Silver Trading: MCX Contracts & Drivers

Silver's Place in India's Commodity Markets

India's relationship with silver is centuries old. Silver coins were the backbone of Mughal-era trade, temple treasuries across the subcontinent accumulated silver over generations, and the metal remains integral to auspicious ceremonies from weddings to religious festivals. This cultural demand has translated into a permanent, structurally significant source of silver consumption that distinguishes India from most other large economies.

On the import front, India is typically the world's largest silver importer in many years, bringing in several thousand tonnes annually to satisfy domestic demand. Unlike gold, where the government has historically imposed import restrictions and levies to manage the current account deficit, silver policy has been relatively more open, though import duties still apply and are subject to revision in each Union Budget. The customs duty structure on silver directly influences the spread between London Bullion Market Association (LBMA) prices in US dollars and domestic MCX prices in Indian rupees.

From a market infrastructure standpoint, silver trading in India is primarily organised through MCX. The exchange operates under SEBI's regulatory oversight and provides a transparent, electronic order-matching platform where buyers and sellers can transact in silver futures and options without needing to handle physical metal. The price discovered on MCX serves as the benchmark for physical silver transactions across India's bullion markets, from Zaveri Bazaar in Mumbai to Chandni Chowk in Delhi.

Beyond MCX, silver exposure is also available through silver Exchange Traded Funds (ETFs) listed on the NSE and BSE. Silver ETFs, introduced by SEBI in 2021, allow investors to hold silver in demat form without dealing with storage, assaying, or the logistics of physical delivery. However, silver ETFs are investment products with no leverage, and they track spot prices rather than futures prices, which means their behaviour differs from MCX futures in important ways - particularly in markets affected by contango or backwardation in the futures curve.

The National Commodity and Derivatives Exchange (NCDEX) does not list silver contracts, making MCX the unambiguous home for silver derivatives in India. The concentration of silver derivative liquidity on a single exchange simplifies the landscape for new participants: if you want to trade silver futures or options in India, MCX is where that activity happens.

It is worth noting that commodity derivatives in India are cash-settled or delivery-based depending on the contract. Understanding which MCX silver contract allows delivery and which is settled in cash is foundational knowledge for any participant, and the next section addresses that in detail.

MCX Silver Contract Specifications Explained

MCX lists several silver derivatives to accommodate participants of different sizes and risk appetites. Understanding the specifications of each contract - lot size, price quotation, margin requirements, and delivery conditions - is essential before placing any trade.

Silver (Big) Futures: The flagship contract trades in lots of 30 kilograms. Prices are quoted in Indian rupees per kilogram for silver with 999 fineness (99.9% purity). The maximum order quantity and position limits are set by MCX and may be revised periodically, so always check the exchange's official website or your broker's platform for current figures. This contract is compulsorily delivery-based, meaning that participants who hold open positions up to the tender period will be required to give or take delivery of physical silver. Institutional participants, large hedgers, and professional traders with access to SEBI-accredited warehouses typically use this contract.

Silver Mini Futures: With a lot size of 5 kilograms, Silver Mini is designed for mid-sized participants who want meaningful exposure without committing to the 30-kg contract. Like the big contract, Silver Mini is delivery-based and quoted in rupees per kilogram for 999 fine silver. Liquidity in Silver Mini is generally good, making it popular with active retail traders and small businesses seeking to hedge jewellery or silverware inventory.

Silver Micro Futures: The lot size here is just 1 kilogram, making it the most accessible MCX silver contract for individual retail traders. Silver Micro is also quoted per kilogram for 999 fine silver. This contract is typically cash-settled, which means no physical delivery takes place; settlement happens at the Daily Settlement Price on the expiry date. The smaller lot size means lower margin requirements, allowing participants with limited capital to gain exposure to silver price movements.

Silver Options on Futures: MCX also offers options contracts on silver futures. These give the buyer the right, but not the obligation, to buy (call option) or sell (put option) silver futures at a predetermined strike price before or on expiry. Options are particularly useful for hedgers who want downside protection without giving up upside potential, and for traders who want to express directional or volatility views with defined maximum loss. The premium paid for an option is the maximum loss for an option buyer, which is a risk-limiting feature unavailable in straight futures trading.

