TA(chart pattern) same as used for gold/equity?
Yes, TA is applicable to all assets.
If I sell Crude 1 lot at 4715 and buy Crude Mini 10 lots at 4700 for sept 20th contract. I am locking in 15 points profit. right? so if I don’t do anything till expiry, how will I realise this profit? Will both contracts be automatically settled by zerodha/MCX ? or I will need to do something? Like taking delivery on one and giving delivery to other? Just think of it as I have done these two trades on 5th sept and didn’t see my account till October and contract expired in between,… what will happen and what are the financial implications?
Yes, if you manage to capture this spread, you should be able to lock in 15. However, you cannot carry this forward to delivery. You will have to close the position before the tender period for delivery.
Hey Karthik,
I know I just left you lot of questions some place else and I am sorry to bother you with more but I really need to ask this. I noticed…
1. CrudeOilMINI SEPT Future is trading at ~4815 and CrudeOil SEPT Future also at the same price, so no arbitrage opportunity there.
2. However, CrudeOilMINI DEC is trading at ~4836. So now comparing with CrudeOilMINI SEPT contract, will this classify as a calendar spread?
3. If so, how can we know the fair price of CrudeOil since we don’t really have a way to get its spot price. Or is there?
4. I am assuming since the CrudeOilMini SEPT and CRUDEOIL SEPT are at the same price, that should be closer to the fair price. Is that right?
5. So, following the rule of thumb, I should buy CrudeOilMini SEPT contract and simultaneously sell CrudeoilMini DEC contract, thereby locking in approx. 21 points as arbitrage profit. But, what I don’t understand is how to calculate the risk involved and how many lots do I need to purchase. I don’t risk more than 1% of my capital but here since it is arbitrage trading I am unable to determine how much I am risking. Please advice.
6. Also, once we take an arbitrage trade, do we need to exit both the positions at the same time? I get that we can exit the near month contract as it approaches expiry but what about the far month contract? When do we exit that?
Many Thanks again.
~ Abudhar al Hassan.
1) Yes
2) I’d suggest you look at this technique to calendar spread – https://zerodha.com/varsity/chapter/calendar-spreads/
3, 4, 5) If you follow the above technique, no need to know the fair value
6) Ideally yes, else you are exposed to naked directional risk.
Hi Karthik,
Am beginner in this commodity shares. Can you please suggest which crude oil is best to handle. I don’t want more profit, just want to get in.
Hi Geetha, I’d suggest you look at the Crude oil mini contract which has a lot size of 10 barrels as opposed to 100 barrels on the regular Crude contract.
Thanks Karthik, will do.
Good luck, Geetha.
I m confused with lot sizes and quantities. When I buy or sell, there is a quantity column there, what to enter? Is it 1 quantity=100 barrels in mega? And 1 quantity= 10 barrels in mini?
1 is in terms of lots. So 100 barrels in mega.
And also, in margin calculator, when I entered quantity as 1, it changes default to 100 or 10 in crude.
But in brokerage calculator, quantity differs.
Dear Sir,
Do we have any volatility index for crude just like we have india VIX for nifty and Bank nifty?
No sir, not available.
If I am long on crude and not sold the contract even till expiry. What will happen to my position?
It will get into compulsory delivery. We do not support this at Zerodha.
Hi,
As per image of a crude oil arbitrage opportunity, can’t we trade crude like calendar spread, means buy in near month & sell in next month as we get a higher value in next months rate?
or
please explain about rate conversions on the expiry day.
thanks.
Of course, you can, Salil. I’d suggest you check this – https://zerodha.com/varsity/chapter/calendar-spreads/
When will Zerodha start BO for commodities?
On the list of things to introduce.
When will Zerodha introduce BO in Commodities?
Hi Karthik,
I am unable to see Option contracts on CrudeMini Futures on MCX website….So I believe Protective & Covered Strategies would not be possible, since lot quantities are not identical, isn’t it? Your thoughts/opinion please….
Thanks
I am unable to see Option contracts on CrudeMini Futures on MCX website —> Crude Mini options arent there, only Crude oil (the big contract) options are available to trade.
