Learning commodity derivatives

INVESTOR EDUCATION

Dinesh Mehta, fresh out of college, has been keenly following the derivatives market in equities. And, he couldn't be more thrilled to find a new investment opportunity when commodity futures trading commenced a year ago. But how does he get in and what share of his portfolio should commodity futures hold?

Filled with starters-jitters, he resisted the temptation. But not any more. For the risk-averse, there is scope. A rule-book method could just be available to you, if you are a beginner.

The Multi Commodity Exchange, (MCX) has recently announced a certificate training course in commodity derivatives trading for the uninitiated in collaboration with Welingkars Institute of Management.

As far as the course content goes, Dinesh will be exposed to the whole gamut. The MCX certification course run independently by the exchange, called the MCX Commodity Derivatives Basic Module (MCD), a distance learning programme, will cost Dinesh Rs 1,500. After six-months, he would be expected to appear for the exam.

Dinesh also has the option of joining the other programme that MCX offers with the Welingkars Institute, Matunga, Mumbai, which is called the management development programme.

This offers a two-day interactive training session, and contact courses with staff from the institute. If Dinesh opted for this, he would have covered an advanced module where he would be certified to be a legitimate commodity trainer.

This course would cost him between Rs 4,000-5,000 as he would classify under the freshers' category. Here, he would have a time-period of one year to appear for the examination.

Besides aspiring retail investors like Dinesh, the course is also on offer for operational staff of share-brokerages who would need to acquaint themselves with the trade, as well as bankers and employees in the clearing and settlement houses, which would help streamline the trade from all angles.

They would have to pay between Rs 7,000-9,000 to sign up.

It is also open to senior level management of various companies, for whom the fee-structure would again vary. The courses are basically designed to capture all the necessary inputs to enable the participant to get well-versed with the modalities of the commodity markets in India.

Under the module introduction to derivatives, an amateur will be familiarised with the basic forms of trading in commodity derivatives, from the meaning of different contracts "" namely, forward, futures, options and swap to the differences in the way they work.

Besides, the syllabus also includes international commodity trading covering various exchanges and how they operate and futures trading in India and it's regulations. Dinesh will also get a taste of the various trading strategies, including arbitrage, hedging and speculation and their advantages and limitations.

There is also a special module covering options and how they operate, and most importantly the tax implications of commodity trading, namely sales tax on the futures transactions from both the sellers and the buyers point of view, as well as service tax.

So how does one sign up? The course is expected to go on the floor by January if all things work out well and one could approach either MCX or Welingkars for the same.

For more information contact: Ramesh Dorairaj (MCX ) 56494000; Tamanna Khanna (Welingkars) 24178300