The share of natural gas and crude in the total options premium turnover of the Multi Commodity Exchange Ltd. has risen over the past three months, according to data by India’s largest commodity bourse. The increase stems from concerns about rising tensions between the US and Iran, and higher heating demand in the western hemisphere due to an extreme winter.
“These (geopolitical) tensions have increased the volatility in the energy basket, drawing back some clients to products such as natural gas and crude oil, in addition to the lure of bullion,” said Amit Chandra, vice president (research) at HDFC Securities Ltd.
While actual users also take positions in energy and bullion options, foreign investors can trade only in cash-settled contracts like energy, and not in bullion or other delivery-based contracts. Market experts suggest that a significant contribution in both categories comes from retail traders. The wider availability of commodity trading through brokers like Groww, which was onboarded last year, is also drawing more individual traders to these options.
Energy’s contribution to overall premium turnover has always exceeded that of gold and silver, rising between 70% and 86% in the first half of the current fiscal (April-September). But it fell to 56% in October as bullion’s contribution spiked to 44%, after having ranged between 14% and 30% in April-September.
However, energy is back in favour–its share in MCX’s options premium turnover rose to 62% in November and to 65% this month until 23 January, while slipping to 55% in December. By contrast, bullion tracked an opposite trajectory: its contribution fell to 38% in November and to 34% this month until 23 January, after rising to 44% in December.
Natural gas volatility, measured as a percentage deviation from a mean, surged over the past three months, driving trader interest. The gap between the high and low in the generic natural gas contract surged from 18.4% in November to 132% as of 23 January, according to Bloomberg data. Against this, silver generic contract volatility rose from 19.5% to 64%, gold volatility rose from 7.4% to 20.3%, and crude volatility jumped from 7% to 15%.
Silver generic contract price surged from a closing low of ₹1.45 lakh a kilogram on 4 November to ₹3.35 lakh on 23 January, while gold jumped from ₹1.19 lakh on 4 November to ₹1.56 lakh per 10g on 22 January. Generic crude rose from ₹5,041 on 7 January to ₹5,630 a barrel on 23 January, while natural gas fell to a low of ₹280 per million British thermal units on 16 January from a high of ₹488 on 5 November.
Options drive MXC fee
In the past three months (1 Nov-23 January), energy premium turnover on MCX aggregated to ₹2.89 trillion, compared with bullion’s ₹1.84 trillion. The two together accounted for ₹4.76 trillion over the period.
For MXC, options premium turnover contributes more to its topline. That’s because the transaction tax tends to be higher on futures because it is calculated on the contract’s notional or face value. For options, the tax is lower as it is charged on the premium turnover.
Options contributed to ₹380 crore while futures accounted for ₹227 crore of the exchange’s overall transaction fee income of ₹607 crore in the September quarter of the current fiscal 2025-26 (FY26). This enabled MCX to more than double its consolidated revenue to ₹697 crore over a year earlier.
MCX’s shares have surged 135% over the past year to ₹2,593 as of Wednesday, driven by a spurt in gold and silver since the second half of the year and rising energy volatility in the recent months, according to exchange data. By comparison, Nifty 500 has risen nearly 10.3% to 23,082.10 during the period.
“The volatility in the energy basket is increasing, and so more and more clients are trading these products, resulting in an increase in market share of natural gas and crude relative to gold and silver,” said Rajesh Palviya, head of technical & derivatives research at Axis Securities Ltd.
Palviya expects the trend to continue on the back of rising geopolitical tensions and a bump in the prices of commodities other than precious metals.
The number of clients trading options on MCX stood at 890,000 in the September quarter, up from 550,000 a year earlier. Those trading futures jumped to 400,000 from 240,000. Apart from rising volatility in energy and bullion, exchanges’ onboarding of new investors bolstered the count. For instance, Groww, India’s largest retail broker by clients, began offering commodity derivatives to clients in October last year.