Hi, I have bought March Futures however I am unable to sell Options for March series…It looks RMS blocked March Option Contracts…Could you please enable it so that we can minimize the market risk?
Kanhaiya, we allow only current month MCX options contracts due to liquidity concerns. We will allow further month contracts once liquidity picks up.
I do understand….however, you allow to trade in futures for long expires which looks strange. Curious to know how should I manage / curtail the risk meanwhile…I am already long on futures
Hi, Any update on above? Also, please let me know by when I should able to trade March options?
Unfortunately, we had to block the contract for liquidity reasons.
I understand that the international crude price in $ is multiplied by USDINR and that’s how we get the INR price, right?
If yes, then isn’t it possible to manipulate crude contract prices by buying more and more at higher prices. My question basically is how does the international crude market and the Indian crude go in tandem? I am a bit confused on this part.
Chirag, it is not just a straightforward multiplication of the INR price. There is more to it, check this – https://tradingqna.com/t/calculating-the-impact-of-international-prices-on-gold-silver-trading-on-mcx/316
But yes, the international price dictates the price locally, and they move in tandem. This is similar to how an iPhone is priced in US and in India.
Ok now I get it. Also I googled and figured there’s contracts where the prices are exclusive of all other charges.
Anyway, could you tell me of books that will help me learn commodity trading? I would want to expertise in commodity trading.
Thanks!
Commodities are tricky, you need to understand how F&O works and then learn the contract specs of the commodity. This according to me will help quite a bit.
Hello,
if i buy a crudeoilmini NRML and i keep it for overnight will they charge money from zerodha , i had noticed in few trades that i been charged and being fresher i would like to know what exactly happens in the overnight trade.
Cheers
There are no such charges, Sathish. All our charges are explained here – https://zerodha.com/charges
can we subscribe US Energy information administration for any report related crude oil price? is there any charge for it ?
I’m not too sure about that, Rahul.
Hi Karthik,
I hope it’ll be very easy for you to answer below queries but very important to understand me the subject matter…
* Bought Crude Futures @ 4000 & Written Call 4300 Strike. On Option Expiry – Crude Closes @ 4325 (DSP).
1) So in this case, the Devolvement of Option for 4300 Strike will be executed on the day of Option Expiry itself, right?
2) My Original Long Future will set-off with Devolved Short Future, right?
3) I’ll have Realized Profit being 325 Points (4325-4000), right?
-> Please correct me even if there is any deviation related to time of devolvement & profit points.
Thanks
1. Yes, the short call position will be either net-off with a contrary position or devolve into a future contract after the expiry day. In your case, on the next trading day, you will not hold the future long position as it would have been netted-off.
2. Yes.
3. Your P&L will be 325 for the futures and Option sell premium minus 25 for the option contract. Since you haven’t mentioned the option sell premium price, I’ll illustrate the possible scenarios:
a. You sold the calls at Rs 40. Your P&L will be 340 [325+(40-25)]
b. You sold the calls at 15. Your P&L will be 315 [325+(15-25)]
c. You sold the calls at 25 Your P&L will be 325 [325+(25-25)]
Hi,
Important to know – Why 25 points reduced from Option Sell premium since 4300 Strike closes out of the money, isn’t it?
If I would have sold the call @ 4100 then it’ll reduce 225 points (4325-4100) which looks strange to me….
Sorry…Please ignore above question….My bad. (I was under impression being Put leg instead of Call)
No problem, happy trading!
Hi Faisal,
Thanks for above. Only last question then I’ll be almost all-set.
Please elaborate two scenarios as below in respect to time of devolvement & P&L.
First being ( CTM-ITM ) & Second being ( deep ITM )
1) Bought Crude Futures @ 4000 & Bought Put @ 4350 Strike @ 25. On Option Expiry – Crude Closes @ 4325 (DSP).
2) Bought Crude Futures @ 4000 & Bought Put @ 4500 Strike @ 175. On Option Expiry – Crude Closes @ 4325 (DSP).
I hope Explicit instruction given by client is implied in case of CTM-ITM.
