Comment on Settlement Holiday and its Impact

Nithin Kamath commented on 02 May 2013, 08:33 AM

The blog above is for equity and not for commodity. Don’t mistake the above blog as an answer to your query.

The answer to your query:

Gold futures which you trade on MCX is a compulsory delivery commodity once it hits the compulsory delivery period. Compulsory delivery period happens 5 days before the expiry date.

So what this means is that if you trade the 5th June gold future contract, 5 days before this date, gold futures goes into compulsory delivery. What this means is that during this period there is a chance of getting assigned delivery if you are holding a gold future contract.

So what this means is that , if you are long gold futures(the big one 1kg), you will have to pay 100% of the amount( around 30lks) and take physical delivery and if you are short gold, you have to give delivery of 1kg of gold as specified by the exchange. The delivery happens in Ahmedabad typically, so all of this can cause a lot of confusion and a possible loss.

Hence it is best to square off all positions of gold 5 days before the expiry and roll it over to the next expiry if you intend to continue.

Cheers,

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