How to Invest in Zinc Futures

Zinc has been in use for different purposes for ages now. The most popular application of zinc around the world is galvanisation. A protective layer of zinc can prevent corrosion of iron and steel. It is also used to manufacture batteries, sunscreens, medicines, fertilizers, and photovoltaic cells. Since zinc has many uses, it has a significant value in the market. Investors can rely on zinc futures to benefit from future price movements. Continue reading to learn how to invest.

Topics Covered:

• What are Zinc Futures?
• How to Trade Zinc Futures?
• Conclusion

What are Zinc Futures?

Zinc futures refer to contracts that allow investors to buy or sell zinc at an agreed-upon price for delivery at a specified future date. These futures contracts are traded on commodity exchanges, providing a way for investors, producers, and consumers to hedge against price fluctuations or speculate on the future price movements of zinc.

You might have heard of derivatives , also known as financial contracts. Futures are a type of derivatives used by investors for hedging and price speculation. You can find a futures contract whose value is based on a given quantity of zinc. Futures will allow investors to buy/sell a given quantity of zinc on a predetermined date in the future. Also, the price for buying/selling zinc is predetermined in the contract, also known as the strike price. When the futures contract expires, you must buy/sell zinc at the predetermined strike price.

How to Trade Zinc Futures?

You can trade zinc futures and build a strong portfolio. However, you must be familiar with the exchanges that offer the asset for trading. For instance, you can find it listed on the Multi-Commodity Exchange (MCX) in India. The National Commodity and Derivatives Exchange (NCDEX) is another place in India where you can find this commodity to place trades. 

To access commodity exchanges, you need a trading account first. Reputable stockbrokers offer both trading accounts and investment platforms, which can be mobile apps or web portals. Additionally, opening a demat account with a reliable broker provides access to trading platforms for efficient commodity trading and portfolio management.

Let us understand zinc investing and trading with a future example. Let us say you purchase a future that allows you to sell zinc at Rs 250 per Kg on 2nd June 2024. Let us say the price of zinc on 2nd June 2024 is Rs 200 per Kg. Since you are selling zinc at Rs 250 per Kg due to the contract, you will make a profit of Rs 50 per kg. The profit is compared to the market rate or spot price on 2nd June 2024. As you can see, you can make a profit even during adverse price movements with the help of futures. Also, you don’t indulge in physical ownership and delivery of zinc when you are trading in futures . Zinc futures are essential for investors wishing to secure their portfolios from adverse price movements, inflation, and other risks.

Now that you have understood how to invest in zinc futures, let us discuss a few alternatives. It is crucial to note that zinc futures will come with an obligation to take action on the expiration date. It means you are compelled to buy/sell zinc when the contract expires. Investors can remove this obligation by investing in zinc options. Futures and options are similar, except for the obligation part. When a zinc option expires, you can wish to buy/sell the commodity or ignore the contract.

Futures and options are settled in cash, thus removing the need for physical ownership. However, some investors might visit physical markets and purchase or sell zinc in person. You can also find mutual fund or Exchange Traded Funds (ETFs) schemes that invest in zinc. These schemes invest a part of their capital in zinc, thus offering the required exposure to the investor. You can also buy shares of companies actively involved in zinc extraction, supply, or application. The value of zinc is expected to rise in the future, and it is the right time to step into the market.

Additionally Read: Demat Account Meaning

Conclusion

Zinc futures are essential for investors wanting insurance against rising prices. It allows investors to buy/sell the commodity at a predetermined price on a future date. Investors can hedge themselves against rising zinc prices, as the predetermined price (strike price) is followed for futures contracts. You can also find alternate investment options like options, mutual funds , and ETFs. Find the best zinc futures now!