Crude Oil-Part 3

13.1 Crude Oil Contracts on MCX: Structure and Market Dynamics

Varun: Isha, crude oil seems to dominate MCX. Is it really that active?

Isha: Very much so. It’s the most traded commodity on MCX, with over ₹3,000 crore turnover daily.

Varun: Wow. So who’s trading it—just big companies?

Isha: Both. Corporates like ONGC and BPCL hedge their physical exposure, while retail traders speculate on price moves.

Varun: And how do we track activity?

Isha: Through the MCX Bhav Copy. It shows volumes, open interest, and price action—essential for gauging market sentiment.

Crude oil stands as the most actively traded commodity on the Multi Commodity Exchange (MCX), commanding significant attention from both institutional and retail participants. On an average trading day, the combined turnover from all crude oil contracts exceeds ₹3,000 crore, representing approximately 8,500 barrels exchanged. This level of liquidity makes crude oil a central pillar of India’s commodity derivatives market.

Participation in crude oil trading comes from a diverse mix of players. Large corporations—including upstream producers like ONGC, Cairn Oil & Gas, and Reliance Industries, as well as downstream refiners like IOC, BPCL, and HPCL—regularly place orders on MCX. These institutional trades are typically driven by hedging strategies, designed to offset exposure in the physical (spot) market. In contrast, retail traders are primarily engaged in speculative activity, aiming to profit from price movements.

To assess the depth and activity of crude oil contracts, traders often refer to the MCX Bhav Copy, a daily report that provides detailed information on contract volumes, open interest, and price action. This tool is essential for evaluating liquidity and gauging market sentiment.

MCX offers two primary crude oil derivatives:

• Crude Oil Futures: Often referred to as the “main contract,” this is the standard version with a larger lot size and higher margin requirements.
• Crude Oil Mini Futures: A smaller, more accessible version designed for retail traders, offering lower capital requirements and reduced exposure.

In the upcoming sections, we’ll break down the structure of these contracts—including expiry schedules, tick sizes, margin obligations, and profit/loss calculations per tick. Understanding these mechanics is crucial for building effective trading strategies and managing risk in the volatile energy market.

13.2 –MCX Crude Oil Futures: The Big Contract Explained

Varun: Isha, I want to understand the main crude oil contract. What’s the structure like?

Isha: It’s called the “big crude” contract. Quoted per barrel, with a lot size of 100 barrels.

Varun: So every ₹1 move means ₹100 profit or loss?

Isha: Exactly. And margins vary—about 9% for overnight and 4.5% for intraday trades.

Varun: That’s a sizable exposure. Good for serious traders, I guess.

Isha: Yes, and knowing the tick size and expiry rules helps you manage risk better.

Crude oil remains one of the most liquid and actively traded commodities on the Multi Commodity Exchange (MCX). Among all contracts, the standard crude oil futures contract, often referred to as the “big crude”, commands the highest trading value. As of October 2025, the average daily turnover for this contract exceeds ₹2,500 crore, making it a central instrument for both hedgers and speculators.

Contract Specifications

Here’s how the big crude oil contract is structured:

• Price Quote: Per barrel (1 barrel = ~159 liters)
• Lot Size: 100 barrels
• Tick Size: ₹1
• P&L per Tick: ₹100 (since 100 barrels × ₹1 = ₹100)
• Expiry: 19th or 20th of every month
• Delivery Unit: 50,000 barrels
• Delivery Location: Mumbai / JNPT Port

This contract is designed for participants who want meaningful exposure to crude oil price movements, whether for hedging physical positions or trading directional views.

Example: Calculating Contract Value and Margin 

Let’s say the current market price of crude oil on MCX is ₹5,865 per barrel (based on the latest data). If you decide to go long on one lot, the contract value would be:

• To carry this position overnight, MCX requires a margin of approximately 9%:
• For intraday trades under MIS (Margin Intraday Square-off), the margin requirement is roughly 4.5%:
• These figures help traders assess capital requirements and risk exposure before entering a position.

Market Snapshot (October 2025)

Here’s a visual snapshot of the current market depth and pricing for the MCX crude oil contract:

This chart shows key support and resistance levels, recent price action, and volume trends. As visible, crude oil is consolidating near ₹5,800–₹5,900, with volatility driven by global inventory data and currency fluctuations.

Strategic Insight

Understanding the structure of the big crude contract is essential for building effective trading strategies. Whether you’re a corporate hedger managing refinery exposure or a retail trader speculating on price swings, knowing the tick size, margin rules, and expiry mechanics helps you stay disciplined and informed.

