Did you know that the metal coating that protects buildings, vehicles, ships, and other structures from corrosion is Zinc?
According to a US survey, about three-fourths of Zinc used is consumed as metal, mainly as a coating to protect iron and steel from corrosion. You can trade in Zinc on the Multi Commodity Exchange (MCX) in India, which has recently launched mini contracts for Zinc futures.
In this blog, we will explore how to trade in Zinc Mini Contracts on Upstox and the benefits of trading these contracts.
What is Zinc?
Zinc is a metal that is often used as a protective coating for other metals to prevent corrosion. It is also used in the production of alloys, such as brass and bronze, as well as in the manufacturing of batteries, cosmetics, and pharmaceuticals. Zinc is an essential trace element for humans, animals, and plants, playing a crucial role in numerous biological processes.
What are Zinc Mini Contracts?
Zinc Mini Contracts are smaller-sized futures contracts for Zinc that trade on the MCX. While the regular zinc futures contracts have a lot size of 5 tonnes, the mini contracts have a lot size of just 1 tonne. These smaller contracts offer more flexibility and accessibility for traders, making them an attractive trading proposition.
Mini Zinc Futures vs Regular Zinc Futures
How Zinc Mini Contracts Work?
Zinc min-i contracts work in the same way as regular contracts. They have a tick size of 5 paisa per kg, and with a lot size of 1 tonne, every rupee move in the zinc price will result in a profit or loss of Rs. 1,000.
How to Trade Zinc Mini Contracts on Upstox
- Log in to your Upstox account.
- Search for 'ZINCMINI' and add it to your watchlist.
- Analyse the market and devise your trading strategy.
- Place your order and manage your position according to your strategy.
Benefits of Trading Zinc Mini Contracts
- Lower margin requirement: Zinc mini contracts are 1/5th the size of regular contracts, resulting in lower margin requirements. At current rates, Zinc mini contracts have a margin of about Rs. 26,000. (Note: Margin changes as the price changes.)
- Flexibility: Smaller lot sizes allow you to customise your trading position based on your risk management rules.
- Exiting the position: Mini lots provide more options for profit booking, such as exiting 50% of your position while continuing to hold the remaining 50%.
Factors Affecting Zinc Prices
- Economic events: Zinc prices on MCX are fixed based on the rates in the international spot market and the movement in US dollar rates. International economic events such as inflation, recession, and global industrial growth impact zinc prices.
- Production-related factors: Nearly 55% of the world's zinc production comes from China, Peru, and Australia. Commissioning of new production facilities and unexpected mine or plant closures due to natural disasters, accidents, strikes, etc., affect zinc prices.
Note: Unlike crude oil mini contracts, which are cash-settled, Zinc mini contracts are marked with compulsory physical delivery.
However, Upstox does not offer a physical settlement of Zinc mini contracts. Instead, open positions are automatically squared off before the start of the tender period, as specified by the exchange. This means you won't have to worry about taking physical delivery of tonnes of Zinc when trading Zinc mini contracts on Upstox.
Conclusion
Trading Zinc mini contracts on Upstox offers an attractive and accessible way for traders to gain exposure to the zinc market. With lower margin requirements, increased flexibility, and the ability to customise trading positions, these mini-contracts present a compelling option for those interested in trading commodities.
However, it's crucial to understand the factors affecting zinc prices and be aware of the delivery mechanism when trading these contracts.
To start trading Zinc mini contracts, log in to your Upstox account and add 'ZINCMINI' to your watchlist today.