Expiry and Rollover: MCX silver futures expire on the fifth day of the delivery month (or the preceding trading day if the fifth is a holiday). Active traders who do not intend to take or give delivery must roll over their positions to the next contract month before expiry. The cost of rolling - essentially the difference in prices between the near-month and the next-month contract - reflects the carry cost, which includes storage charges, insurance, and financing costs.

Trading Hours: MCX operates in two sessions. The morning session runs from 9:00 AM to 5:00 PM IST, and the evening session extends to 11:30 PM IST on normal days (timing may differ on US daylight saving days). The extended evening session is significant because London and New York commodity markets are active during Indian evening hours, meaning major global price moves are often captured in real time during the evening session.

Margins: MCX prescribes initial margin, exposure margin, and special margins for silver contracts. Margins are set as a percentage of contract value and can be revised intraday during periods of high volatility. Brokers may levy additional margins above the exchange minimum. Always confirm current margin requirements with your broker before trading.

What Drives Silver Prices: A Framework for Analysis

Silver prices are simultaneously influenced by macroeconomic forces, monetary policy, industrial demand, currency movements, and investor sentiment. No single factor dominates at all times; the relative weight of each driver shifts depending on the broader economic environment. Developing an analytical framework to assess which drivers are most relevant at any given time is one of the core skills of a successful silver trader.

The Monetary Policy and Interest Rate Channel: Silver, like gold, is a non-yielding asset. When real interest rates (nominal interest rates minus inflation) are low or negative, the opportunity cost of holding silver falls, making it more attractive relative to fixed-income assets. Conversely, when the US Federal Reserve tightens monetary policy and real yields rise, silver tends to face headwinds. For Indian traders, the Reserve Bank of India's (RBI) monetary policy stance also matters through its effect on the rupee. A weaker rupee increases the INR price of silver even if the dollar price is flat, which is why domestic MCX prices can diverge significantly from international LBMA prices during periods of currency volatility.

Industrial Demand: Approximately 50% of global silver demand is industrial. The metal's unique properties - highest electrical conductivity of any element, high thermal conductivity, reflectivity, and antibacterial qualities - make it indispensable in several growing sectors. Photovoltaic solar panels are the fastest-growing industrial use of silver. Each solar panel requires a small amount of silver paste for its electrical contacts. As solar capacity expands globally to meet decarbonisation targets, silver demand from this sector is expected to grow structurally. Electric vehicles, 5G infrastructure, consumer electronics, semiconductors, and medical devices also contribute meaningfully to industrial silver demand. A global manufacturing slowdown - often indicated by falling Purchasing Managers' Index (PMI) readings in China, the US, or Europe - tends to weigh on silver's industrial demand and, by extension, its price.

Investment Demand: Investment demand for silver operates through multiple channels - physical coins and bars, silver ETFs globally, and derivative contracts. When risk aversion rises and investors seek safe-haven assets, gold typically benefits first, and silver follows with more volatility. When risk appetite returns and equity markets rally, silver can outperform gold because of its industrial demand backdrop. Flows into global silver ETFs, published weekly by leading custodians, are closely watched as an indicator of institutional sentiment.

The Gold-Silver Ratio: This ratio measures how many ounces of silver are required to buy one ounce of gold. Historically, the ratio has oscillated widely - from below 20 in the early 20th century to above 120 during periods of extreme stress. Many traders use the gold-silver ratio as a relative value tool. When the ratio is historically high, silver is considered cheap relative to gold, and some traders position for ratio compression by going long silver and short gold. When the ratio is low, the reverse logic applies. However, this is a mean-reversion trade that requires patience and careful risk management.

