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Presentation on theme: "Commodity Markets Agenda"— Presentation transcript:
Slide1
Commodity
Markets
Slide2
Agenda
In this session, you will learn about:
Features of the Commodity Market
Commodity Exchanges of The World
Types of Commodity Trades
Popular Commodity Indices
Regulators
Slide3
Commodity Market
Slide4
Commodity Market
A
physical or virtual marketplace for buying, selling and trading
raw
or primary products.
A physical or virtual marketplace for buying, selling and trading
raw or primary
products
is known as :
Secondary Market
Primary Market
Commodity Market
None of these
Slide5
Types of Commodities
Hard Commodities
Typically natural resources that must be mined or extracted
Soft Commodities
Generally refer to commodities which are harvested as products
Types of Commodities
C
ommodities
which are harvested as
products are known as Hard CommoditiesSoft CommoditiesLiving Commodities None of these
Live HogsGJMNQVZ5,000MBMunicipal Bond IndexHMUZ5,000MDS&P MidCap 400 IndexHMUZ1,000PMMexican PesoFHJMNUVZ*500MMMajor Market IndexHMUZ500MVMini Value Line
Kgs of riceMr S may not deliver the rice per the agreement if the price goes up to Rs. 110RISKRISKThe price of the underlyer may decrease to Rs. 95.
Slide22
Options
Gives the right but not the obligation to a holder
to call or put an underlyer at a specified strike
on a specified date
Traded in
OTC & Exchange Traded Markets
Maximum loss is premium paid
OTC Options are Customized
StandardizedGives the right but not the obligation to a holder to call or put an underlyer at a specified strike on a specified date is know as Options TrueFalse
Slide23
Example of Options
Spot Market
Rs
23,500 for 10gms of gold
Mr
L
Buyer
CounterpartyI want to buy gold in the future, but not sure if the price will go up or down?COMMODITYOPTION
Buy at Rs 23,800 3 months laterPREMIUM
Slide24
If price is
Rs
. 25000:
Mr. L will exercise the option to buy, paying
Rs
1200 less
If price is Rs. 23,000:Mr. L will expire the contract as he can buy for cheap Example of Options (Contd.)
Agreed RateRs 23,800 for 10gms of gold
THREE MONTHS LATERSpot MarketRs 23,500 for 10gms of gold
Slide25
Two Giants in the Commodity Market
Gold
Safe-Haven Status
Slide26
China
vs
US Crude Oil Imports
Two Giants in the Commodity Market
Crude Oil
Opposite of Gold
Slide27
Key Players in the Commodity Market
CHINA
World’s
largest consumer of steel, iron ore, and coal
Hard Hit:
Brazil, Russia, South Africa
Slide28
Impact of Commodities on Markets
Slide29
Commodity
Indices
Slide30
Commodity Indices via Bloomberg Platforms
Slide31
DJ-UBS Index
DJ-UBS commodity index is composed
of commodity futures contracts on physical commodities, traded on U.S exchanges. This index is based upon relative trading activity of individual
commodities.
Components of DJ-UBSCI:
Aluminum
Coffee
Corn
Crude OilLive CattleSilverWheatZinc
Single Commodity:Not less than 2%No group of commodities:Not more than 33%
Slide32
Major drawbacks:
DJ-UBS Index
Major advantages with DJ-UBSCI
:
Loss on 1.5% return
Diversification
High Liquidity
Continuity
Economic SignificanceWhich is not a advantage of Dj-UBS Index Diversification High LiquidityContinuityThe index is rebalanced annually
Slide33
Offer
a way for investors to trade the
CCI Index
as a commodity
future
Consists of a wide and diversified group of commodities, all under one contract
CCI22 Commodities
Continuous Commodity Index (CCI)Live since1957Earlier called: CRB Index
