Derivatives

MCX launches rubber futures

Akhil Nallamuthu BL Research Bureau | Updated on January 02, 2021

The Multi Commodity Exchange (MCX) on December 28 launched four futures contracts on natural rubber. Contracts expiring in January 2021, February 2021, March 2021 and April 2021 are available for trading now.

Contract specification

The tick size is ₹1 and the lot size of each contract is 1 MT (metric tonne); the price quoted will be per 100 kg, exclusive of charges like warehouse rates, GST etc. The contract will be available for trading on weekdays between 9:00AM and 5:00PM.

On the first day of trade, the January futures contract opened at ₹16,000 per 100 kg, which declined over the week and closed on ₹15,300 on Friday. Trading volume has not been great and the bid-ask spread seems to be higher. There has not been a single trade yet in March and April series. However, these features are not uncommon for newly launched futures.

Taking the latest price, the value of one lot of futures contract will be ₹1.53 lakh (price per kg multiplied by lot size, i.e., ₹153 multiplied by 1 MT). According to MCX, minimum initial margin requirement to buy or sell one lot of futures will be 10 per cent, translating to ₹15,300 here. Note that it can be higher. The expiry will be the last business day of the month and importantly, these contract are compulsory delivery contracts.

From the perspective of traders, they can wait for a few months before transacting in rubber futures considering the lower liquidity and higher spread during initial stages.

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Published on January 02, 2021
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