How do I go about trading aluminium futures in the commodity markets?

In terms of volumes, the daily volumes on aluminium futures are nowhere close to what we get to see in gold and crude oil. In fact, it is also much lower than the volumes on copper. But considering India’s low per capita consumption of aluminium, there is scope for a massive expansion of trading volumes in aluminium. The aluminium also trades in two versions. The Big Aluminium contract comprises of 5MT (5000 KG) lot size and is substantially more liquid. There is also the Mini Aluminium contract which has a lot size of 1 MT (1000 KG) but that is not a very popular contract.

Assuming that the current market price of Rs.121/KG of aluminium, the Big Aluminium contract will have notional lot value of Rs.605,000 (121 x 5000). As in case of most other commodities, the margin will be levied as 4% SPAN margins and 1% extreme loss margin. Thus the 5% margin will entail a payment of Rs.30,250/- per lot of aluminium futures. The aluminium contract will commence on the 01st of the month and will expire on the last day of the calendar month. At any point of time there will be 5 monthly contracts on aluminium futures, although the volumes will still be concentrated in the near month contracts.

One can trade aluminium futures on the MCX either for squaring up trades or for taking actual delivery. Currently, volumes on aluminium futures are yet to develop in a big way. But the potential continues to be huge. It could be a contract to watch out for!