Introduction

Research refers to the search for the knowledge. One can also define research as a
scientific, systematic search for the actual information on a specific topic. In fact, research is
an art of scientific investigation. A careful investigation or enquiry specially through search
for new fact in any branch of knowledge.
Here the data collected are analyzed through eta and !olatility to find out the degree of risk
involved in commodity futures.
Statement of the problem
"ommodity #uture is a very important instrument in hedging risks, which arises in the
spot market. $peculators and hedgers use commodity utures to reduce the risks.
"ommodity #utures have volatility. ecause of varia%ility, "ommodity futures are not much
popular. Here an attempt is made to know volatility involved in &' "ommodity #utures.
Commodity market
(he commodity market is a market where forwards, futures and options contracts are
traded on commodities. "ommodity markets have registered a remarka%le growth in recent
years. (he stage is now set for %anks to trade in commodity futures. (his could help
producers of agricultural products %ankers and other participants of the commodity markets.
anks have started acknowledging the commodity derivatives market. In this conte)t the
*un+a% ,ational ank and the "orporation ank have sanctioned loans worth Rs -' crore to
commodity futures traders over the past si) months.
In the present glo%al economic scenario, due to various factors such as inflation,
political factors, natural factors, the variations in prices of all commodities are a natural
phenomenon. $o, from the point of the cultivators of the commodity .in case of agricultural
products/ or dealers in the metals, there is a genuine need for them, an instrument with which
they can hedge their risks. (hus, a commodity future is one of the most important derivative
securities. 0ith this they will %e a%le to reduce risks.
"onse1uently, the speculators who play an important part, in determining the price
also come in the picture. (hus with the help of their speculative e)pertise, it can also %e a
very lucrative investment opportunity. (hrough this, pro+ect, an attempt is made to prove that
commodity futures can %e used effectively as a risk reduction instrument and also as a very
good investment opportunity.
(he futures market in commodities offers %oth cash and delivery2%ased settlement.
Investors can choose %etween the two. If the %uyer chooses to take delivery of the
commodity, a transfera%le receipt from the warehouse where goods are stored is issued in
favor of the %uyer. On producing this receipt, the %uyer can claim the commodity from the
warehouse. 3ll open contracts not intended for delivery are cash2settled. 0hile speculators
and ar%itrageurs generally prefer cash settlement, commodity stockiest and wholesalers go for
delivery. (he option to s1uare off the deal or to take delivery can %e changed %efore the last
day of contract e)piry. In the case of delivery2%ased trades, the margin rises to '24-5 of the
contract value and the seller is re1uired to pay sales ta) on the transaction.
(rading in any contract month will open on the twenty first day of the month, three
months prior to the contract month. #or e)ample, the 6ecem%er 4''- contracts open on 4&
$eptem%er 4''- and the due date is the 4'2day of the delivery month. 3ll contracts settling in
cash will %e settled on the following day after the contract e)piry date. "ommodity trading
follows a (7& settlement system, where the settlement date is the ne)t working day after
e)piry. However, in case of delivery2%ased traders, settlement takes place five to seven days
after the e)piry.
Objectives
(he o%+ectives of the study are8
(o study the growth of commodity futures trading.
(o analyses the risk involved in various commodity.
(o know the use of strategies availa%le in the commodity market.
(o analyse and compare the various commodity futures trading
Need of the study
"ommodity market is growing and it is %ecoming more critical. (herefore the research is in
on the commodity futures and analysis of risk and return involved in commodity futures.
Scope of the study
One month spot prices for commodity futures like $oya %ean, *otato, arely, Red
"hilli, 9old, $ilver, 3luminum, ,ickel, copper and "rude oil etc are collected for
calculation.
(he a%ove mentioned commodity futures are more traded in the market in terms of
volume.
Methodology
:ethodology states that how the research studies should %e undertaken. (his includes
the design specifications, sources of data, methods of primary data collection, methods used
for collecting secondary data etc. :ainly secondary data has %een used for the study.
$econdary data consists of collecting information from various financial sites. It includes the
records and reports of research e)perts. #or analysis and interpretation statistical tools are
used.
In this study standard deviation and eta are used for calculating Risk and Return of
commodity futures.
Sample Design
,"6;< and :"< are the India=s the two ma+or e)changes for commodity trading and as
many as more than -- commodities are listed.&' commodity futures are taken sample size for
the purpose of the study.
Sources of data
(he re1uired information or data collected from the stock %rokers and two ma+or
e)changes.
(he spot prices of commodity were collected from for one month of march from
various we%sites.
(he secondary data were the %asis for the study.
Limitations of the study
(he following are the limitations of the study.
6ue to non2availa%ility of sufficient time one month data was taken for analysis.
(he data are availa%le in the date of the e)piry of the contract.
:ost of the information gathered for the study is from Internet and magazines etc.
that are in the printed form. Hence, the level of accuracy cannot %e e)pressed to %e
&'' per cent.
COM!N" #O$IL%
"6 ;1ui has esta%lished rokerage house with over >' years of rich e)perience in
financial services. It has the *rofessional :anagement. Its 9uiding principles ? (rust,
(ransparency and (hought leadership and It ;mpanelled with large num%er of #II=s and
6II= One of the most reputed names in fundamental research.
"6 has %een set up to engage in
$tock roking
;1uity
6erivatives
6epository $ervices
6istri%ution of Investment *roducts
6istri%ution of Insurance
"ommodities roking
"urrency
Head1uartered in:um%ai, "6 has a growing network of offices across several states to
ensure easy accessi%ility to our clients wherever they are. "6 has ranch Offices spread
across the country to offer %etter reach and service to the investor. (he company currently
marks its presence in the following regions8
:um%ai
@olkata
6elhi
Hyder%ad
Aaipur
!i+ayawada
Opening Shortly
3hmeda%ad
angalore
*une