US Dollar Index: Silver is priced globally in US dollars. A stronger dollar makes silver more expensive in other currencies, which tends to dampen demand and weigh on prices. A weaker dollar has the opposite effect. For Indian traders, the USD/INR exchange rate adds an additional layer: even if LBMA silver prices are flat in dollar terms, a depreciating rupee will push MCX prices higher.

Geopolitical and Macro Risk: War, financial crises, sovereign debt concerns, and pandemic-level disruptions historically trigger safe-haven demand for precious metals. Silver's response tends to be more volatile than gold's in these situations - it can rally sharply and also give back gains quickly once the acute risk phase passes.

Supply Factors: About 70–80% of silver mined globally is a by-product of mining for other metals - lead, zinc, copper, and gold. This means silver supply is not purely responsive to silver prices; it also depends on the production economics of these other metals. Mexico, Peru, China, Russia, and Australia are among the top silver-producing countries. Mine supply disruptions, such as labour strikes, flooding, or regulatory shutdowns, can tighten supply and support prices. Recycled silver from electronics and jewellery scrap is also a meaningful supply source.

Reading the MCX Silver Price: Domestic vs International Benchmarks

One of the first things new traders notice when they start tracking MCX silver is that the price in rupees per kilogram does not directly match the international LBMA spot price in US dollars per troy ounce. Understanding the conversion and the factors that cause the two to diverge is fundamental to trading MCX silver intelligently.

The Conversion Formula: The international silver price is typically quoted in US dollars per troy ounce. To convert this to INR per kilogram - the unit MCX uses - you apply the following conversion: MCX price (INR/kg) = LBMA price (USD/troy oz) × 32.1507 (troy ounces per kilogram) × USD/INR exchange rate.

For example, if LBMA silver is at USD 30 per troy ounce and the USD/INR rate is 84, then the theoretical MCX price would be 30 × 32.1507 × 84 ≈ ₹81,020 per kilogram. In practice, the actual MCX price will differ from this theoretical value because of import duty, GST, handling charges, and any localised supply-demand imbalances.

Import Duty and GST: India levies customs duty on silver imports. The duty rate can change with each Union Budget, so traders must refer to the latest Finance Act or the CBIC website for current rates. Import duty is a structural wedge between international and domestic prices; when duty is high, the domestic premium over international prices widens. Goods and Services Tax (GST) also applies to physical silver transactions. For exchange-traded derivatives, GST applies to brokerage and exchange charges, not to the notional value of the trade.

Domestic Spot vs MCX Futures Basis: Even within India, there is a difference between the physical spot price quoted in bullion markets (such as Zaveri Bazaar) and the MCX near-month futures price. This difference is the basis. In a normal market, futures trade at a premium to spot because of the cost of carry (storage, insurance, financing). As a futures contract approaches expiry, the futures price converges toward the spot price - a phenomenon known as basis convergence. Traders who understand basis dynamics can exploit misalignments between spot and futures, a practice known as cash-and-carry arbitrage.

Impact of Rupee Volatility: Because MCX prices are denominated in rupees, a sharp depreciation of the rupee can lift MCX silver prices significantly even if LBMA prices are unchanged. This was visible during episodes of sharp rupee weakness in 2013, 2018, and 2022, when domestic commodity prices in rupees rose more than their dollar equivalents. Conversely, a strengthening rupee can compress domestic gains from rising dollar-denominated silver prices. Traders with a macro overlay often hedge their currency risk separately using currency futures on NSE or BSE.

Seasonal Demand Patterns: In India, silver demand follows distinct seasonal rhythms. The wedding and festive season - roughly from October to January - sees elevated demand for silver jewellery and silverware. The pre-wedding inventory build-up by jewellers and the gift-buying season around Diwali and Dhanteras can support domestic silver prices. Akshaya Tritiya in April–May is another demand peak. While these seasonal factors are well-known and often priced in, unexpected surges in demand or supply disruptions during peak seasons can create short-term price spikes that attentive traders monitor.

Technical Analysis Tools for Silver Trading

While fundamental analysis helps determine the directional bias for silver over the medium to long term, technical analysis provides the timing and entry/exit precision that traders need for day-to-day decision-making. Silver, being a highly liquid and internationally traded commodity, generally responds well to standard technical analysis approaches.

