InvestorQ : How is the nickel contract traded on the MCX?
Siya Saran made post

How is the nickel contract traded on the MCX?

Answer
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Dilmini Mercia answered.
2 years ago


Interestingly, Nickel is one of the most actively traded contracts on the MCX and is among the top-10 most active contracts on the MCX on most days. Even while the price of nickel has been on a downward trend, it does offer sufficient opportunities to trade from a very short term perspective. That makes it a key product for traders as well as for users of nickel to hedge their price risk of inputs.

The nickel futures contract on MCX is also traded in two formats viz. the Big Nickel Contract and the Nickel Mini contract. While the Big Nickel contract has a lot size of 250 KG, the Nickel Mini contract has a lot size of 100 KG. So how will the contract work in the MCX context? For example, currently Nickel is quoting at a price of Rs.660/KG. Thus a typical Big Nickel contract with 250 KG lot size will have a notional value of Rs.165,000/- (660*250). This is one of the contracts with the lowest notional values on the MCX. The current initial margin (SPAN + Extreme Loss) comes to around 6% and therefore a single lot of Big Nickel Futures will attract an initial margin of Rs.9900/- only. Since the Big Nickel contract already has very low margin requirement, the Mini Nickel is not too popular unless there is a clear arbitrage spread between the two contracts.

The Nickel contract on the MCX will be initiated on the first of each calendar month and will expire on the last working day of the month. Each month on the 1st a new contract that is four months ahead will be launched. For example on 01st of September 2017, a new contract expiring on January 2018 will be launched, and so on. You can trade on Nickel for actual delivery of the metal as well as for square off trading. In case you intend to square off the trade, then the same needs to be intimated to the exchange at least 4 days prior to the expiry of the contract.

Nickel has, in the last few years, emerged as one of the most active metal contracts on the MCX. With its short term volatility, it has offered a good route to trade and to hedge risk for end users of Nickel.