Currency Trading

Understanding  Lot Size, Tick Size, Margin for USDINR, JPYINR, GBPINR, EURINR in MCX-SX and NSE:
In India, NSE and MCX-SX are the currency exchanges, which provide:

    Futures trading on the currency pairs USDINR, EURINR, GBPINR, and JPYINR
    Options trading on USDINR NOW.

Our main focus on this page is to make you understand about Lot Size, Tick Size and Margin needed to trade on USDINR, EURINR, GBPINR and JPYINR. Lot Size (1000) is same for all above mentioned currency pairs. Tick Size (.0025 paisa) is same for all above mentioned currency pairs.

Lot size = 1000 (i.e.) when you buy 1 contract then lot size is 1000
Tick Size =.0025 paisa
Since Lot size is 1000 and for each movement of .0025 tick size, you will be either Gaining or Losing 2.50 Rupees.

Price Movement
= Lot size * Tick Size
= 1000 * .0025
= 2.5 Rupee
(i.e.) 1 movement of Tick Price will be 2.5 Rupees.

So there will be 400 (1 Rupee/.0025) tick price movements within a Rupee.

Note: If you want to trade on currency futures, brokers may be charging 3% to 5% margin amount, which is based on the lot size and settlement price of the symbol.


Margin Example:

We will assume that current prices of USDINR, EURINR, GBPINR, and JPYINR are 55, 70, 80 and 60 rupees respectively. So the margin amount needed to buy 1 contract:

Formula = current price of currency pair * LOT SIZE * 3%
Margin needed for USDINR = 55*1000*.03= 1650 Rupees
Margin needed for JPYINR=60*1000*.03=1800 Rupees
Margin needed for EURINR=70*1000*.03=2100 Rupees
Margin needed for GBPINR=80*1000*.03=2400 Rupees
Example:
SYMBOL=USDINR; BOUGHT PRICE= 55.1025; LOT SIZE = 1000; TICK SIZE = .0025; SOLD PRICE = 55.8975.
Your margin may be around 1650 rupees and you buy 1 lot of USDINR at 55.1025 and you sell it for 55.8975.

Gross Profit
= (sold price - bought price) * lot size
= (55.8975-55.1025) * 1000
= (.7950) * 1000
= 795 Rupees

Or you can calculate this in another way.
= ((sold price - bought price) / Tick Size ) * Price Movement
= ((55.8975-55.1025) / .0025) * 2.5
= (.7950 /.0025) * 2.5
= 795 Rupees
Sample NSE CURRENCY REPORT:

DATE    INSTRUMENT    UNDERLYING    EXPIRY DATE    MTM SETTLEMENT PRICE
09-Jul-14    FUTCUR    EURINR    28-Jul-14    81.6575
09-Jul-14    FUTCUR    EURINR    26-Aug-14    82.0875
09-Jul-14    FUTCUR    EURINR    26-Sep-14    82.56
09-Jul-14    FUTCUR    EURINR    29-Oct-14    83.495
09-Jul-14    FUTCUR    EURINR    26-Nov-14    84.1025
09-Jul-14    FUTCUR    EURINR    29-Dec-14    84.775
09-Jul-14    FUTCUR    EURINR    28-Jan-15    85.3925
09-Jul-14    FUTCUR    EURINR    25-Feb-15    85.8875
09-Jul-14    FUTCUR    EURINR    27-Mar-15    86.5
09-Jul-14    FUTCUR    EURINR    28-Apr-15    87.16
09-Jul-14    FUTCUR    EURINR    27-May-15    87.7625
09-Jul-14    FUTCUR    EURINR    26-Jun-15    88.39
09-Jul-14    FUTCUR    GBPINR    28-Jul-14    102.6725
09-Jul-14    FUTCUR    GBPINR    26-Aug-14    103.17
09-Jul-14    FUTCUR    GBPINR    26-Sep-14    103.72
09-Jul-14    FUTCUR    GBPINR    29-Oct-14    104.25
09-Jul-14    FUTCUR    GBPINR    26-Nov-14    105.5975
09-Jul-14    FUTCUR    GBPINR    29-Dec-14    105.3
09-Jul-14    FUTCUR    GBPINR    28-Jan-15    107.1375
09-Jul-14    FUTCUR    GBPINR    25-Feb-15    107.5925
09-Jul-14    FUTCUR    GBPINR    27-Mar-15    108.305
09-Jul-14    FUTCUR    GBPINR    28-Apr-15    109.07
09-Jul-14    FUTCUR    GBPINR    27-May-15    109.77
09-Jul-14    FUTCUR    GBPINR    26-Jun-15    110.4975
09-Jul-14    FUTCUR    JPYINR    28-Jul-14    59.0625
09-Jul-14    FUTCUR    JPYINR    26-Aug-14    59.385
09-Jul-14    FUTCUR    JPYINR    26-Sep-14    59.885
09-Jul-14    FUTCUR    JPYINR    29-Oct-14    60.36
09-Jul-14    FUTCUR    JPYINR    26-Nov-14    60.8125
09-Jul-14    FUTCUR    JPYINR    29-Dec-14    61.305
09-Jul-14    FUTCUR    JPYINR    28-Jan-15    61.755
09-Jul-14    FUTCUR    JPYINR    25-Feb-15    62.12
09-Jul-14    FUTCUR    JPYINR    27-Mar-15    62.57
09-Jul-14    FUTCUR    JPYINR    28-Apr-15    63.0525
09-Jul-14    FUTCUR    JPYINR    27-May-15    63.4925
09-Jul-14    FUTCUR    JPYINR    26-Jun-15    63.9525
09-Jul-14    FUTCUR    USDINR    28-Jul-14    60.03
09-Jul-14    FUTCUR    USDINR    26-Aug-14    60.3725
09-Jul-14    FUTCUR    USDINR    26-Sep-14    60.765
09-Jul-14    FUTCUR    USDINR    29-Oct-14    61.1625
09-Jul-14    FUTCUR    USDINR    26-Nov-14    61.5525
09-Jul-14    FUTCUR    USDINR    29-Dec-14    61.965
09-Jul-14    FUTCUR    USDINR    28-Jan-15    62.4
09-Jul-14    FUTCUR    USDINR    25-Feb-15    62.55
09-Jul-14    FUTCUR    USDINR    27-Mar-15    63.1
09-Jul-14    FUTCUR    USDINR    28-Apr-15    64.0125
09-Jul-14    FUTCUR    USDINR    27-May-15    64
09-Jul-14    FUTCUR    USDINR    26-Jun-15    64.465
09-Jul-14    OPTCUR    USDINR                59.77