Trend Analysis and Moving Averages: Silver tends to trend strongly in both directions. Moving averages - particularly the 50-day, 100-day, and 200-day simple or exponential moving averages - are widely used to define the primary trend. When silver's price is above its 200-day moving average, the long-term trend is considered bullish, and pullbacks toward the moving average may represent buying opportunities for trend-followers. When price is below the 200-day moving average, the trend is bearish, and rallies toward it may be selling opportunities. Crossovers between shorter-term and longer-term moving averages generate trade signals that many algorithmic and discretionary traders watch closely.

Support and Resistance Levels: Silver has historically respected certain round-number price levels and previous highs or lows. On the MCX chart, previous contract highs and lows, as well as levels corresponding to significant psychological price points (such as ₹70,000/kg, ₹80,000/kg, ₹1,00,000/kg), tend to act as support or resistance. Pivot points, calculated from the previous day's high, low, and close, provide intraday reference levels.

Relative Strength Index (RSI): The RSI is a momentum oscillator that measures the speed and magnitude of price changes on a scale from 0 to 100. Readings above 70 suggest overbought conditions and potential for a correction; readings below 30 suggest oversold conditions and potential for a bounce. In strong trends, silver can remain overbought or oversold for extended periods, so RSI signals work best when combined with trend analysis.

Bollinger Bands: These are volatility bands plotted two standard deviations above and below a moving average. Silver tends to be more volatile than gold, so Bollinger Band widening - known as a "Bollinger squeeze" breakout - can signal the start of a significant price move. Traders watch for price touching or breaching the outer bands as an indication of an extreme move that may revert or accelerate depending on broader context.

Volume and Open Interest: Volume on MCX represents the number of contracts traded in a session, while open interest represents the total number of outstanding contracts at any point. Rising prices accompanied by rising volume and open interest suggest new money entering the market in the direction of the trend, which is considered a confirmation signal. Rising prices with falling open interest suggest short covering rather than fresh buying, which may be less sustainable. Open interest data is published by MCX at the end of each trading day.

The Gold-Silver Ratio Chart: As discussed in the drivers section, the gold-silver ratio is itself a tradeable chart with its own technical levels. Some sophisticated traders analyse the ratio chart using moving averages and momentum indicators to time relative value trades between gold and silver.

Commitment of Traders (COT) Data: For silver traded on COMEX in the US (which is the global price-setting venue), the US Commodity Futures Trading Commission (CFTC) publishes Commitment of Traders reports weekly. These reports break down open interest among commercial hedgers, large speculators, and small speculators. Extreme positioning by large speculators - whether net long or net short - has historically been a contrarian indicator for silver prices. While this data refers to COMEX rather than MCX, global positioning directly influences the prices that flow through to MCX.

Hedging with Silver Futures: Who Uses It and How

Beyond speculation, one of the primary purposes of commodity derivatives markets is hedging - the use of futures and options to reduce or eliminate price risk for those with genuine commercial exposure to silver. Understanding who hedges with MCX silver contracts and how those hedges are structured provides important context for all market participants.

Jewellery Manufacturers and Exporters: A jewellery manufacturer who has committed to supply a fixed-price order for silver jewellery in three months faces the risk that silver prices will rise before they can acquire the raw material. By buying silver futures on MCX today at the current futures price, they lock in their raw material cost. If silver prices rise, the gain on the futures position offsets the higher cost of physical silver. If silver prices fall, they lose on the futures but benefit from cheaper physical silver. The net effect is cost certainty - which is what a hedger seeks.

Importers: An importer of silver who has invoiced a shipment in US dollars faces two risks: silver price risk and USD/INR exchange rate risk. Buying MCX silver futures (which are denominated in rupees but ultimately reflect both the dollar silver price and the exchange rate) provides a combined hedge for both risks. Some sophisticated importers supplement this with currency futures on NSE to fine-tune their currency exposure.

