Zerodha Commodity Trading Review

Published on Tuesday, April 27, 2021 by Chittorgarh.com Team

Zerodha, India's largest stock broker also offers commodity trading to its customer. Zerodha is a member of the MCX that allows customers to buy and sell commodities like metals, bullion, energy products, and agricultural products.

Zerodha MCX trading is a facility provided by Zerodha to trade in Commodity Futures and options (F&O). Zerodha allow commodity options trading products like Silver, Gold, Zinc, Copper, and Crude oil in MCX.

Note:

• Zerodha customers need an Equity Trading and Demat account before opening Commodity trading account.
• Zerodha customers have to maintain separate funds for Equity and Commodity trading. You cannot utilize, adjust or move the funds within Equity and Commodity.
• Zerodha offers the same trading platform 'Zerodha Kite' for Equity, Currency and Commodity.
• Zerodha allows only Limit and stop-loss orders for MCX options. You cannot place market orders for commodity options trading.
• Zerodha Commodity intraday trades should be squared off 25 minutes before the close of the commodities market. If the positions are not squared-off by the clients within the mentioned timeline, Zerodha auto squares off the open intraday positions with a charge of Rs 50 + GST for each squared-off open position.

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Zerodha Commodity Account Opening

To trade in commodity, you have to open/activate Zerodha Commodity Trading segment by submitting request.

Note: Zerodha offers commodity account opening only to existing Zerodha Equity account holders or if you opt to open Equity trading and Demat account along with a Commodity trading account. You cannot open only a commodity account with Zerodha.

If you are already an existing Zerodha customer, you can enable the Commodity trading segment online by paying Rs 100 towards Zerodha commodity account opening charges.

If you are new to Zerodha, you also need to open an Equity trading and Demat account along with a commodity account. Zerodha charges Rs 200 for online account opening of Equity Trading and Demat account. You also need to pay an AMC of Rs 300 towards the maintenance of the Demat account.

Steps to open Zerodha Commodity Account

Following are the steps to open an online commodity trading account with Zerodha:

1. Visit the Zerodha
2. Click on the Sign up Now button.
3. Enter your mobile number and click on Continue.
4. Enter the 6-digit OTP received on your mobile number. Click on Confirm.
5. Verify your email id by entering 6 digits OTP received on your email id.
6. Enter your PAN No. and Date of Birth. Click on accept and Continue.
7. Pay the account opening fees.
8. Enter your Aadhar number and allow Zerodha to access your Aadhar details.
9. Enter your bank account details.
10. Write the displayed OTP on a piece of paper and hold it in front of a camera to complete the online In-Person verification (IPV).
11. Upload all the required documents like PAN, Aadhar card, canceled cheque, signature photo proof, and Income proof (mandatory only for derivatives trading)
12. Complete E-sign with Aadhar.
13. Review the account opening form and click on Sign Now.

Zerodha MCX activation (for Existing Customers)

An existing Zerodha account holder can enable the commodity trading account online through Zerodha Console by clicking on Segment activation. You are required to upload income proof for activation of Commodity Derivatives trading.

 

 

For offline Zerodha commodity account activation, you need to:

1. Download the Commodity account opening form from the Zerodha website available under Downloads and Resources.
2. Print the form and fill it with the required details like identity, address, bank account, trader classification, contact details, etc.
3. Send the duly filled and signed form to the Zerodha Head office.

Note: Zerodha Commodity trading account gets activated in 48 hours post, Zerodha receives the online or the physical request.

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Zerodha Commodity Trading App

Zerodha offers MCX trading through Zerodha Kite App and Zerodha Kite web. The same trading software works for Equity, Currency and Commodity trading.

Zerodha Commodity account login credentials remain the same as for Equity trading account. You need to log in to Zerodha Kite using your Zerodha User ID and password.

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Zerodha Commodity Trade Classification

As per the recent SEBI guidelines, MCX needs to submit the trader classification of each commodity market participant in various categories as specified by SEBI. As a result of this, Zerodha requires each client to declare the trader category for each commodity in Zerodha Console. Every client must provide this declaration failing which the commodity trading gets suspended.

