Multi Commodity Exchange ( MCX ) has recently launched Delivery Based Derivative Contracts in Base Metals for Copper , Zinc ,Lead ,Aluminium and Nickel
Since the launch of Base Metals Contract at MCX Industry and Base Metal Traders were demanding for Delivery based Contracts at MCX .
As earlier the Base Metals Contract were Cash Settled with LME Price for Zinc ,Lead , Aluminum ,Nickle and CME for Copper.
Advantage for Indian Metal Industry :
Industry and Physical Market has been shying away from Hedging the Price risk at MCX due to lack of Physical Delivery.
Now is the perfect time to go back to their drawing boards as described by the Chinese Word 危機; pinyin: wēijī ( Word used for Risk and Oppurtunity in Chinese) and work on managing their price risk at MCX.
Raw Material accounts for 60-65% cost of any Finished product and when the price of the Underline Raw Material like Copper for Copper Wires and Lead for Batteries .
Fluctuating on Minute by Minute basis the entire Value Chain is at Risk as the Profit Margins get squeezed with any increase in the cost of Raw Material.
Physical Delivery Contracts gives a lot of Permutations and Combinations to traders and Consumers to arbitrage and Price Risk Management .
Trading at MCX : The Following are the Advantages :
1. Benchmark Price for Indian Market as earlier they only had London Metal Exchange price for reference.
2. Opportunity to Import and Deliver at MCX Warehouses as Quotes are Available with ample Liquidity.
3.Arbitrage between Spot Market and Futures.
4.Hedging at Rs. Denominated Price with no risk of Currency Fluctuations.
5. Opportunity to take Delivery with Quality Assurance and Counter Party Risk by MCX.
We consult our Corporate Clients to make most of this oppurtunity and manage their risk as defined by the Chinese
Word 危機; pinyin: wēijī ( Word used for Risk and Oppurtunity in Chinese )
MCX India : http://www.mcxindia.com
FINDOC : http://myfindoc.com
Also See : Riskless Algo Strategy : Reversal