Thanks
In both cases, there will be a net-off of the contracts.
Your P&L will be 4325 in both cases.
Thanks a lot….I hope Explicit instruction given by client is implied in case of CTM-ITM. Please let me know otherwise.
Thanks again
Sir
Since Zinc has been converted into compulsory delivery contract from April ,2019 , what are the penalties charged if I failed to take,give delivery at expiry. I had an open position in zinc mini contract at expiry. I this also a compulsory delivery contract?
Pranay, at Zerodha, we ensure that you don’t end up with a physical delivery obligation for a compulsory physical settled contract. This is the same for Gold, Silver, etc.
We block trading in physical delivery contracts before the delivery intention period and square-off open positions in those contracts too.
In any case, if there is a physical delivery obligation, the penalty is prescribed in the contract specification that can be found on the MCX website.
1. why options order for crude are getting rejected ? It is option order blocked on any crude strike for current month ?
2. What is expiry time on expiry day fro crude ?
3. Is this issue of closing crude contract in 5-6 days in advance is solved ?
4. Now, Can i do “intra-day” trade on crude on until expiry day ?
Does Zerodha allow CO and BO order in Crude oil?
No BO/CO in commodities yet.
Hi karthik. I enjoyed reading your varsity material and finally arrived at currency and commodities
Small question regarding arbitrage
why is there such a huge difference between
ALUMINIUM 31MAY2019 143.60
ALUMINI 31MAY2019 123.80
ZINC 31MAY2019 212.80
ZINCMINI 31MAY2019 188.8.
dose it have something to do with the recent announcement of compulsory delivery on these contracts. If so how dose that account for such huge anomaly. Please share your thoughts and knowledge on this.
Check this – https://tradingqna.com/t/arbitrage-opportunity-in-aluminium/52656/2
If we have option to trade in 6 month advance contract then what is the reason for order rejection…in Zerodha Why we are pushed to trade in nearest expiring contract?
That is because there is no liquidity and the spreads are quite high, Prakash.
But it shows some volumes means people are allowed to trade.
Yes, it is just our internal risk management policy not to allow.
But, if you allow at least in 3 month advance, investor can minimize his losses, taking one long in one month and one short in next month
There is no liquidity, Prakash.
There is liquidity sir, that’s why some volumes are there, and if something is available in market and available in other broker’s platform then it should be available in Zerodha also.
Sure, Prakash. Let me check with the team here.
Hi Karthik,
Are we allowed to use BO(Bracket Order) to trade in Crude Oil trade? as I check on my mobile app bo option is not able to select. Where as I am able to select co, amo or regular.
We do not have this facility yet for commodities.
Is Cover Order being allowed in Commodities as Zerodha says:
Intraday trade using CO on Equity, F&O, Currency & Commodity. In a CO you can place intraday buy/sell market orders with a compulsory stop loss for a higher leverage than trading using product type as MIS. All open CO positions gets auto squared off before end of the day ( Equity & F&O: 3.20pm, Currency: 4.30PM, Commodity: 25mins before close). Margin requirement will vary based on the Stop loss price.
Latest Update ( 16th July 2014)
Cover orders are allowed for trading commodities.
Am I missing something, let me know.
Thanks,
Hmm, CO is allowed for commodities 🙂
Hi…
I purchase 2 crudeoil fut in some different time zone at a day in NRML position But Next day 11.00PM one crudeoil is automatically Sell. How is this possible…?. Please give me answer.?????
Perhaps there was a margin shortfall? I’d suggest you call the support team for this, Mahendra.
Is there any delivery option for commodity? If yes where it is in app.
How much is the margin required to hold the 1 lot of crude oil for 2-3 months with my own money, without using margin from zerodha?
Nope, no such option.
If BO is not available for commodities in Kite right now, what is the alternative we can use??
We are working on it. For now you can use CO for commodities.
How 8500 barrels is 3000crore? Price per barrel is around rs3800 now. And what is delivery units 50000 barrels?
