How Many Commodities Are Permitted For Futures Trading?

Last Updated: 16 Sep 2025

The investment market in India is an exciting one for an investor looking to make profits. One can invest in multiple financial products such as equities, FDs, Mutual funds, etc. However, there is an effective method used by knowledgeable investors to diversify their portfolios and increase their returns: Futures Trading. It is a great way for investors to hedge against price fluctuations and earn profits along the way.

Here’s everything about Futures Trading and how commodities make up for the bulk of the trading process.

What is a Futures Contract?

As the name suggests, a futures contract is an agreement to buy or sell an asset at a specific time in the future for a predetermined price. This lowers the risk against price fluctuations to get a proper price no matter the future price.

For example, imagine an Airline company anticipates its fuel demand to rise in the coming months. The company can then buy a futures contract for fuel at a predetermined price. This way, even if the price increases, they only have to pay the price determined while buying the contract. However, a fuel company may fear that the fuel prices may decline and sell a futures contract for fuel to the airline company for the agreed-upon price. Once both sides agree on a specific price, a futures contract becomes legal, deliverable in 2-3 months.

However, investors use a futures contract to make a profit. They buy a futures contract after researching, analyzing, and anticipating that the price of the asset they are buying will go up, and they will only have to pay the predetermined price. For example, if an investor buys a Futures Contract for Rs 10,000 and at the time of expiry, the price of the total commodity becomes Rs 15,000, the investor, by selling, earns a profit of Rs 5,000.

What Is Future Trading in Commodities?

Futures Trading for commodities is the process of buying a futures contract for commodities such as gold, oil, sugar, pulses, natural gas, etc. You can trade in commodities futures through spot prices or future prices. Spot prices allow investors to pay for and receive the delivery of the commodity immediately, while future prices follow an expiry date and price at a specific point of time in the future.

How Does Futures Trading in Commodities Work?

Futures Trading for commodities works on the same principle of futures trading. You can buy a futures contract for any commodity, such as chana dal, natural gas, aluminum, etc., for a pre-determined price and sell it before the expiry date. If the price of the commodity is higher than the price before the expiry date, you earn a profit; if not, you incur a loss.

Commodity trading in India is done through commodity exchanges managed under the umbrella of the Securities and Exchange Board of India (SEBI).

Objectives of Commodity Futures for Trading

Hedging

Think of a coffee grower who worries that prices will fall by harvest time. A futures in commodities contract lets the farmer lock in today’s acceptable price for beans that will be delivered months later. At the same time, a café chain fearing price spikes can secure its supply cost in advance. This mutual insurance, called hedging, gives both sides peace of mind, allowing them to focus on growing coffee or brewing lattes instead of obsessing over market swings.

Pricing

Even people who never sign a trading ticket benefit from the transparent quotes on an exchange. The constant tug-of-war between buyers and sellers produces a public, up-to-the-second benchmark that reflects what the world is willing to pay. Thanks to future trading commodities markets, a chocolatier in Paris and a cocoa farmer in Ghana can check the same price screen and plan accordingly. Clear, continuous pricing reduces guesswork, helping the entire supply chain make smarter decisions.

Liquidity

For any market to function, participants must be able to enter and exit positions quickly. Futures exchanges encourage large numbers of traders, farmers, processors, banks, and speculators to show up every day. Their collective activity provides the “liquidity” that turns orders into trades in a blink. Because of this depth, someone selling 10,000 barrels of oil tomorrow can usually find a willing buyer within seconds in futures and commodities trading. High liquidity lowers transaction costs and keeps markets resilient during news shocks.

Standardisation

Picture trying to trade wheat if every contract specified a different grain variety, moisture content, or delivery silo. Chaos would ensue. Exchanges solve this by creating standardised contracts that spell out quantity, quality, and settlement terms down to the last detail.

Standardisation ensures that a ton of wheat in Chicago is interchangeable with the same contract sold in Singapore, streamlining operations for a futures commodities merchant who moves goods around the globe.

For the Investors

Retail savers and institutional funds both look beyond stocks and bonds in search of diversification. Adding a slice of commodities can smooth out a portfolio’s ups and downs because raw-material prices often march to their own beat. Through future investing commodities contracts or funds that track them, investors can gain exposure without having to store soybeans in the garage.

How many commodities are permitted for Futures Trading?

Although there are hundreds of commodities you can trade in any of the exchanges; the most common permitted commodities are as follows:

Commodity sectors	Constituents
Agriculture	Grains: Rice, Basmati rice, wheat, maize, jeera. Oil and oilseeds: Castor seeds, soy seeds, castor oil, refined soy oil, soy meal, crude palm oil, groundnut oil, mustard seed, cottonseed, etc. Spices: Pepper, red chili, jeera, turmeric, and cardamom. Pulses: Chana, urad, yellow peas, tur dal.
Metals and materials	Base metals: Aluminum, copper, nickel, zinc, tin. Bulk commodities: Iron ore, coking coal, bauxite, steel. Others: Soda ash, chemicals, rare earth metals.
Precious metals and materials	Gold, silver, platinum, and palladium.
Energy	Crude oil, natural gas, Brent crude, thermal coal, alternate energy.
Services	Oil services, mining services, and others.

How to Invest in commodity futures?

First, you need to select a stockbroker to open a commodities trading account. IIFL is one of the leading players in the broking space in India and offers broking services in various categories of equity, commodities, currency, derivatives, etc. Trader Terminal, the proprietary trading terminal of IIFL, offers the convenience of trading in commodities by providing flexibility of access through desktop applications as well as a browser-based web application. You can trade commodity spot prices through the following process:

• Step 1: Open a commodity trading account with IIFL through the our online trading app or IIFL’s website.
• Step 2: Choose an exchange and the asset with the commodity market you want to trade.
• Step 3: You can start trading your preferred commodities futures contracts once your account is active.

Strategies for Commodity Futures Trading

Commodities trading can be risky and needs constant revisions on technical factors to ensure that you don’t lose your invested capital. Here are some strategies you can follow for commodity futures trading:

• Niche Commodity Market: Every commodity futures trader has its niche commodity where they feel confident. You can try your hands on various commodities to choose what is best suited for you and stick to trading the same commodity’s future contracts.
• Follow the Trend: Once you know your niche commodity, you can make profits by following commodity trends. As the prices are determined through demand and supply factors, you can closely watch the affecting factors and follow the price
• Analyze the fundamentals: You can monitor and analyze the fundamentals and technical factors that can affect the price of the commodity. For example, a weaker monsoon may indicate that the prices of agriculture-related commodities may go up, and you can make a profit by trading in the commodities futures contract.

Commodity Futures trading can prove to be a great way for investors with a high-risk potential. The process can give high returns on the investments if the decisions are backed by a good strategy and extensive research. Consult with your stockbroker and its advisors to learn about what is futures trading in commodities and get research and analysis support. You can start monitoring daily financial newspapers that carry news about most commodities. Furthermore, there are specialized magazines on agricultural commodities and metals available for subscription.