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Mumbai: Retail traders are increasingly preferring commodity options to equity index options, drawn by sharper swings in energy and bullion prices that create more trading opportunities. A lower tax incidence than on equity options is also making commodity options more attractive.
Average daily premium turnover (ADPT) in metals and energy options on the Multi Commodity Exchange of India (MCX) rose 15% in the September quarter from the June quarter. In contrast, premium turnover in index options on the National Stock Exchange (NSE) and BSE fell 27% over the same period, according to exchange data.
MCX's options ADPT climbed to ₹10,450 crore, lifted by sharp moves in crude oil and natural gas prices. Taxation is also tilting the balance in favour of commodities. The securities transaction tax (STT) on equity options was raised by 50% to 0.15% this fiscal year, while commodity options continue to attract a transaction tax of 0.05%. The availability of monthly options on bullion and energy products has further sharpened their appeal.
Trading equity F&O (futures and options) has become costlier since April, said Nilesh Sharma, executive director and president, Samco Securities. The STT hike raised the cost of every trade, he said, and, together with Sebi’s earlier curbs, tighter leverage rules from July and the introduction of the Closing Auction Session (CAS) in August, has left the equity side crowded and expensive for traders.
The active crude oil contract on the MCX gyrated in a 59% range—between a closing low of ₹6,426 a barrel on 2 July and ₹10,238 on 15 September. This compared with a 41% movement between the high and low in the previous quarter, according to Bloomberg data.
The number of clients trading on MCX nearly doubled to 1.37 million in the first quarter (April-June) of FY27 from 703,000 in the first quarter of FY26, according to the exchange’s investor presentation.
While the NSE and BSE are known for their popular weekly options on the Nifty and Sensex, MCX offers monthly options on bullion, energy and metals.
The active gold contract swung 15% between its high and low in the June quarter and 18% between its low and high in the September quarter, according to Bloomberg data.
For those looking to punt, volatility is the pull, said Naveen Mathur, director of commodities and currencies at Anand Rathi Share & Stock Brokers Ltd. He said higher volatility in products such as crude oil, coupled with a transaction tax on commodities that is a third of that on equity index options, had helped drive volumes.
The increased participation of retail investors on the MCX is also reflected in their rising share as a percentage of the average daily premium turnover. Their share rose 12% from June-end to 41.6% at the end of August, according to the latest data from the Securities and Exchange Board of India (Sebi).
By comparison, the retail share of turnover on the BSE and NSE rose by 8% and 8.6%, respectively, over the same period, to 37.8% and 39.2%.
Speculators are also finding more opportunities in commodities after Sebi rationalised the number of weekly equity contracts that a stock exchange could launch to one, effective November 2024, from multiple contracts earlier.
“Equity derivatives currently offer two weekly index-option expiries, while commodities provide multiple monthly opportunities. Six key commodities—gold, silver, crude oil, natural gas, copper and zinc—have monthly expiries, effectively offering six additional expiry opportunities every month over and above the eight weekly index-option expiries,” said Sunil Katke, national head of commodity retail at Kotak Neo.
The availability of almost 15-hour market timings, extending until 11:30 pm, has further strengthened participation, while the ability to leverage common collateral is enabling equity F&O clients to participate in commodities, particularly after 3:30 pm, Katke added.
“MCX September ADTP is trending at ₹11,000 crore, which is the second-highest in a month. This is driven by higher activity across crude and bullion contracts,” said Amit Chandra, vice-president at HDFC Securities.
Srushti is a markets reporter at Mint. She writes on equity markets, and her areas of coverage range from brokers and exchanges to mutual funds and the fast-evolving alternatives space, including GIFT City, from the financial capital of India. She has an experience of over three years in journalism, and has previously worked at Moneycontrol. She has an undergraduate degree in mass communication and a postgraduate diploma in business and financial journalism from Asian College of Journalism, Chennai.<br><br>Srushti prefers meeting people from the industry over making calls. Her work aims to drive impact—her story on illegal gold imports, for instance, caught the government’s attention and contributed to a policy shift. She specialises in turning complex market data into clear, engaging stories so even her grandmother could understand futures and options.<br><br>Outside of the newsroom, she enjoys spending money on jewellery and watching thriller films—especially the kind that keep her awake at night. She spends 1.5 hours a day commuting in Mumbai locals, listening to horror podcasts on her way to work. She’s also very talkative—so reach out only if you have lots of time.
Ram Sahgal is a deputy editor at Mint. He has over 20 years of experience in journalism, with previous roles at The Intelligent Investor, Bombay Times, The Economic Times, and The New Indian Express. Between his media roles, he briefly worked at a commodities exchange before returning to his true passion, business journalism. Ram graduated in liberal arts from St Xavier’s College, Mumbai, where he studied films, which explains his move to Bombay Times, where he covered the film industry during the rise of Sunny Deol and Sanjay Dutt. He took a leap of faith to transfer to The Economic Times, and thanks to his restless mind, later moved to cover the commodities beat. Over the past three years, Ram has been tracking the stock markets at Mint. His focus areas include writing about market infrastructure institutions, brokerages, derivatives, and related regulations. His hobbies include spotting trains and understanding the locomotives that power them. In his free time, he takes his octogenarian mother out for drives and goes to the cinema with her on weekends. If he has a dream, it is to write a screenplay for a movie. For now, he enjoys viewing market data on NSE and BSE, observing the shifting mood of Mr Market, and conversing with market experts.
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