The latest product specs are here – https://www.mcxindia.com/products/energy/crude-oil
Hello, Mr.Karthik Rangappa,
Can I use both arbitrage and option trading in crude oil- crude oil mini as per VARSITY Chapter 12, Crude Oil (Part 3), the crude oil contract blog. Ref: https://m.economictimes.com/marketstats/pid-110,pageno-1,sortorder-desc,sortby-premiumdiscountchange,type-premium.cms
Best Wishes
You can, Jagpat.
Economictimes is publishing MCX Silver-Silver Micro Option premium is possible to execute both arbitrage and option trading as per your theory.
Futures, is quite possible.
Hi Karthik,
The below link of NSE shows energy futures but it doesn’t appear on our platforms….plz let me know…
https://www.nseindia.com/products/content/derivatives/commodity/Contr_spec_enrgfut.htm
Guess there is no trading volume.
What do you think if there are any chances of volume increase in NSE Crude Mini futures from Jan’20? (since Dec’19 is last month for crudemini on MCX).
It will increase, Kans.
Does it profitable to arbitrage between bse brent crude oil & mcx crude oil/mini ?
Ah, never tried that Sushil. Maybe you should explore. But I think you’ll get hit with the liquidity.
Crude oil MINI January 2020 contract is not yet launched, any update ?
Crude Oil Mini contracts are going to be delisted as per SEBI
I’m not sure about this, Aneesh. No official circular on this yet.
Crude Oil Arbitrage
HOW DID WE GAIN 4+ IN THIS ABOVE EXAMPLE , AS WE LOSS AROUND 900 AND EARN 130 RS …
WHAT IS THE LOGIC BEHIND THIS , AND DOES THIS REALLY WORKS
Hmm, 4 points is the spread between the two contracts, which is locked up right?
Agr m crude oil 4189 pr buy krta hu toh mujhe 4189 hi dena hoga ya 4189×100 dena hoga?
You will have to pay the margin amount.
Hi Karthik,
Usually funds remain idle in commodity trading A/c; so, Do Zerodha is planning to provide collateral Margin Facility for Commodity trading? ( same as collateral margin for F&O trading)
Thanks,
Kans
Nope, we don’t do that yet. By the way, commodities are already heavily leveraged, why would you want to do this?
Right…Let me keep my funds lower….Thanks
The crudeoil mini contract is gone,
and the arbitrage opportunity is not possible,
Please update the this module up to date so new traders benefit from up to date information and not get confused from past information,
please kindly update this module
Thanks, Abbas. Will post and update.
Hi Karthik,
On expiry day;
1) If both Long Call & Short Call closes ITM then I believe it’ll net-off, (there will not be the situation of devolvement either, Right?
2) In the above scenario (2 legs); what are the charges for Long ITM Call if letting it expired (i.e.not squared-off) on expiry? (I would like to know if there is anything like STT trap like Index/Equity option exercising)
Thanks
1) Yes, long CE and Short CE will net off.
2) Nope, no STT kind of situations in commodities.
Crude Oil Mini Is missing, How to trade in Crude Oil M.
Crude Mini no longer exists.
Crudeoil mini contracts (FEB /else) are not available for trade. Please guide, I would like to trade in crude mini. It is showing only for 100 BBL lot size option and not for 10 BBL.
I think the crude mini contracts are no longer available to trade.
Crudeoil futures show default qty as “1” when we place an order thru zerodha.
What does that mean? Is it just 1 barrel we are trading or is it 100 barrels ?
It is 1 lot, Saurabh, which is 100 barrels.
Crude oil MIS margin now got double 25k to 50k when this back to old 25k.
Sir I guess we will have to wait for the volatility to subside.
When will zero the provide bracket order facility in commodity trading
I want to know that who controls the margin requirement for trading crude oil as right now due to high volatility the margin requirement is double so who controls it actually the brokerage firm or commodity exchange
hi sir
kindly suggestion if crude oil pil current price 2400 Rs in march. when i purchase 2500 CE crude oil and also purchase 2300 pe
then how required marzin indraday / delivery . also please suggestion its working option in zeroda . also suggestion expiry time
regards
niranjan
You should get a margin benefit here since its a spread position. You can check the exact margins using this calculator – https://zerodha.com/margin-calculator/SPAN/
hi sir,
Can i hold crude oil for 6 month? If yes then how?
