Commodity Trading

Given below are some of the important interview questions on Commodity Trading prepared by experts to help you for the upcoming job interview.

Q.1 In Case Of Commodity Market what Is NCDEX Rain?
NCDEX RAIN in the Commodity Market is a rainfall index of NCDEX giving the Percentage of cumulative normal expected rainfall it has actually rained taking into consideration average actual rainfall at both: Colaba and Santa Cruz weather stations in Mumbai.
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Q.2 What Is MCX In the Commodity Market?
Multi Commodity Exchange of India, it's a demutualised online commodity exchange of India which is Promoted by Financial Technologies (I) Ltd, SBI, Fidelity International, NSE, NABARD, HDFC Bk, SBI Life Insurance Co., Union Bank of India, Canara Bk, Bank of India, Bank of Baroda and Corporation Bank.
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Q.3 Please explain what is Freightex In Commodity Market?
In the commodity market FRIGHTEX is an index on NCDEX representing simple average of the freight rates per tonne across high-density routes for a distance of 1000 kilometres.
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Q.4 Would you invest In Commodities, if yes then why?
Yes, because it has Transparency and Fair Price Discovery: Trading in commodity futures is transparent and a process of fair price discovery is ensured through large-scale participation. Through the large participation views and expectations are also reflected of a wider section of people who are concerned with that commodity. Online Platform: for price risk management Producers, traders and processors, exporters/importers get an online platform through MCX / NCDEX.
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Q.5 Do you know what is NAFED in the Commodity Market is?
The National Agricultural Cooperative Marketing Federation of India Ltd is abbreviated as NAFED, it is an apex organization of marketing cooperatives for agricultural produce in India, under the Ministry of Agriculture, Government of India.
It was founded back in October 1958 with the vision to Promote the trade of agricultural produce and forest resources across the nation.
And now if you see NAFED is one of the largest procurement as well as marketing agencies for agricultural products in India. With its headquarters in New Delhi, NAFED as four regional of Source.
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Q.6 Can you explain what is National Commodity And Derivative Exchange Of India?
National Commodity and Derivative Exchange of India, it is a demutualised online commodity exchange of India , and it's Promoted by NSE, ICICI Bk, LIC, PNB, CRISIL, NABARD IFFCO and Canara Bank.
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Q.7 What Is MSP In Commodity Market?
MSP in commodity market means Minimum Support Prices. To insure agricultural producers against any sharp fall in farm prices, Minimum Support Price (MSP) is a form of market intervention by the Government of India.
On the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP) the minimum support prices are announced by the Government of India at the beginning of the sowing season for certain crops. MSP it's is price fixed by Government of India to protect the producer.
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Q.8 What Is Assayer In Commodity Market?
In commodity market (person/institution) Assayer is an authorized entity that certifies and grades the commodities which are delivered in exchange accredited warehouses.
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Q.9 What does Bullion denotes in the Commodity Market?
In the Commodity Market Bullion is the generic word for gold and silver.
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Q.10 What Is Beneficiary Account?
It is a Demat account in the name of an Individual (single or jointly). It is similar to a bank account. Also, such accounts could also be in the name of a partnership firm, a Corporate, a society and a trust.
Therefore this account is to be used for transacting in commodity balances held by the account holder at Exchange accredited warehouses. These commodity balances would have been - in a physical process set up - represented through a warehouse receipt.
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Q.11 Please give some information on OCEIL.
Online Commodity Exchange India Ltd. is abbreviated as 'Oceil,' it's a national multi-commodity exchange located at Ahmedabad.
The status of National Multi-commodity Exchanges is given to the Online Commodity Exchange India Ltd. (OCEIL), Ahmedabad, and the National Board of Trade (NBOT), Indore. While the NBOT had been trading in future contracts mainly in the Soya complex, the OCEIL is trading in the entire edible oil complex.
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Q.12 Please explain what do you mean by private equity transactions?
In particular target companies when private equity firms make investments, it is referred as private equity transaction. A target company is an enterprise having the Potential to perform in the short period of time.
