Commodity Markets Agenda
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Commodity Markets Agenda

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Commodity Markets Agenda




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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

Slide6

Trading on the Commodity

M

arket

Trading can be physical or virtual

50

major commodity markets worldwide

Slide7

Top Traded Commodity Classes

Rank

Commodity

Value in US$

(In thousands)

1

Mineral fuels, oils, distillation products, etc.

$2,183,079,941 2Electrical, electronic equipment$1,833,534,414 3Machinery, nuclear reactors, boilers, etc.$1,763,371,813

4Vehicles other than railway, tramway$1,076,830,856 5Plastics and articles thereof$470,226,676 6Optical, photo, technical, medical, etc. apparatus$465,101,524 7Pharmaceutical products$443,596,577 8Iron and steel$379,113,147 9Organic chemicals$377,462,088 10Pearls, precious stones, metals, coins, etc.$348,155,369

*As of 2012

Slide8

History of Commodity Markets

Samurai Trading

 Hearing Skills

Slide9

Commodity Exchanges of The World

Slide10

Commodity Derivatives

Commodity Derivatives Trading

Commodity derivatives are investment tools that allow investors to profit from certain items without

possessing

them

Exchange Traded

Over the Counter

Standard

terms and conditions

Customized to the needs

!

Highly Risky

Slide11

Commodity

Futures

Slide12

Commodity Futures

S

tandardized contracts traded in exchanges which derive their value

from the underlying commodity

Slide13

Commodity

Futures

Month

Codes

F - January

J - April

N - July

V - OctoberG - FebruaryK - MayQ - AugustX - NovemberH - MarchM - June

U - SeptemberZ - DecemberCLQ15

Crude OilAugust2015

PL

V

15

Platinum

October

2015

Slide14

Commodity

Futures

SYM

Commodity

Months Traded

Volume

ADAustralian $

FHJMNUVZ*1,000AGSilverGJMQVZ250BO

Soybean OilFHKNQUVZ20,000BPBritish PoundFHJMNUVZ*15,000CCornHKNUZ50,000CCCocoaHKNUZ5,000CDCanadian $FHJMNUVZ*7,500CFGasoline/Crude SpreadNext 6,9,12 Mos

NACHHeating Oil/ Crude SpreadNext 6,9,12 MosNACLCrude OilNext 18 Mos100,000CNCanadian Gov't BondsHMUZ100CTCottonHKNVZ10,000DMDeutsche Mark (Ð)FHJMNUVZ*50,000FCFeeder Cattle

FHJKQUVX

2,000FZDiammonium Phosphate

HMUZ

100

HG

Copper

All Months

10,000

HO

Heating Oil

Next 18 Mos

35,000

JY

Japanese Yen (¥)

FHJMNUVZ*

25,000

KC

Coffee "C"

HKNUZ

10,000

KI

Gold

GJMQVZ

100

KV

Value Line Index

HMUZ

200

KW

Wheat

HKNUZ

5,000

Slide15

Commodity

Futures

SYM

Commodity

Months Traded

Volume

LBLumber, Random Length

FHKNUX500LCLive CattleGJMQVZ15,000LH

Live HogsGJMNQVZ5,000MBMunicipal Bond IndexHMUZ5,000MDS&P MidCap 400 IndexHMUZ1,000PMMexican PesoFHJMNUVZ*500MMMajor Market IndexHMUZ500MVMini Value Line

HMUZ200MWWheat (hard red spring)HKNUZ2,500NGNatural GasNext 18 Mos25,000NKNikkei 225 Stock AvgHMUZ2,500NWWheat (white)HKNUZ100NZAnhydrous AmmoniaHMUZ10

OOats

HKNUZ2,000

PA

Palladium

HMUZ

500

PB

Frozen Pork Bellies

GHKNQ

2,500

PL

Platinum

FJNV

3,500

PN

Propane Gas

Next 15 Mos

250

RL

Russell 2000 Stock Index

HMUZ

100

RR

Rough Rice

FHKNUX

500

Slide16

Commodity

Futures

SYM

Commodity

Months Traded

Volume

SSoybeans

FHKNQUX50,000SBSugar #11 (World)HKNV20,000SF

Swiss FrancFHJMNUVZ*25,000SMSoybean MealFHKNQUX20,000SPS&P 500 Stock IndexHMUZ75,000WWheatHKNUZ15,000XBU.S. Treasury BondsHMUZ5,000XCCornHKNUZ

1,000XFSwiss FrancHMUZ250XJJapanese YenHMUZ250XKNY GoldAll Months100XLLive CattleGJMQVZ50XMDeutsche MarkHMUZ500XN

U.S. Treasury Notes

HMUZ100XO

Oats

HKNUZ

25

XP

British Pound

HMUZ

250

XS

Soybeans

FHKNQUX

2,500

XT

U.S. Treasury Bills

HMUZ

5

XY

NY Silver

All Months

50

YX

ICE Composite Index

HMUZ

3,500

Slide17

Trade

Types

Slide18

Commodity Trade Types

Forwards

Options

Commodity Trade Types

Slide19

Forwards

It is an OTC market product traded between two parties where they agree to buy and sell a specific commodity at a pre-agreed price

Bilateral Trading

Agreed Terms &

Conditions

Added Risk

Slide20

Example of Forward

Contract Date

1

St

April

Contract Validity

3 MonthsSpot Price of Basmati

Rs. 100 /kiloInterest Rate12%

Mr LBuyerMr. SSellerFuture Price:?

1000 Kgs of riceFuture PriceFuture Price = Spot Price * (1+0.12/4) = 100 * (1+0.03)

= 103

Slide21

Example of Forward

Mr

L

Buyer

Mr. S

Seller

Future Price:Rs 103000

1000

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

Major advantages with CRB Index:

Slide34

Fair

weight, based on trading

volume

S&P GSCI

Major advantages with

S&P GSCI

Investment Performance

Investment in Commodity Futures

Slide35

Commodity Regulators

Some of

the regulators

include:

Slide36

Mumbai | Bangalore | Pune | Chennai | Jaipur

ACCREDITED TRAINING PARTNER:

Thank You