Thank you!
You can buy monthly futures and roll this over.
Hi, can i have physical delivery of crude oil.
Or i can have the position till squre date and can have the delivery by paying full in advance
You can but Zerodha does not support this.
Hi Karthik,
Please refer CME data as per below link. The May month settlement date for Futures is 21st April…..it looks strange…Any idea about this?
https://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude_product_calendar_futures.html?optionProductId=190
Thanks
But this is US markets right?
Yes….just curious to know…
Checking crude prices on CME in$ terms…Let me know any information
Sure! Good luck 🙂
Hii sir
Why crudeoil mini is not showing in search results?
Is trading of crudeoil mini stopped temporarily or permanently?
There are no mini contracts, Abhinav.
Hello
If i buy crude oil on 20th april for long term and which is date of expiry
can i hold for more than one or two month ?
thanks
I think you should look at the May contract. Unfortunately liquidity is not enough.
filled quantity 1/1 means regarding crude oil
Hello,
If i bought April 20 , 2020 contract of mcx crude, at what price will it settle if i forgot to square off?
CE or PE? CE would be 0.
Hi Karthik,
Is it possible if MCX prices go below zero i.e in negatives? 🙂
Thanks,
It did, the settlement price 🙂
Can I sell crude oil & hold it for next day
..
Also if I buy crude oil & dont want to sell in loss & want to hold it will it get delivery if yes
What are the options of Wearhouse & charges for that..
You can sell and carry it forward as long you have the required margins.
By the way, Crude oil is cash-settled commodity. You cannot take delivery of it.
Before the expiry of the April contract of crude oil its value is below 950rs and today it is showing the value of 1600rs sudden rise how its possible.
In May contract, the graphs do not show the 950rs the lowest points is1579 rs means yesterday it touches 950rs and today it is not there is this possible or somewhere I’m wrong
What happens if my intraday crude oil trade continues to hit lower circuit and I am not able to exit or square off?
Then you will be stuck with an open position and will have to wait for an opportunity to exit.
Yes obviously but What happens if it hits lower circuit till End of the day ?
Although good for you, you’r still stuck with a position.
The April 20020 crude oil closed @-2884. Its really illogical and illegal causing lot of loss to the buyer. For having purchased the oil punishing with him another 2884/- causing huge loss to the buyer. Hope Nithin kamath, CEO Zerodha, take up the issue with MCX exchange either close at the closing price of MCX or deliver the oil to the buyers. which is logical and legal . Elther closing at MCX closing hour (5PM) rate, By doing so, do not affect the seller otherwise buyer is put lot of unbearable loss and untold misery and agony.
Unfortunately, this is neither illogical or illegal. It is just that this has never happened ever before. Btw, crude oil is a cash-settled commodity, so no physical settlement here.
How can I stay invested in crude oil for long term? I don’t see any investment option like stocks for crude oil. So how do I go about long term investment in this commodity?
The best option is to buy an oil ETF, unfortunately, none available in India.
Since, crude oil contacts are in lots of 100 or 10, then why on contract buy sell dept table quantity is shown as different units rather than in multiples of 10 or 100?
Like how does contract break into numbers other than multiple of 10?
PS. I am willing to trade in crude so trying to get all info before hand.
Your chapter was very well explained. i shared the same with my callegues too.
1 lot = 100 barrels, so the multiplier is 100.
Hi..
I was going through the chapters on the crude oil and there are 2 types of contracts available 1) CRUDEOIL & 2) CRUDEOILM, however when i tried searching for the futures contract on the Kite app i can find only the CRUDEOIL. The CRUDEOIL MINI is not appearing on the search & add option.
Please advise.
Regards
Milind Chari
CurdeMini has been discontinued, Milind.
Hi sir, is there is any specific reason behind the MCX decision to discontinue the crude mini.
I’m not really sure, perhaps due to the increased volatility.