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Q.13 In the equity trading what are two types of orders issuers may issues?
The basic types of orders issuer’s issues in equity trading are Buy Orders Sell Orders
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Q.14 Can you judge whether the stock is expensive by just looking at its price?
No, just by Looking at its price you cannot judge the stock price, if the company’s earnings prospects are high enough a $200 stock can be cheap, while if earning potential is low a $10 stock can be expensive. While, the P/E ratio is the correct judge of the valuation of the stock.
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Q.15 What is call option?
Call option is a right of the shareholder and it's not an obligation to purchase share at a specified price and a specified date in future.
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Q.16 What charges are payable when purchasing a stock?
There are four payable charges, while purchasing a stock:
Stock Brokers
Commission
Stamp duty
Cost of the stock
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Q.17 Please mention what are certain measures for which you have to be ready for equity trading?
It is very important to spend time after researching and learning about trading, even when a broker is handling your equity account. What all it requires is: knowledge, discipline and time Ready to lose money, and if you are not ready for taking risks, then equity trading is not right for trading. While, if you're running into heavy losses or the market is not performing as expected than cut losses and stop for the day. Don’t be foolish enough to turn profits into losses. Consider selling some of your stocks and but mind not all of them.
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Q.18 Explain what is Option trading?
It is a contract between the seller and buyer to buy or sell a one or more lot of underlying assets at a fixed price on or before the date of expiry of the contract.
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Q.19 Explain how options are different than equities?
Options are derivatives which simply means their values is derived from the value of an underlying investment. Options are traded among institutional investors, professional traders, individual investors and securities market places. By Put or Call, option trade is defined. Option trading has the potential to limit an investor’s risk; it offers a known risk to buyers. Option buyer cannot lose money, more than the price of the option.
The Options have expiry date while the Regular equities can be held for indefinite time. Like regular equities, option does not have any Physical certificates. Owning an option does not mean right to ownership of any share or dividends of a company unless the option is exercised.
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Q.20 What is the main advantage of derivative?
Prices reflect the perception of market participants about the future
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Q.21 Where is NCDEX located in India?
Mumbai
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Q.22 What is another name of short hedge?
selling hedge
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Q.23 What are the disadvantages of hedging?
Following are some of the disadvantages of hedging. 1. Lack of Regulation 2. Lack of Transparency 3. High Fees
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Q.24 Which commodity was first traded in India?
Cotton as a commodity was first traded in India.
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Q.25 How many parties are involved in an OTC contract
There should be 2 parties required.
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Q.26 What is offer price in Commodity Market?
In commodity market, offer price in commodity market is the lowest price at which a dealer is willing to sell a commodity.
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Q.27 What is Closing price in Commodity Market?
Closing Price in the commodity market is the price at the end of the day's trading on a commodity market.
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Q.28 What is GDP in Commodity Market?
GDP in commodity market refers to the Agricultural Gross Domestic Product.
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Q.29 What is MCX in Commodity Market?
In India, Multi Commodity Exchange (MCX) is a demutualised online commodity exchange of India promoted by Financial Technologies (I) Ltd, SBI, Fidelity International, NSE, NABARD, HDFC Bk, SBI Life Insurance Co., Union Bank of India, Canara Bk, Bank of India, Bank of Baroda and Corporation Bank.
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Q.30 What is CIF in Commodity Market?
In commodity market (CIF) Cost, Insurance & Freight which is basically the transaction cost of doing a commodity trading.
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Q.31 What is Global Commodities?
The commodities highlighted in this resource have been conveyed, exchanged, and demolished around the globe for a number of years. They encouraged transform societies, habits of consumption, global trading operations, and social practices.
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Q.32 What are commodity exchange and types?
A commodities exchange is a legitimate thing that defines and implements rules and methods for patronizing standardized commodity records and related investment products. There are many varieties of modern commodities exchanges, which incorporate fuels, metals, and agricultural commodities exchanges.
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Q.33 Explain the importance of commodity.