Miners and Recyclers: While India has limited primary silver mining, recyclers who process electronic scrap and recover silver face the reverse risk: they hold a future supply of silver and are concerned that prices might fall before they can sell. They can hedge by selling silver futures now, locking in a sale price for their expected future production.

Long-term Investors Using Options: A long-term investor who holds significant silver ETF units or physical silver and is worried about a short-term price correction can buy put options on MCX silver. The put option gives the right to sell silver futures at a specified price; if silver falls, the put option gains in value, partially offsetting the loss on the physical holding. The maximum cost of this protection is the option premium paid. If silver rises instead, the investor forgoes the premium but fully participates in the upside - a structure similar to insurance.

Basis Risk in Hedging: Hedging with futures is not perfect. The basis - the difference between the spot price and the futures price - can change in unpredictable ways, especially during periods of market stress. When basis behaviour deviates significantly from what the hedger expected, the hedge may not provide the anticipated level of protection. This is known as basis risk, and managing it is a key part of professional hedging practice.

Delta Hedging with Options: Market makers and sophisticated traders who sell silver options must manage their delta - the sensitivity of the option's value to a change in the underlying silver futures price. They do this by continuously adjusting their position in silver futures. This dynamic hedging activity generates a significant portion of the trading volume in silver futures and contributes to market liquidity.

Silver vs Gold: Key Similarities and Differences for Traders

Gold and silver are often discussed together as precious metals, and many of the macroeconomic drivers that affect gold also affect silver. However, there are important structural differences between the two that every commodity trader should appreciate before deciding how to approach each metal.

Volatility: Silver is significantly more volatile than gold. The daily price swings in silver, both on COMEX and MCX, are often two to three times larger in percentage terms than those of gold. This higher volatility is driven by silver's smaller market size - the total value of all silver traded globally is a fraction of the gold market - combined with the dual nature of silver demand. When industrial sentiment deteriorates, silver can fall sharply; when it improves, silver can rally faster than gold. For traders, higher volatility means larger potential profits but also larger potential losses.

Market Size and Liquidity: The global silver market, while deep by most standards, is much smaller than the gold market. The smaller market size means that large flows - whether from ETF buying or institutional portfolio rebalancing - can move silver prices more dramatically than similar flows would move gold. On MCX, silver liquidity, particularly in the Silver Mini and Silver Micro contracts, is generally adequate for retail traders, but the large Silver contract can have wider bid-ask spreads during off-peak hours.

Jewellery and Cultural Demand in India: Gold dominates Indian jewellery and bridal demand in terms of value, but silver has significant volume. Tribal jewellery in states like Rajasthan, Odisha, and Jharkhand relies heavily on silver. Rural household savings in silver are a meaningful component of domestic demand. The cultural demand dynamics for silver, while substantial, are less price-inelastic than gold's - consumers are somewhat more willing to defer silver purchases when prices spike, because alternative materials exist for some silver applications.

Store of Value vs Industrial Metal: Gold's demand is almost entirely driven by investment and jewellery, making it a purer monetary metal and safe-haven asset. Silver's industrial demand component means it is more sensitive to the global business cycle. In a recession, gold often holds its value or appreciates as a safe haven, while silver may fall because industrial demand contracts. In an economic expansion, silver may outperform gold because industrial demand adds to investment demand. This distinction matters for traders constructing commodity portfolios.

Storage and Delivery Logistics: Physical silver is bulky relative to its value. One kilogram of silver occupies far more space than one kilogram of gold for the same rupee value (since gold is much more expensive per kilogram). This makes storage and handling of physical silver more logistically challenging. Delivery-based MCX contracts require accredited warehouses that meet MCX's quality and security standards. Retail traders who trade the cash-settled Silver Micro contract avoid these complications entirely.

Tax Treatment: In India, profits from commodity futures and options are taxed under the head of business income for most active traders. Physical silver, if held as an investment, may attract capital gains tax with indexation benefits if held for more than a specified period. The specific tax rates and holding period thresholds are subject to change with each Finance Act, so always consult a qualified tax professional and refer to the latest SEBI and Income Tax Department guidelines for current rules.

