About Derivatives and Commodities

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Permalink Reply by Amit Puggal on January 29, 2010 at 5:04pm

Hi Naga Raju....

These both are actually Financial instruments...as far as commodity is concern it is just like any other security (equity or debt). In this assets could be any commodity like pulses etc. commodity market is actually secondary market for commodities like MCX etc..

Derivatives are those instruments in which Price of the instruments change with change in value of underlying assets. derivatives can be for any assets. In general we talk about equity, commodity,currency and interest rate derivatives. Main purpose of these derivatives are to hedge your exposure from real transactions. Types of derivatives are FUTURE & OPTIONS and SWAPS.

Hope this will help you....!!!!

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Permalink Reply by pardeep on February 3, 2010 at 9:12am

As Amit Puggal told u These both are actually Financial instruments ,wheras commodity trading deals with the commodities in the form of pulses, crops,metals etc and derivatives are generally refers to financial derivative which includes forward ,future and option trading in equity or debt . The main point of difference between commodity and financial derivative is that we can do option trading only in financial derivative and not in commodity

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Permalink Reply by Anju on February 8, 2010 at 11:39pm

Derivatives are financial securities/instruments which derive their value from underlying assets. Underlying assets could be in the form of commodity as well.

In order to mitigate or remove the risk related to price fluctuations of commodities, derivatives are bought.

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