Commodities are necessary for Growth and Development, and Pulses Play a Critical Role. The commodities division is very significant for the economy of exhibiting countries.
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Q.34 What is the OTC market?
An (OTC) over-the-counter market is a decentralized business in which market members trade stocks, currencies, commodities or other devices straight between 2 parties and without a central exchange or broker. This is different from an auction market system.
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Q.35 What are commodities contracts?
A commodity futures contract is an arrangement to purchase or sell a predestined amount of a property at a particular price on a particular date in the future. Commodity futures can be practiced to hedge or defend an investment area or to bet on the directional progress of the underlying asset.
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Q.36 What are the top traded world commodities?
Coffee. Natural gas. Cotton. Gold. Crude oil. Wheat. Corn. Sugar.
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Q.37 Why commodity prices are befalling?
Seasonal and other weather variations have an abundant influence on commodity prices. The conclusion of summer brings with it abundant harvests, so commodity prices lead to falling in October. These seasonally depressed prices maybe 1 reason major stock market plunges often happen in October.
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Q.38 What are the three OTC markets?
The OTC Markets Group program is separated into three distinct market tiers which are the OTCQB, the OTCQX, and the Pink.
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Q.39 Is OTCQB more useful than OTC?
Stocks purchasing in the OTCQB have several of the same protections as more traditional, larger stocks. There is also no assurance that stocks exchanging in the OTC market are of more powerful quality than money stocks trading on various OTC tiers or even unusual OTC marketplaces.
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Q.40 Why is the forward rate higher than the spot rate?
Typically, a forward premium indicates possible differences arising from variations in the interest rate among the two currencies of the 2 countries included. Forward currency rates are often distinctive from the spot exchange rate for the currency.
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Q.41 What is the spot market in India?
A spot market is where financial tools are traded for quick delivery, such as currencies, commodities, and securities. Delivery, here, suggests cash exchange for a financial mechanism. In contrast, a futures settlement is based on the presentation of the underlying asset at a future date.
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Q.42 How clearing and settlement method is operating?
The clearing purpose of the clearing corporation is intended to work out a) what members are adequate to deliver and b) what segments are due to undergo on the settlement date. Settlement is a two-way method that involves the transfer of funds and protection on the settlement date.
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Q.43 Which is the most significant commodity exchange in India?
While MCX is the biggest commodity exchanging market in India, since 2003, NCDEX has begun pulling up the pace and is currently the biggest commodity trading business in India in terms of volume.
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Q.44 What is the world's common valuable traded commodity?
Crude oil is one of the world's most in-demand products as it can be filtered into products involving diesel, petrol, and lubricants, with many petrochemicals that are utilized to make plastics.
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Q.45 What is a settlement system in banking?
A settlement bank attributes to a customer's bank where amounts or transactions are finally complete and open for customer use. Oftentimes, the payer of purchase will be a customer of a separate bank from the customer, and so an interbank settlement method must happen.
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Q.46 What is the distinction between arbitrage and hedging speculation?
Speculation is based on theories and hunches. Arbitrage includes a limited quantity of risk, while the prospect of loss and profit is higher with speculation. Anyone can join in speculation, but arbitrage is largely practiced by large, institutional investors and hedge funds.
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Q.47 What is an arbitrage strategy?
Arbitrage is the policy of taking benefit of price differentiation in various markets for the same asset. For it to get a place, there should be a circumstance of at least 2 equivalent assets with differing values.
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Q.48 Define long hedge.
A long hedge is a futures position that is inserted into for the objective of price determination on a purchase. Long hedges are used by companies and processors to eliminate price dryness from the purchase of needed inputs.
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Q.49 Is speculation suitable for commodity futures markets?
Speculators give the liquidity of the market, help in price development, and take on risks that other market partners wish to discharge. In commodities exchanges, speculators also hold markets active and stave off deficiencies of goods by offering them up when prices drop and maintaining the middlemen who link supply chains.
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Q.50 What are the various types of market analysis?
Competitive analysis. SWOT analysis. Target audience analysis. Environmental analysis. Market Segmentation. Global market segmentation.
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