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Market Intelligence › Basic Terminologies
The underlying is a physical thing, not a share — and that changes everything
Published by The Retail Trader · JUL 23, 2026 · Derivatives & Commodities
In commodity futures you trade a contract on a physical thing — gold, crude, copper. This is its biggest difference from equity, and all the other differences come from it.
A share is a part of a company, with no storage cost, and it does not spoil. A commodity has to be stored, warehousing costs money, and the supply of many commodities depends on the season.
So in a commodity's price, carrying cost, the supply cycle and global demand all come in together.
At the level of trading, these things are different:
• The lot size and quality specification of every contract is set by the exchange.
• Trading hours are longer than equity, because of the link with global markets.
• Some contracts go into physical delivery, some are cash settled.
• One commodity can have contracts of different sizes.
Before taking a position, you must read the specification of that exact contract — lot size, tick value, expiry and the method of delivery. In equity all of this is nearly the same; in commodities every contract is its own separate animal.
This article is for education only — it is not a buy or sell recommendation, makes no claim of guaranteed returns, and is not advisory. Rules, rates and mechanics are changed from time to time by the exchanges, SEBI and RBI, so verify every number yourself with your broker or an official source.