Commodity MarketsTrading

P&L Effect of 1 Rupee Movement in MCX commodities

Calculating profit/loss for every 1 rupee movement of underlying MCX commodities contract is a cumbersome task for the vast majority of commodity traders. It’s important to understand these instruments as commodities have different contract specifications, expiry dates and vastly differing contract sizes. Commodity contracts differ from each other based upon the –

  • Trading Unit / Lot size
  • Base Value
  • Tick Size 

Due to the above mentioned differences, the P&L effect for a 1 rupee change in the underlying price can be substantially different. P&L effect of 1 rupee movement in commodities contract is one of the most commonly asked inquiries to our support team.  Most of the commodity traders are not well-versed with the contract wise lot size or tick size effect on the profit-loss, which further leads to a suspicious claim over the contract note and substantially increases the inbound queries related to brokerage, P&L and so on this particular topic. 

The table below shows the contract specifications for MCX commodities, the commodities are segregated into Agri, Base Metals, Energy, Precious Metals.

Here, MMBTU – Million Metric British Thermal Units

MT – Metric Ton -1000 Kgs

1 MT – 10 Quintals

1 Quintal -100 Kgs

Here, Trading Unit refers to the size (in weight) of the commodity position. For instance, the trading unit of gold is 1Kg, which means when a trader takes a position in gold it will be 1kg or in multiples thereof. A 1 lot position in gold means a trader has taken exposure to the tune of 1kg, while a 5 lot position in gold means a trader has taken exposure to the tune of 5kgs. 

Quotation/ Base value refers to the unit in which the price is quoted. For instance, the quotation of gold is a price per 10 grams. This means the price that appears on the trading terminal is quoted in terms of 10 grams.

In trading, the Tick size is the smallest amount a price can change when there is a change in the underlying contract price due to supply and demand dynamics. On the trading terminal, you can see the prices quoted on “Quotation/Base Value” and not on “Trading Unit” therefore, you will not be sure whether you have to book profit or get out of the trade with a loss. The above table will help you to verify your P&L and make informed decisions. 

Let’s take the example of the GOLD contract.

Trading Unit – 1 Kg – 1000 grams

Quotation/ Base Value – 10 grams

Therefore, Profit/loss for every 1 Rupee movement of the underlying contract of GOLD will result in Rs. 100. 

If a trader has a long position in gold and the price of gold increases from Rs. 37,000 to Rs. 37100, the trader would profit Rs.10,000  (100* (37,100 – 37,000)). Conversely, a short position would mean a loss Rs. 10,000 in case the price of gold moves up by 100. If you have multiple lots, use the multiplier to get the exact P&L effect.

Further, you can also use our Brokerage Calculator and Margin Calculator to know the exact brokerage and margin required for carrying out the commodity trades. If you want to learn more about commodity contract and specifications, I recommend you to read this chapter on School of Stocks. If you have any questions, you can ask us in the comments section below.

Tejas Khoday

Tejas Khoday

Tejas is the Co-Founder & CEO at FYERS, the youngest team to get NSE’s broker license. He has a specialization in finance and has over 10 years of work experience spanning across proprietary trading, risk management, and broking. Tejas & his team started FYERS, a technology-focused brokerage as a mission to transform the trading/investment landscape in India.

33 Comments

  • Avatar Ranjeet says:

    I am facing problem while transferring funds from my Commodity account to my bank account. I have raised this issue to your customer executive but it has not been resolved. All the time I have to call customer care to transfer funds which I don’t feel comfortable. Can you please see to this matter and try to resolve this problem.
    Note: I don’t face this issue in capital only in Commodity through apps.

  • Avatar AMIT KUMAR PANDEY says:

    sir can you pls add the ‘MARK” feature in watchlist as present in the tradingview platform. it will help as to mark the important scrips in the watchlist.

  • Avatar arun kumar says:

    HI thanks for doing such things this will be usefull for new trader and its easy and simple and we can understand the basis of MCX before entring the market thanks for helping out me

  • Avatar Rohan says:

    That one rupee moment is there in All Future contract for MCX segment. Does it also affect an Option Contract? If I want to place a Gold 37500PE options Can I make the stop loss in Terms of paisa or I need to mention in the rupee only?

    • Tejas Khoday Tejas Khoday says:

      Hi Rohan, it is applicable for options too as the lot size is the same for both futures and options. Yes, SL can be in paise too.

  • Avatar Narendra Joshi says:

    Hey Tejas how about explaining this through a video might help traders understand better. Anyway well written.

    • Tejas Khoday Tejas Khoday says:

      Hmmm, we’re not really big on videos at the moment. It would be great if you can use the content in our blog and make a video if possible.

  • Avatar Harsha Vardhan says:

    I am 24 and working. This is very useful information for the beginner like me. Thanks for explaining in such a nice and simplified way. Throughly enjoyed reading it.

  • Avatar Vara Prasad says:

    Very useful information for the beginners in the commodities segment. Very well written covering all the minute details. Thanks for this very useful blog.

  • Avatar NewUser says:

    A big thanks to Sir,
    My question is, As I am new to trading Can I trade in commodity? Can I make a good profit out of it?

    • Tejas Khoday Tejas Khoday says:

      I believe trading in commodities is less complex as compared to equities and the market is open for a longer period of time during each day. Yes, since there are not too many variables to deal with, trading commodities is relatively easier than equities and much easier than currencies.

  • Avatar soorya says:

    This is a very helpful blog for the new traders who are stepping into the commodity market. contracts structure well explained here.

  • Avatar Khan says:

    I am new to MCX and this was really helpful, Looking forward for more Blogs from Fyers.

  • Avatar Umesh says:

    How the Base value is calculated?

    • Tejas Khoday Tejas Khoday says:

      The base value is the popular quantity used to quote the price of commodities. MCX has decided it based on market practices.

  • Avatar Gopal says:

    Hi Tejas,
    I always had a confusion in the lot size and Tick size. Now i got a clarity and thank you for the in detail Explanation. But Why there 4 types of Precious Metal Gold, instead of only one?

    • Tejas Khoday Tejas Khoday says:

      Hi Gopal, Good question. Ideally, so many varieties of gold contracts are not required. In fact, the traded volumes are very thin in contracts other than Gold Mini and Gold contracts. I guess they expected wider participation in gold due to the different types of contracts available.

  • Avatar Jathin Singh says:

    Sir, trading with contracts which had a big lot size is better or with small lot sizes like gold and silver is better, Because we can make 5000 rs profit for 1rs movement is zinc and aluminum?

    • Tejas Khoday Tejas Khoday says:

      Ideally, you should trade contracts which allow you to maneuver your trades properly. As long as you are able to trade 2 or more lots, you can consider a big contract. Otherwise, it is better to stick to the smaller contracts as you can easily scale in and out of your trades.

  • Avatar ShanthGowdru says:

    The simpliest way to understand the trading behaviour beforing enterning into the Commodity trading.Thank you for making me to understand the basic info about the MCX trading.Untill now I havnn’t traded in MCX,but after going through this i planned to start my trade in MCX.
    Thank you Tejas Sir.

    Happy for your resourcefulness.

  • Avatar Aniket Jain says:

    What is the minimum initial margin, and it is mentioned as 4% for crude oil, Please explain about this??

  • Avatar Anwar Basha says:

    So for crude oil, the formula for calculating PNL is – 100*No. of lot size*No. of ticks, Is it correct

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