Hi Karthik,
Well, I should’ve had this question earlier but it just struck me. The Futures price is a function of the Spot price:
Futures Price = Spot price *(1+ rf – d)
So let’s say, for ex, crude oil contract’s value is 3221/- (calculated using spot value). But since even a contract is traded, and no seller is willing to sell it below 3230/-, the contract’s value will go up to 3230/-. Now, it’s no more a function of the spot price but rather the contract traders are deciding the price.
Does this happen? If yes, then futures might just follow a different trend altogether.
Thanks!
Rohit, the theoretical price is for guidance for its fair value. End of the day, what matters is the demand and supply dynamic.
Can i buy CRUDEOIL MAY FUT and sell on the next day itself or i should wait till the expiry date. Can you explain on it?
Yes, you can.
To buy CRUDEOIL MAY FUT, how to calcuate margin required in account?
Check this – https://zerodha.com/margin-calculator/Commodity/
The contract details are as follows –
Price Quote – Per barrel
Lot size – 100 barrels
Tick Size – Rs.1/-
P&L per tick – Rs.100/-
Expiry -19/20th of every month
Delivery units – 50,000 barrels
Physical Delivery – Mumbai / JNPT Port
hi Karthik, in the above what is delivery units?
No delivery unit as Crude oil is compulsory cash-settled.
Hey,
I am not getting Crudemini in my Kite app
My user id is LD3093,Please Help ?
Contact me on 9425123421
Crudemini contracts are no longer available.
Hello,
Todays closing price of crude oil is 2517 (may fut).
If i have to buy 1 lot what is amount to be maintained in my commodity account?
Kindly provide calculated value in the answar plz.
Please check this – https://zerodha.com/margin-calculator/Commodity/
Hello,
Today crude oil price is approx. 2500(June Fut).
If I have to buy 1 lot, according to the margin and span calculator amount required is 260000.
But When I try to place the order its rejected and it’s displaying as the required margin is 357800 (CRUDE OIL JUNE FUT).
What is wrong? Can you help us on it?
Crude has an adhoc margin of 1L which is not shown in the margin calculator.
What is adhoc margin? How to know the value for zerodha
Think of it as adding a margin on the fly to protect against unexpected volatility.
Hello,
#1: I wonder why Crude Oil contracts are so popular? It’s not even Gold or Silver which was used as money. Why everyone trade it so much
#2: I have a question about hedging. Suppose I am a company and will have oil ready to sell in 12 months and I want to hedge the position. There is no 12-month contract, so what should I do? What if I choose the 6-month contract (with the intention to rollover) but end up in short squeeze?
1) Crude oil is a real commodity, has real uses 🙂
2) Depends on which one is more liquid. In India, it is always the current month contract.
What is this delivery units 50000 barrels?
If you intend to take physical delivery.
What will happen if we do not exit the contract and pass the expiry date? Will it get exit at the market price at the time of expiry ?
Yes, it will get settled at the settlement price.
Hello, i checked the MCX nearest future chart and the volume was ranging between 50k-70k only, is this volume enough for the volatility and move the price, as in stock we search for the stocks with volume more than 1 million, than why so less volume showing to me here, i checked in investing.com, moneycontrol and tradingview.com, everywhere this was only showing
plz confirm my issue, thank you
Keshav, you should not have a fixed number like 1M or 50-70K. You need to look at volumes from the average perspective i.e. if today’s volume is higher than last 10 days average volume, then it is considered good volume.
HI Karthik ,
i have checked today on zerodha Kite and having below queries –
1. i did not see crude oil big and crude oil mini contract by searching, i only found “CRUDEOIL20AUGFUT” same till next 6 month expiry.
2. i did not find lot size on buying/selling popup while selling and buying contract (like nifty future we get automatically 75 on popup)
1) The mini contracts have been discontinued by the exchanges
2) Yes, you’ll have to fill the lot size
and also can we see crude oil spot like nifty or bank nifty ?
There is no spot market for Crude in India.
Good information given by you sir… Heartly thanks….
Happy learning, Vipin!
Hi karthik, I cant find crudeoil mini anywhere . Could you explain whats the reason
I guess these contracts are discontinued.
