Tracking Commodity Futures and Options Prices

Commodity futures and options are quoted on recognised exchanges such as MCX and NCDEX. Each contract has a quoted price that changes every second during market hours, reflecting supply‑demand dynamics and news flow.

For exam purposes, SEBI differentiates between the last traded price (LTP), the closing price, and the settlement price. The LTP is the most recent transaction price, while the closing price is the price at the end of the trading session. The settlement price, published after the market closes, is used for MTM and margin calculations.

Understanding these definitions prevents common mistakes, such as using the LTP for margin computation. Questions often ask which price is used for daily profit‑and‑loss calculations; the correct answer is the settlement price.

Primary price feeds come from the exchange’s market data segment, accessible via the exchange website, authorized data vendors (e.g., NSE‑IFSC), and SEBI‑approved aggregators. These sources publish real‑time quotes, depth of market, and daily settlement values.

SEBI’s Circular on "Price Disclosure for Commodity Derivatives" requires brokers to provide clients with at least the settlement price and the daily high‑low range. Failure to do so can lead to regulatory action, making this a high‑weight topic in the exam.

In practice, traders also rely on Bloomberg, Reuters, and mobile apps such as MCX‑Trader for instantaneous updates. The key is to verify that the platform displays the official settlement price, not a delayed or simulated quote.

MTM is the daily re‑valuation of open positions using the settlement price. It ensures that gains and losses are realised each day, preventing the build‑up of large un‑settled exposures.

For a futures contract, the MTM profit or loss equals the price difference between today’s settlement and yesterday’s settlement, multiplied by the contract size and the number of contracts held. The same principle applies to options, but the premium is used as the price basis.

Exam questions may present a table of settlement prices and ask you to compute the cumulative MTM over several days. Remember to reset the base price each day to the new settlement price.

Real‑time prices update with each trade and are essential for intra‑day risk monitoring. However, they can be volatile and may not reflect the price used for official margin calls.

End‑of‑day (EOD) prices, typically the closing price, are used for daily P&L statements and for calculating the next day’s MTM. The EOD price is less prone to momentary spikes and is the figure quoted in most exam scenarios.

When answering questions, check the wording: "last traded price" signals real‑time, whereas "settlement price" or "closing price" signals the figure for MTM and margin purposes.

Option prices consist of intrinsic value plus time value. The intrinsic component is the difference between the underlying futures price and the strike price (for calls) or vice‑versa (for puts). Time value reflects volatility, time to expiry, and interest rates.

SEBI requires brokers to display the option premium alongside the underlying futures price. The premium is the price used for MTM, not the underlying futures price itself.

Exam items often ask you to compute the option’s MTM using the change in premium. Remember to treat the premium as the price variable in the MTM formula, while the underlying price is only relevant for intrinsic value calculations.

Most Indian exchanges operate a live price board on their websites, showing LTP, high, low, and volume for each contract. These boards refresh every few seconds during market hours.

Mobile applications such as "MCX‑Trader" and "NCDEX‑App" push real‑time alerts, enable users to set price thresholds, and display the official settlement price after market close. They are exam‑relevant because SEBI mandates that brokers provide clients with timely price information via electronic means.

When using an app, verify that the displayed price is tagged as "settlement" for MTM calculations. Some apps also show the "indicative" price, which should not be used for official reporting.

Professional traders often subscribe to Bloomberg Terminal or Reuters Eikon, which provide consolidated real‑time price feeds, historical charts, and analytics such as implied volatility for options. These platforms also flag price anomalies that may affect MTM.

Algorithmic trading desks use Application Programming Interfaces (APIs) from MCX to fetch settlement prices directly into risk‑management systems. The API returns the official settlement price in a structured format, eliminating manual entry errors.

For the exam, remember that while advanced tools are optional, the underlying principle remains the same: always base MTM and margin calculations on the official settlement price supplied by the exchange or its authorized data vendor.

Review the definitions of LTP, closing price, and settlement price; the exam frequently tests your ability to pick the correct one for MTM. Memorise the MTM formula and the variables it uses.

When a question provides a price series, identify whether it is real‑time or settlement. Use settlement prices for any profit‑and‑loss or margin‑related computation.

Remember the tick size for each commodity, as it affects the minimum profit or loss you can record. Also, be aware that option MTM uses the premium, not the underlying futures price.