The following NSE CURRENCY REPORT has been taken on 09th July 2014  from www.nseindia.com.
This table is a sample which explains the different underlying, their contract cycles and price movements.


Explanation for the Headers in the above Table:

Date: Date on which Instrument traded
Instrument: You can see Instruments FUTCUR for FUTURES CURRENCY and OPTCUR for OPTIONS.
Underlying: You can see EURINR, GBPINR, JPYINR, and USDINR. i.e. Euro, Pound, Yen and USD are traded with INR.
Expiry Date: The date when the future contract or option contract expires.
MTM Settlement PRICE: Settlement price of EURINR, GBPINR, JPYINR, and USDINR.
Contract Trading Cycle: 12 months trading cycle.
Example: USDINR: you can see 12 contracts expiring on various Months

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Can I do an SIP in Commodities?
If you're trading in NSEL it is possible to do an SIP. If you?re trading in MCX you cannot invest through an SIP mode

How much margin is applicable in the commodities market? How is it arrived at?
As in stocks, margin in commodities is also calculated by VaR system. Normally it is between 5-10% of the contract value. The margin is different for each commodity. Just like in equities, in commodities also there is a system of initial margin and mark-to-market (MTM) margin. The margin keeps changing depending on the change in price and volatility
How does day to day and final settlement take place?
Daily MTM will be cash-settled by exchange on T+1 basis i.e., next working day after the trading day. However in case of delivery, the settlement date may be five to seven days after the expiry as per contract specifications and exchange rules. The settlement procedure is also available on the related exchange site.
Are options also allowed in commodity derivatives?
No. Options in goods are presently prohibited under Section 19 of the Forward Contracts (Regulation) Act, 1952. However the market expects the government to permit options trading in commodities soon.
I am already investing in stock markets, why should I invest in commodity futures?
Commodity markets work independently of the equity market and debt market. You must have heard of investment advisors asking you to diversify your portfolio. What they essentially mean is to put your eggs in various baskets so that you are saved from any catastrophe. The commodity market is one such a basket, which allows you to diversify your risks. For e.g., when the stock market returns go down it is not necessary that the Gold prices will also fall. So if you are equity or a debt market investor you have all the more reasons to invest in commodities.
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Why invest in commodities?
The short answer is that, based on historical data, adding commodities exposure will increase your returns while lowering your risk. Investing in commodities is much safer than equities because there is no inside trader.

Who should invest in commodities?
Investors
Producer/ Farmers
Importer/ Exporters
Hedgers, Specualtor, Arbitrageurs

Do physical deliveries happen in commodity futures exchanges?
The exchanges, in order to maintain the futures prices in line with the spot market, have made available provisions of settlement of contracts by physical delivery. They also make sure that the futures and spot prices coincide during the settlement so that the fair price discovery mechanism is in place.

Do I need a separate Trading & Demat account for commodities trading?
Yes. You need to open a separate trading and demat account for trading in commodities. If you want to trade in NSEL you have to have a separate trading and demat account but if want to trade in
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Is the concept of trading in commodity futures new in India?
Commodity futures market was very much there in earlier times in India. In fact it was one the most vibrant markets till the early 70s. But due to numerous restrictions the market could not develop further. Now that most of these restrictions have been removed, there is enormous scope for the development and growth of the commodity futures market in the country.

Who regulates the commodity market?
Commodity Market in India is regulated by Forward Market Commission (FMC) under the guidance of the Ministry of Consumer Affairs, Food, & Public Distribution.

Which are the major commodity exchanges in India?
As in capital markets, a commodity exchange is an association or a company or any other body corporate that is organizing futures trading in commodities and is registered with FMC (Forward Market Commission). Three major national level commodities exchanges are Multi Commodities Exchange of India (MCX), National Commodities and Derivatives Exchange of India (NCDEX) and National Spot Exchange Ltd(NSEL).
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What is a Commodity Market ?
Commodity markets are markets where raw or primary products are exchanged. These raw commodities are traded on regulated commodities exchanges, in which they are bought and sold in standardized contracts. These contracts are known as Future contracts.

What are Commodities Future ?
Commodities Future contract is a standardized contract between two parties to buy or sell a specified asset of standardized quantity and quality for a price agreed today (the futures price or strike price) with delivery and payment occurring at a specified future date, the delivery date.
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Free Videos To Help You With Your Trading:


Trading as a Business - Management by the Numbers

System Overview - Part 1

System Overview - Part 2

Management by the Numbers - Part 1

Management by the Numbers - Part 2

Management by the Numbers - Part 3

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Trading as a Business - Closing profits

Trading as a Business - The 4 Risks of This Business

Trading as a Business - Daily Review Sample

Trading as a Business - Expiration Week
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Trading As A Business - Inside My Trading
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Trading As A Business - Making Money Up or Down or Sideways


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