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Oct 14, 2013, 03.28 PM IST | Source: CNBC-TV18

What are common strategies to get into commodities market?

The cross arbitrage means first month-second month contract. It is called a spread contract where you can take a big position and you will play the gaps between the two months contract, says Dharmesh Bhatia, Deputy Vice President-Research at Kotak Commodities Services.

Dharmesh Bhatia

Deputy Vice President-Research

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Q: What are some of the common strategies that one can deploy while taking initial steps in the commodities market?

A: Commodities market is not an investment as of now. It is completely Futures market. It is majorly driven by speculators. So the common thing is that you can go for a naked position. You can just open the position, hold the position. Second thing is you have to do a cross arbitrage. The cross arbitrage will be that first month-second month contract. It is called a spread contract where you can take a big position and you will play the gaps between the two months contract.

Third thing is cross arbitrage like two exchange arbitrage and there is another thing which has come across is three exchange arbitrage, where you trade with two exchanges and third exchange is INR where you have to hedge the position because INR movement is such a high fluctuation. Fifth, I will suggest you to take a delivery and hold the position which is a traditional way, where you take a delivery and hold the position until and unless you get good returns.

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