You need to select any one of the below trader categories that best suits you:

1. Farmers/Farmers Producers Organisations (FPOs)
2. Value chain participants of the particular commodity.
3. Proprietary traders
4. Domestic financial institutional investors (DII)
5. Foreign participants.
6. Others

The commodity trader classification is now included in the Commodity account opening form as well.

 

 

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*During daylight savings, the Non-Agri product market closes at 11.55 pm.

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Zerodha MCX Margin

Zerodha MCX margin allows its customers to trade many times over the funds available in their account. The leverage is provided only for Intraday (MIS) and Cover orders for Commodity Futures. There is no leverage for Commodity options.

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Zerodha Commodity Settlement

The commodity futures contracts are generally cash-settled or physically settled. However, Zerodha does not offer physical delivery of commodities. Hence, you are required to close your open positions in Zerodha Commodity before the delivery period starts. A delivery period is the period before the expiry of a commodity futures contract when the buyers or sellers submit their intent to take or give the delivery of their open positions.

The commodity options contract gets either converted to a respective futures contract on the expiry day or gets cash-settled based on its moneyness.

• A close-to-money (CTM) commodity options contract gets devolved into the respective futures contract on the day of expiry of the option contract, provided you have given clear instructions to that effect. In case no instruction is provided, the option expires worthless.
• An in-the-money (ITM) contract automatically gets converted to a futures contract. However, if the exchange does not find a match for your commodity contract, the trade gets cash-settled.
• An out-of-money (OTM) commodity options contract expires worthless.

You need to maintain sufficient margins with Zerodha for the options contracts to get converted to a futures contract, failing which Zerodha will square off the positions.

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Zerodha Commodity Fund Transfer

Zerodha has separate bank accounts for Equity and Commodity as stipulated by SEBI. You cannot utilize, adjust or move the funds within Equity and Commodity.

You need to transfer the funds to the ZERODHA COMMODITIES PRIVATE LIMITED MCX account from your linked bank account each time you want to trade or in case of any margin requirement in Commodities.

You can transfer the funds using the UPI, instant payment gateway, or net banking. Zerodha charges Rs 9 + taxes for the funds transferred through the instant payment gateway. There are no charges by Zerodha for UPI and Net banking (bank charges may apply).

Zerodha also provides a convenient online withdrawal through Zerodha Console and Zerodha Kite. The commodity withdrawal requests get processed at 8 AM on weekdays in Zerodha (except on holidays). It takes up to 24 hours for the amount to get credited to the bank account. The withdrawal requests placed after the processing cut-off time get picked up for the next day.

 

 

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Zerodha Commodity Account Closure

Zerodha commodity account can be closed either online or offline. Before initiating the closure of the commodity account, you need to ensure that no dues are outstanding on your commodity trading account.

Steps to close the Zerodha commodity account online:

1. Download the Zerodha commodity account closure form. Select Zerodha Commodities Private Limited option using any text editor.
2. Log in to Digio to e-sign the document. (Digio is an e-sign application provider used by Zerodha to allow the users to securely e-sign the documents)
3. Upload the account closure by clicking on Add document.
4. Click on the sign icon.
5. Enter your VID and click on Send OTP
6. Enter the received OTP to complete the E-sign process.
7. Download the digital signed formed and raise a ticket with Zerodha to submit the account closure request.

Steps to close Zerodha commodity account offline:

1. Download the Zerodha Commodity account closure form from the Zerodha website. The closure form is available under the Downloads and Resources as Account deactivation/closure form.
2. Put a tick on the box besides Zerodha Commodities Private Limited.
3. Sign the form.
4. Send a letter requesting to close only the Commodity trading account and the duly signed account closure form to Zerodha head office.

Zerodha takes 5-7 working days to process the closure request on receipt of the account closure form.

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Conclusion

Zerodha offers a seamless and convenient commodity trading experience to its customers through its powerful trading platform Kite, an online fund transfer facility, and margins that allow trade up to 2-2.5 times for intraday commodity trading. Zerodha commodity calculators help customers to know about the cost of trading and margin requirements and upfront. It is important to note that you also need to have or open an Equity trading and Demat account in Zerodha along with a commodity trading account. Zerodha does not offer physical delivery of commodities.