The commodity market does not close when the stock market does. Your equity screen goes quiet at half past three. A non-agricultural commodity futures position stays live until half past eleven at night, and until 11:55 for part of the year.
That one fact changes how commodity futures behave in an account, and it is the first of four differences worth knowing.
What Are Commodity Futures? Meaning and Definition
A commodity future is a standardised exchange contract to buy or sell a set quantity of a commodity at a price fixed today, for settlement on a future date.
SEBI has regulated this market since 28 September 2015, when the Forward Markets Commission was merged into it. The contracts trade on MCX, NCDEX, NSE and BSE.
How Do Commodity Futures Work?
You take a position by placing margin, the deposit the exchange requires before you may hold the contract. The position is settled against the market each day until you close it or it expires.
Expiry is where commodities part company from equity. An Indian commodity contract is either cash settled or compulsory delivery. A compulsory delivery contract opens a staggered delivery window of at least five working days before expiry. Either side may then lodge an intention to give or take delivery.
Types of Commodity Futures
The useful split is not gold against crude oil. It is the one SEBI uses to set trading hours.
Non-agricultural commodities trade from 9:00 in the morning until 11:30 at night, or 11:55 when United States daylight saving shifts. Agricultural commodities with international linkages close at 9:00 in the evening. Those without them close at 5:00.
Benefits of Commodity Futures
A producer or user of a commodity can fix a price now for a sale or purchase later. That takes the uncertainty out of one leg of the business.
The long session lets you respond to overnight moves in international markets while they happen rather than the next morning. That cuts both ways, and the second way is the one people forget. The position can also move against you at eleven at night, when you are not watching.
Risks of Trading Commodity Futures
Margin is the first risk. SEBI names nine kinds in this segment: initial, extreme loss, special, additional, concentration, tender period or delivery period, pre-expiry, lean period on agricultural commodities, and calendar spread. Several appear only as expiry approaches, so holding a position gets more expensive as it ages.
Delivery is the second. Carry a compulsory delivery contract into its window and you owe the goods, or the money for them, rather than a cash difference.
The clock is the third: a long session is a long exposure.
How to Trade Commodity Futures?
What is Commodity Trading covers the account and the segment. The steps below are futures-specific.
Fund the account for margin, not for the contract value. Margin is a fraction of the position, which makes a loss a multiple of the deposit rather than a fraction of it.
Read the expiry date and settlement type before placing the order, because a compulsory delivery contract held too long stops being a trade.
On the sale side, Commodities Transaction Tax of 0.01% applies to non-agricultural commodity futures, and the seller pays it.
Also Read: If you are ready to explore commodity trading, you can Start Trading in Commodities through Indiabulls Securities.
Commodity Futures vs Physical Commodity Trading
Buying the physical commodity means paying the full price, then storing, insuring and proving its quality when you sell.
A futures contract replaces all of that with margin and an expiry date. You never handle the goods unless you carry a compulsory delivery contract into its window.
The trade-off is plain: no storage cost, but a daily settlement, a margin that grows near expiry, and a position that can be closed against you. Commodity Market vs Stock Market sets out the wider differences in venue and hours.
Things to Consider Before Trading Commodity Futures
Check the settlement type first, because it decides whether expiry ends in cash or in goods.
Know the expiry date and the staggered delivery window, and the date you have to be out by.
Budget for margin that grows as expiry nears, not the margin quoted on the day you open.
Then decide whether you will be awake for the session you are exposed to.
Conclusion
Commodity futures have the contract shape you know from equity, and four Indian specifics change how they behave.
The session runs to nearly midnight. The contract may end in goods rather than cash. The margin stack has nine named parts and grows as expiry nears. The seller pays 0.01% in transaction tax that the buyer does not.
Contract specifications, session timings and margin rates are published by the exchange before you trade. None of it removes the risk of loss on the position.
