Derivatives

A primer on guarex futures

Akhil Nallamuthu BL Research Bureau | Updated on August 21, 2021

The National Commodity & Derivatives Exchange Limited (NCDEX) launched a futures contract on the Guarex index last week. The futures will have the Guarex index as the underlying which is composed of guar seed (63.43 per cent) and guar gum (36.57 per cent). This is akin to the sectoral indices in the equity market which can be used by traders and investors to take exposure in a particular sector. The Guarex futures can also be used by participants with physical exposure to hedge their holdings with a margin amount against price fluctuations.

Specifications

The lot size of the Guarex futures contract is 100 units, and the price is quoted in rupees per unit. The tick size is one rupee and the maximum number of lots one can enter is 50. The settlement is done in cash and the last trading day of the month is the expiry day. The Final Settlement Price (FSP) will be the underlying index price arrived at based on the volume-weighted average price of the constituents of the underlying index between 4:00 pm and 5:00 pm on the expiry day.

A daily price limit (DPL) of 4 per cent will be applicable. Once (+/-) 4 per cent is reached, trading will be allowed only within these levels for 15-minute period post which the limit will be increased to (+/-) 6 per cent for the rest of the day. Essentially, the contract price cannot change more than 6 per cent in a trading day. There is a minimum initial margin of 10 per cent (of the contract value) and the exchange or the regulator can call for additional ‘special margin’ if they deem fit.

Send your queries to derivatives@thehindu.co.in

Published on August 21, 2021

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