Taxation of Silver Trading Profits in India

Understanding the tax implications of silver trading is a critical part of the total return calculation for any market participant. Indian tax law treats profits from commodity derivatives differently from capital gains on equities or mutual funds, and the rules can be nuanced depending on how you participate in the silver market.

Business Income for Derivative Traders: Profits and losses from trading commodity futures and options on MCX are generally treated as business income (non-speculative business income if the transactions are exchange-settled, which they are on MCX). This means they are added to or subtracted from your total income and taxed at the applicable income tax slab rate. Business losses from commodity trading can be set off against other business income in the same year, and unabsorbed losses may be carried forward for up to eight assessment years as per current provisions - though always verify this against the latest Finance Act, as rules may change.

STT and CTT on Commodity Derivatives: Unlike equity derivatives where Securities Transaction Tax (STT) applies, commodity derivatives on MCX attract Commodities Transaction Tax (CTT). CTT applies to non-agricultural commodity futures such as silver and gold. The rate is prescribed by the government and is subject to revision. CTT is deducted at source by your broker and appears on your contract notes. It is available as a deduction when computing your taxable business income from commodity trading.

GST on Trading Costs: Brokerage, exchange transaction charges, and other trading-related services attract GST at 18%. These costs are deductible as business expenses when computing your taxable income.

Physical Silver Capital Gains: If you hold physical silver (coins, bars, silverware) as an investment and sell it later, the gains are taxed as capital gains. Short-term capital gains (STCG) arise if the holding period is below a specified threshold and are taxed at your applicable income tax slab rate. Long-term capital gains (LTCG) with indexation benefits apply if the holding period exceeds the specified threshold. The holding period thresholds and tax rates for LTCG on physical silver are specified in the Income Tax Act and may be amended by each Finance Act - refer to the latest provisions or consult a qualified CA.

Silver ETF Taxation: Silver ETFs listed on NSE and BSE are structured as fund-of-funds or direct ETFs, and their tax treatment is governed by the rules applicable to debt mutual funds or the specific fund category as amended. The Finance Act 2023 removed indexation benefits for certain fund categories; subsequent Budgets have further modified rules. Always verify current silver ETF tax treatment with the latest Finance Ministry guidance.

Advance Tax Obligations: If your commodity trading generates significant profits, you may be required to pay advance tax in quarterly instalments to avoid interest penalties under Sections 234B and 234C of the Income Tax Act. Keeping track of your running profit and loss position throughout the financial year and making timely advance tax payments is good financial practice.

Maintaining Records: SEBI and the Income Tax Department expect traders to maintain complete trading records including contract notes, bank statements, margin statements, and P&L summaries. Discrepancies between broker-reported information and your ITR can trigger scrutiny. Most brokers provide annual tax P&L statements that are useful when filing your income tax return.

Silver ETFs vs MCX Futures: Choosing the Right Instrument

Since SEBI approved silver ETFs in India in 2021, retail investors have had two primary exchange-traded routes to silver: MCX futures and options, or silver ETFs on NSE and BSE. Each instrument has its own characteristics, and the right choice depends on your investment objective, risk tolerance, capital, and time horizon.

Silver ETFs - Key Features: Silver ETFs hold physical silver in SEBI-accredited vaults and issue units that represent a fractional claim on this silver. You can buy and sell silver ETF units on NSE or BSE through a standard demat account, exactly as you would buy shares. There is no expiry date, no margin requirement, no rollover cost, and no risk of receiving a margin call. The minimum investment is approximately the price of one ETF unit, which may be as low as the price of one gram of silver. For long-term investors who want silver exposure without the complexity of futures, ETFs are far more user-friendly.

MCX Futures - Key Features: MCX futures provide leveraged exposure to silver prices. With an initial margin of, say, 6–8% of the contract value, a trader controls a much larger notional position than the capital deposited. This leverage amplifies both profits and losses. Futures have expiry dates, require active position management, and impose rollover costs. They are suitable for traders who actively manage their positions, hedgers with specific short-term price risk, and sophisticated investors seeking to express precise directional or spread views.

