Diploma in Commodities Market

Commodities Trading is a global phenomenon and offers tremendous potential to market participants for both profit taking on small price corrections as well as to hedgers looking at managing price risk on account of price fluctuations.

In developed markets, futures trading is conservatively 10 times the size of cash market in commodities. If we consider the fact that in the US, where the futures trading is almost 20 times that of the cash market production, it would only be fair to suggest that our futures market would be a very large and deep market, easily many times more than that of the securities market.

As per the figures available for the year 2004-05, for commodities produced in India, the value of this produce (including all agricultural commodities and metals), is around Rs 6,00,000 crore. Therefore, the potential futures market size, based on the international ratio of cash market to futures market (with a conservative multiplier of 10) could be easily valued at Rs. 60,00,000 Crore, which is awaiting to be tapped. Welingkar and MCX open up this opportunity for all commodity market participants to come, participate and benefit from this market.

Overview of the program

The program will be broadly classified into three sections:

The first section will be utilized to cover introduction to commodity markets, both in India and abroad; regulatory framework, issues in commodity trading and markets, future of commodity trading in India, various commodities traded in markets, bank finance, understanding of other markets like stock market and forex market etc.
The second section will cover derivative products, options, futures and spot trades, mechanism of trading, clearing system, margin requirements, mark to market system, membership issues and registration procedure, risk management, hedging and speculative trading, difference between commodity trading and stock trading, special issues relating to commodity market.
The third section will cover actual trading practices, hands on experience on trading, particularly trading in select commodities, visit to the exchange, mock-trading sessions / games and assessment of the result of the mock trading sessions and taxation aspects of the commodities market.


Program Structure

A - Understanding of Commodity Markets & Trading

Introduction to course and Multi Commodity Exchange. Introduction to commodities markets, Historical perspective and growth of global and domestic development of commodity markets, Regional and National level commodity exchanges, types of commodities traded

General introduction to MCX, its set up, trading operations in MCX, membership issues and fees structure, registration procedure, etc.

Regulatory issues, Regulation of Indian commodity exchanges, FMC and its role. Role of Government in promoting commodity trading; recent policy and regulatory measures and changes.

Important Indian & Global Commodity Exchanges, contracts traded on them, special features of these exchanges if any.

Role of Banks and Warehousing in Commodity Markets

Foreign Exchange & Commodity Markets, FDI, possible role of FIIs in Commodity Markets, potential impact of FII's role in Indian Commodity Markets,

Trading in commodity futures Markets, market mechanism, role of brokers/members, trading strategies, pricing, margin requirements, settlement process, delivery mechanism, compulsory delivery and its impact

B - Market Mechanism, Risk Management, Derivatives and Strategies using Derivatives

Introduction to derivatives products: Meaning and definition- spot and forward Market, hedging & speculation, Arbitrage, Swaps.

Introduction to commodity futures, their types, pricing, features of futures trading, concepts of open interest, close out, mark-to-market practice, margins, etc.

Strategies using futures to hedge risk, with examples

Introduction to options, their types, features, pay off profiles for put and call options

Strategies using options to hedge risks, using long and short positions, spreads, straddles, strangles, etc. with examples.

Operating mechanism of commodity exchanges in India.

Risk Management & surveillance mechanism for commodity futures trading through commodity exchanges.

Clearing, Settlement and delivery mechanism in commodity exchanges

Risk in commodity trading, commodity price risk management, importance and need for risk management measures, value at risk case studies

Stock market operations and comparison of stock and commodity markets

C- Trading practices, Opportunities and Simulation

Fundamental analysis on selected commodities

Technical Analysis & its relevance to commodity trading

Case studies of four selected commodities

Hands on trading experience / mock trading / simulated games in commodity futures on four selected commodities

Accounting and Taxation issues for commodity derivatives, Service tax and Stamp duty issues

Projects and Presentations

Sample Questions Discussion