13.3 Currency Impact: The Dollar-Oil Relationship

Varun: Isha, there are so many crude contracts listed. How do I pick the right one?

Isha: Focus on liquidity. The near-month contract—like October 2025—is always the most active.

Varun: What if I want to hold beyond expiry?

Isha: Then shift to the next month’s contract before expiry. Long-dated ones are mostly for hedgers.

Varun: So timing matters?

Isha: Absolutely. Liquidity shifts as expiry nears, and you need to follow that flow to avoid slippage.

Crude Oil Futures Contract Calendar – October 2025

Every month, the MCX introduces a new crude oil futures contract that is scheduled to expire six months later. For example, a contract launched in October 2025 will have its expiry in April 2026. This rolling structure ensures that there are always multiple contracts available for trading, each with a defined lifespan of six months.

While several contracts may be active at any given time, not all are equally relevant for trading. The most important factor to consider when selecting a contract is liquidity, the ease with which you can enter and exit positions without significant price impact.

How Expiry Works

Each crude oil contract expires on or around the 19th of the expiry month. So, if you’re trading in October, the October 2025 contract is the current month’s contract and will expire around the 19th. As we approach expiry, typically around the 15th to 17th of the month, traders begin shifting their positions to the next month’s contract, in this case, November 2025.

This transition is driven by liquidity. The near-month contract always has the highest trading volume and tightest bid-ask spreads, making it ideal for active traders. As the expiry date approaches, volume gradually shifts to the next contract, which then becomes the new near-month.

Practical Trading Logic

Let’s say today is October 22, 2025. The most liquid contract would be the October 2025 crude oil futures, expiring in a few days. If you’re planning to hold a position beyond expiry or want to avoid last-minute volatility, you might consider trading the November 2025 contract instead.

Contracts with expiries further out such as December 2025 or January 2026 are available but typically have low participation. These long-dated contracts are mostly used by hedgers or institutions managing extended exposure. For retail traders and short-term strategies, they offer little advantage until they move closer to expiry and attract more volume.

13.4 Crude Oil Mini Contract: Accessible Trading with Lower Risk

Varun: Isha, the big crude contract feels heavy. Is there a lighter version?

Isha: Yes, the Crude Oil Mini. It’s perfect for retail traders. Lot size is just 10 barrels.

Varun: That means smaller margins and smaller tick values?

Isha: Exactly. ₹10 per tick, and margin starts around ₹5,500. It’s great for learning and managing risk.

Varun: Sounds ideal for short-term strategies.

Isha: It is. Many traders use it to build confidence before scaling up.

The Crude Oil Mini contract has become a favourite among retail traders on MCX, and for good reason. It offers a more accessible entry point into crude oil futures trading, with lower capital requirements and reduced exposure per tick. This makes it especially appealing to those who prefer managing smaller positions or are just starting out in commodity derivatives.

Why Traders Prefer the Mini

The appeal of the mini contract lies in two key features:

• Lower margin requirement: Traders can participate with a modest capital base.
• Smaller tick value: Each price movement results in a smaller profit or loss, which helps manage emotional and financial risk. Many traders find comfort in seeing smaller losses, even if it means smaller gains.

Contract Specifications

• Price Quote: Per barrel
• Lot Size: 10 barrels
• Tick Size: ₹1
• P&L per Tick: ₹10
• Expiry: 19th or 20th of every month
• Delivery Unit: 50,000 barrels
• Delivery Location: Mumbai / JNPT Port

Example: Calculating Contract Value and Margin (October 2025)

Let’s assume the Crude Oil Mini December Futures is trading at ₹5,865 per barrel. The total contract value would be:

The margin requirement for overnight positions (NRML) is approximately 9.5%:

For intraday trades (MIS), the margin is around 4.8%:

These figures are significantly lower than those required for the standard crude oil contract, making the mini version ideal for short-term strategies, learning environments, and capital-conscious traders.

13.5 Crude Oil Arbitrage

Varun: Isha, I saw a ₹5 price gap between the big crude and mini contracts. Is that normal?

Isha: Not always. That’s an arbitrage opportunity—buy the cheaper one and sell the expensive one.

Varun: So I match notional values and lock in the difference?

Isha: Exactly. If done right, it’s a risk-free profit. But these gaps are rare and short-lived.

Varun: Got it. Need to act fast and size it correctly.

Isha: Yes. Arbitrage is all about precision and timing.

Arbitrage is one of the most disciplined and risk-managed strategies in trading, especially when applied to instruments that share the same underlying asset. In the case of MCX crude oil futures, both the standard Crude Oil contract and the Crude Oil Mini contract are based on the same benchmark price. Therefore, under normal market conditions, they should trade at identical or near-identical levels.