Hello sir,
Thanks you for your efforts for education in stock market.
I think sir crude oil mini contracts are not traded. So I guess this chapter requires some updation.
Thank you once again.
Thats right, I think the contracts are suspended. Will do the updates.
Crude oil October future is trading @2820 per barrel, so the contract value is 282000. But in Kite, the required margin is showing 387000 for 1 lot. Have no idea why.
I’d suggest you call the support line for this.
Dear Karthik, Varsity has been doing tremendous job towards investor education thanks to your nice lucid presentation style and excellent teaching ability. The humble and interesting way you explain core concepts and share your knowledge and experience with the readers speaks volume of your passion about trading. It strikes chord with all those who are really passionate about market. You inspire them all. Thank you very much. Keep it up dear.
Thanks for the kind words, Sujoy and I’m glad you liked the content 🙂
You made it interesting sir! Thank you for the insights…
What are delivery units in the contract details? If it is what its name seems to imply, shouldn’t it be the same as the lot size?
Where did you see this? It is the same.
In the contract details of Section 12.2 and Section 12.3
Am first timer for commodities. Clarify
1 Say you take 3 months contract in crude oil. Can you square off anytime.
2. In case of losses do you have to maintain additional margins like in futures contracts in nifty/stocks.
1) Yes
2) Yes
Crude oil mini, I can’t see it in the search results, tried crudeoilm apr fut, but no luck, is there a change in this?
Mini contracts are no longer available, Umang.
Sir, when i do a c+ and c- in equity, the margin requirement reduces drastically. Same doesnt happed in crude oil. Can you explain it
Dear sir ,
Kindly explain why crude option prices taking too long to update 🤔🤔
Which prices are you talking about, Annurag?
Sir crude oil mini contact is not available If I search
I used symbol CRUDEOILM
Its not available
Crude Mini is no longer available.
In kite…
Sir as you know there would be no liquidity for contracts until near month,therefore charts will form when there is liquidity,since I’m tracking futures and not spot is available how can I analyse keeping 40-45 days candlestick which formed once liquidity started picking up?
Bharath, try looking for the international crude price. Indian markets anyway follows that.
Could please confirm that the expiry of crude oil futures is always cash settlement. Also at what time does expiry happen on expiry date? EOD or at some time in the middle like currency market?
Thank u,
thank u,
soo much mr.rangappa..
varisty is really a univesrity for traders and investors
Happy learning!
Dear sir,
Is there any opportunity for learning trading on equity markets as well as commodity market via online classes??? Or any physical classes with live examples and demonstrations???
I am eagerly looking for such classes and learn.
Regards
No online classes, Vijay. Everything is via the web.
Can this page please be updated since CrudeOil Mini no longer traded?
Will do, Mayank.
Hi, the Crude Oil Mini contact might have been discontinued, it doesn’t show up on Kite. And there are Monthly Options too. Please cover this in an update. Thanks
Thats right, mini is no longer available. Will update.
Hi ,is crudeoil physically settled ,what is zerodha policy ,dk u close it like for gold
Yes, it gets closed before expiry.
Sir, we can also this arbitrage strategy with big gold and gold mini right sir 🙂
Sure, you can give it a try, Muthu.
How to add crude oil mini in Zerodha?
Crude Mini is no longer traded Kannan.
In my zeeodha app crudeoil mini lot not found… please help
Sir it’s a suggestion or maybe a doubt, i don’t know clearly myself ….. So, the thing is i Checked tradingview.com it does not show 1. Crudemini contracts 2. Silver1000 contracts… So where these contracts banned or something … and if they are no longer tradable could you please update the text of the chapters it’s kind of confusing at this stage … 🙂
Sorry for the trouble 😉
Thanks, Chetan. I will update the text 🙂
Hi Karthik, great stuff. Is there still Crude Oil mini offered by MCX? I couldn’t find it.
Ah no Pradeep, Mini is not available now I guess.
Ah, I found in the previous comments. No longer traded. Thanks Karthik, wonderful piece of knowledge. Crude oil today is damn expensive and so are the margins. But looks like an interesting commodity to trade.