Cost Comparison: Silver ETFs incur an annual Total Expense Ratio (TER) charged by the fund house, which reduces returns over time. MCX futures incur brokerage, CTT, exchange transaction charges, and rollover costs. For short-term trading, futures may be more cost-efficient; for long-term buy-and-hold exposure, the ongoing TER of ETFs may be comparable or lower than the cumulative rollover costs of a perpetually rolled futures position.

Taxation Difference: As described in the taxation section, commodity futures profits are taxed as business income. Silver ETF gains may be taxed as capital gains (with the applicable STCG or LTCG rates depending on holding period). Depending on your tax bracket and holding period, one structure may be more tax-efficient than the other. This is another area where consulting a qualified tax professional is worthwhile.

Liquidity and Market Hours: MCX silver contracts trade during extended hours (including the evening session), allowing participants to react to global developments in near real time. Silver ETFs on NSE and BSE trade only during stock market hours (9:15 AM to 3:30 PM IST). For traders who want to respond to late-evening global market moves, MCX futures offer a significant advantage.

Suitability: To summarise broadly - silver ETFs suit long-term investors seeking simple, low-maintenance silver exposure in demat form. MCX futures and options suit active traders, hedgers, and sophisticated investors who understand leverage, margin management, and derivatives pricing.

Example

Key benefits

How it works

1. 1
   Open a Trading and Demat Account

   To trade MCX silver futures and options, you need a trading account with a SEBI-registered broker who is a member of MCX. For silver ETFs, you additionally need a demat account. Complete the KYC process, including PAN verification, address proof, and income declaration, as required by SEBI regulations.

2. 2
   Enable Commodity Derivatives Segment

   Commodity derivatives (MCX, NCDEX) are a separate segment from equity derivatives. You may need to specifically activate the commodity segment with your broker and sign a separate risk disclosure document. Some brokers require a net-worth declaration or income proof above a minimum threshold for derivatives trading.

3. 3
   Fund Your Margin Account

   Deposit sufficient funds (or eligible securities) into your trading account to meet the initial margin requirement for the silver contract you wish to trade. MCX prescribes minimum margins, but your broker may require a higher amount. Always maintain a buffer above the minimum to absorb intraday price movements without triggering a margin call.

4. 4
   Select the Right Silver Contract

   Choose the appropriate MCX silver contract based on your trade size, delivery preference, and capital availability - Silver (Big) for large positions or physical delivery, Silver Mini for medium-sized positions, or Silver Micro for small, cash-settled trades. Check the expiry date and ensure you have a plan for rolling or closing the position before expiry.

5. 5
   Place Your Order

   Enter your buy or sell order on your broker's trading platform. Specify the number of lots, order type (market, limit, stop-loss), and price. For limit orders, set your desired entry price; for stop-loss orders, specify the price at which your position should be automatically closed if the market moves against you.

6. 6
   Monitor Your Position and Manage Risk

   After entering a trade, actively monitor your position relative to the margin requirement, open interest trends, and any macro developments that could move silver prices. Adjust or close positions as needed. Do not wait for a margin call - proactively manage your exposure to avoid forced liquidation at unfavourable prices.

7. 7
   Close, Roll, or Deliver

   Before the expiry of your contract, decide whether to close the position (offset by an equal and opposite trade), roll it forward to the next contract month, or - in delivery-based contracts - proceed with physical delivery. Ensure you understand the tender period and delivery logistics of any contract before entering a position you may need to deliver or receive.

Formula

MCX Silver Price (INR/kg) = LBMA Spot Price (USD/troy oz) × 32.1507 (troy oz per kg) × USD/INR Exchange Rate + Import Duty + Local Charges

Gold-Silver Ratio = Gold Price (per unit) ÷ Silver Price (per same unit)

Key takeaways

Frequently asked questions

Related terms