However, due to temporary inefficiencies, differences in order flow, or latency in price updates, these contracts may occasionally diverge in price. When that happens, a short-lived arbitrage opportunity emerges allowing traders to lock in a risk-free profit by exploiting the price gap.

Example (October 2025)

Let’s say the following prices are quoted simultaneously:

• Crude Oil Futures (Standard): ₹5,865 per barrel
• Crude Oil Mini Futures: ₹5,860 per barrel

The difference is ₹5 per barrel. Since both contracts represent the same underlying asset, this discrepancy can be traded.

Trade Setup

The rule in arbitrage is simple: buy the cheaper contract and sell the more expensive one. In this case:

• Buy10 lots of Crude Oil Mini at ₹5,860
• Sell1 lot of Crude Oil Standard at ₹5,865

This ensures both sides of the trade represent the same notional value:

• Crude Oil Standard: ₹5,865 × 100 barrels = ₹5,86,500
• Crude Oil Mini: ₹5,860 × 10 barrels × 10 lots = ₹5,86,000

The ₹5 price gap across 100 barrels gives a locked-in arbitrage profit of ₹500.

What Happens When Prices Converge?

Let’s assume both contracts eventually align at ₹5,875:

• The Crude Oil Mini position gains ₹15 per barrel → ₹15 × 100 barrels = ₹1,500 profit
• The Crude Oil Standard position loses ₹10 per barrel → ₹10 × 100 barrels = ₹1,000 loss
• Net profit remains ₹500, regardless of where the price converges

This is the beauty of arbitrage: once executed correctly, the profit is insulated from market direction.

Real-World Considerations

Such opportunities are rare and often short-lived. High-frequency trading algorithms are designed to detect and exploit these gaps within milliseconds. However, manual traders may still catch them during periods of low liquidity, news-driven volatility, or technical glitches.

If you spot a price mismatch between the Crude Oil and Crude Oil Mini contracts, act swiftly, but ensure your order sizes match in notional value to maintain a true arbitrage setup.

13.6 Key Takeaways

1. Crude oil is the most traded commodity on MCX, with high liquidity and broad participation.
2. Institutional players hedge exposure, while retail traders focus on speculation.
3. The big crude contract has a lot size of 100 barrels, with ₹100 profit/loss per tick.
4. Margin requirements vary—around 9% for NRML and 4.5% for MIS.
5. Liquidity is highest in near-month contracts, making them ideal for active trading.
6. Expiry happens around the 19th of each month, and traders roll over positions accordingly.
7. The Crude Oil Mini contract offers lower risk, with a 10-barrel lot size and ₹10 per tick.
8. Mini contracts are suitable for beginners, short-term strategies, and capital-conscious traders.
9. Arbitrage opportunities arise when price gaps appearbetween big and mini contracts.
10. Successful arbitrage requires matching notional values, quick execution, and awareness of market inefficiencies.

13.7 Fun Activity

You’re evaluating whether to trade the Crude Oil Standard contract or the Crude Oil Mini contract on MCX. Use the data below to answer the questions.

Market Snapshot:

• Crude Oil Price: ₹5,865 per barrel
• Standard Lot Size: 100 barrels
• Mini Lot Size: 10 barrels
• Tick Size: ₹1
• NRML Margin: 9% for Standard, 9.5% for Mini
• MIS Margin: 4.5% for Standard, 4.8% for Mini

Questions:

1. What is the contract value for each variant?
2. What is the NRML margin required for each?
3. What is the P&L per tick for each?
4. If you have ₹30,000, which contract can you afford to trade?
5. Which contract offers higher leverage per rupee of margin?

Answers:

1. Standard = ₹5,865 × 100 = ₹5,86,500

Mini = ₹5,865 × 10 = ₹58,650

2. Standard NRML = 9% × ₹5,86,500 = ₹52,785

Mini NRML = 9.5% × ₹58,650 = ₹5,571.75

3. Standard P&L per tick = ₹1 × 100 = ₹100

Mini P&L per tick = ₹1 × 10 = ₹10

4. With ₹30,000, you can afford Crude Oil Mini (NRML margin = ₹5,571.75)

You cannot afford Standard (NRML margin = ₹52,785)

5. Standard: ₹100 per tick / ₹52,785 margin ≈ 0.00189

Mini: ₹10 per tick / ₹5,571.75 margin ≈ 0.00179

Standard offers slightly higher leverage, but Mini is more accessible.