Benefits from Future Trading

As a producer/processor, futures trading helps to hedge the price risk.

Enables companies to finalise costing

On the commodity exchanges, simultaneously 3 to 6 futures contracts phased over a timespan of 6–12 months are available. This provides the firm the ability to lock in purchase prices for almost a year, enabling management to finalise the sale price of the final good without affecting margins.

Better working capital utilisation

Direct purchase in the spot markets requires huge capital. On the futures platform, for dealing the same quantity, the amount employed could be as low as 1/10th of the amount employed in a spot transaction. Thus the firm can free up working capital and use it for other requirements.

Price discovery

In majority of the markets, trade may be controlled by few traders, while the futures platform provides an electronic format to attract buyers & sellers from across India, supporting efficient price discovery.