Commodity Analysis

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SEETHARAMAN R GURUMURTHY K | Updated on January 16, 2018 Published on October 23, 2016


I would like to know about the options market. How do I look up information on it? Please guide me.

Also, what is beta value? How is it calculated?

Vasudevan, Karur, Tamil Nadu

For a fundamental understanding of the options market, you could read Options, Futures, and Other Derivatives by John C Hull, considered a very good book. If you would like to equip yourself with professional knowledge, you could opt for the NSE Academy’s Certification in Financial Markets (NCFM) or courses offered by the Global Association of Risk Professionals.

Beta value

An investor wants to be compensated commensurately for the risk he takes while investing in a particular investment product. For example, in equities, the value can vary based on multiple factors. The uncertainty that affects the price is called risk which is mainly classified into systemic risk and company-level risk.

Systemic risk or market risk occurs due to interest rate changes, revision to GDP forecast, inflation, or even a war. Company-level risk arises because of a company’s inefficient operations, high debt levels andother issues.

Beta measures and quantifies the systemic risk a company is exposed to. The higher the number, the greater the risk. Beta is calculated using statistical techniques and it measures the return sensitivity of the investment product to changes in a market variable (i.e. interest rate, inflation, market index, etc).

What is the near-term outlook on cardamom?

Chetan Jesrani, C Mulji Traders, Mumbai

Year 2016 has been a good so far for the cardamom futures contract traded on the MCX. However, the strong rally since the beginning of this year seems to have halted in the past two months. A long-term trend resistance around ₹1,200 per kg has halted this rally and the contract is range-bound between ₹1,100 and ₹1,200. A decisive weekly close on either side of the range will give a cue on the next leg of move. Until then, the contract may retain the ₹1,100-1,200 range. A strong weekly close above ₹1,200 will be the first sign of the bullish range breakout. The next short-term target is ₹1,320. It may also increase the likelihood of the rally extending to even ₹1,500 over the medium term. On the other hand, if the cardamom contract breaks below ₹1,100, a short-term fall to ₹1,000 is possible. Inability to reverse higher from ₹1,000 may increase the likelihood of the fall extending to ₹900 and ₹850 over the medium term. Also, a strong fall below ₹1,000 will keep intact the long-term channel movement in place since 2013. In that case, a revisit of ₹700 over the long term cannot be ruled out.

Note: The above view is based on technical analysis and is not a trade recommendation.

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Published on October 23, 2016

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