It is. Happy learning and trading 🙂
Hi Karthik, I have one doubt. I’ve noticed that in the crude oil futures chart, the prices don’t really follow the pivot levels at all. In stocks and stock futures, it respects the pivot levels and as a trader one can make strategies around that, but for crude I couldn’t see any connection between the price and the pivot points. Does crude oil trading require a different technical approach?
I’ve never used pivot actually. Maybe try the traditional S&R technique?
Ok, maybe regular S&R can be checked. Thanks Karthik. Also one more thing, is Elliot Wave Theory something that is of use for a daytrader. I understand the basics of it but haven’t been able to apply it in the day trading context. Any possibilty of a chapter on Elliot Waves being added to the Technical Analysis module? By the way, I’m totally loving Varsity. Excellent writing and keeps the reader glued to the narration and theory. Great work and thanks to you and Zerodha team.
Thanks and I’m glad you like Varsity, Pradeep 🙂
About Eliiot waves, I’m not sure as I’ve never used it myself and hence you don’t find content about it in Varsity 🙂
You Need to update this article as Crude Oil Mini contracts are no longer available for trading as per SEBI and MCX latest guidelines and updates.
I will do that. In fact, quite a few places need an update, maybe will start doing that in a month or 2.
Very nicely explained!
Happy learning.
Crude Oil Mini is no more available to trade, article should be updated
Noted.
why cant I see crudeoil mini lots in my zerodha kite app? I have active Acount of MCX commodities acount.
Plz help.
Jayant, please do talk to the support desk for this.
Is there a update version of this chapter, which also deals with options of crude oil futures.
Is there any thing new presently in the market, apart from the information given in this chapter?
Is there a index, which we can go Bar by Bar for last few years ( like Nifty Index) for manual backtesting, as crude oil futures are monthly.
Is there a way, by which i can access EOD Bar chart for 5-10 years of crude oil future.
Thank you and best wishes.
About the bar chart – I guess you can try the continuous chart.
The chapter will be updated soon.
Hi karthik, i have successfully locked 3 point for arbitrage, now my question is should i let this both open positions expire or how do i exit it for profit? {(Crude oil rs.6008 buy) and (mini rs.6011 sell)contract June 2023 series}
Technically yes, you will have to let both positions expire. But is 3 points good enough to cover for costs?
Haha no worries I’m just testing the strategy, I’ll add more lots in future trade.
Sure, happy learning 🙂
how to add crude oil mini index in chart and how to add strike price for mini open these chart can u give brief on the same as i see only futures for the crude oil but no index for crude oil in trading view i can see the index for crude oil but not in zerodha if i am missing some of the steps kindly guide how to include chart for crude oil index and and also include the mini futures for crude oil thanks
Please call the support desk for this.
The article does not cover options on crude oil
We can take that separately. Thanks for pointing.
Hi Karthik, thanks a lot for the wonderful write-up. Just one query – are options contracts available for Crude Oil mini? I saw just Futures
Thanks.
14 Aug 23
They were, now discontinued.
Oh, just realised that the Crude Oil Mini segment itself has been discontinued 🙂
Yup 🙂
How the futures contracts are settled after the expiry of the contract? Cash or delivery !
All stock futures are cash settled, Jagmeet.
Hi,
Will zerodha allow holding the arbritrage position till expiry without physical delivery hike in margin?
No, you will have to have the margins. Also, positions will be squared off before expiry.
Congratulations on your soooo simple
teaching ways and wordings. Even beginner also excites.
Happy learning!
I am zerodha customer.
Commodity segment is active.
But I have buying the crudeoil this shows that strike price is outside the allowed range .try a strike closer to the spot price.
How to trade.
Please help me
I’d suggest you call the customer support for this, they will be in a better position to help you with this query.
Why is physical settlement of crude oil contracts are done with 50,000 barrels when we actually traded on only 100 barrel or 10 barrel ( in case of mini) ? I am confused about this part .
Ah, are you sure about this?
yes sir , i am sure about this question!:)
this part is confusing me