MCX BULLDEX -The First Commodity index futures is the need of the hour for bullion traders
Everybody knows the importance of Indices in financial markets. It is difficult to get exposure in all 50-100 major stocks and an instrument reflecting all such stocks gives the exact market sentiment and a hedging tool. Indices have globally become the key indicator for stock market growth, sector-wise Industrial growth, or some tomes economic growth.
But why you need an index for just Gold and Silver?
With the above-explained logic, It’s Not necessary. Just for two commodities, an index doesn’t make any sense. But here comes the importance of a particular asset and the valuation.
Valuation
17 years ago when MCX was launched Gold prices were just around 4000/10gm and Silver at 8000/Kg. The value of a contract was less and so margin and cost involved in trading. But today gold attracts a minimum of 4-5 Lacs as margin and the breakeven point comes around a minimum of 10 Pints (Rs.1000/kg) without including brokerage.
The new indices launched MCXBULLDEX comes with a Lot size of Rs.50 and the price around 16000 now. So the total cost is only 7-8 Lacs. Reduction in contract value will naturally reflect in the margin and the breakeven.
Risk & Return
Let’s see a table showing the price fluctuation and daily return as per the closing price starting from the launching date of the MCXBULLDEX index. The table says MCXBULLDEX has got daily volatility better than Gold and lesser than Silver.
As per the Table, A trader may lose or gain an average 1.48% from the contract value on a Single Day. Your Daily volatility risk is 11840/- for a price of 16000 with a margin of around 85000/- and breakeven point around 2-3 points.
- With this Volatility, MCXBULLDEX has better placed than, Gold and silver when compared to margin and cost involved in trading.
- Gold MINI and silver MINI when compared to cost involved in trading and ROI value.
With simple logic, My View is MCXBULLDEX is like NIFTY or CRUDE OIL and the disadvantage is it doesn’t have a great name like NIFTY or BANKNIFTY. Participants started mentioning the new commodity Index with the symbol MCXBULLDEX since the actual name MCX Comdex BULLION is a little long and confusing.