The strategy does not need the price of oil to rise or fall. It needs two related contracts to converge — which is what they are contractually built to do.
A position in a main commodity contract is held against an opposing position in that commodity's mini contract, on the same exchange. One main lot is offset by a fixed number of mini lots, using the exchange's own contract ratio.
Exposure on CME Group venues (COMEX / NYMEX) is held against opposing Indian commodity exposure, with USD/INR as the base currency of the hedge. The currency leg is itself hedged.
A measurable price difference is observed between two related contracts on the same underlying commodity.
The two legs are matched on commodity, strike, expiry and settlement day — economically the same exposure in opposite directions.
Both legs are sent by the same automated instruction rather than keyed by hand, so the two orders reach the exchange together. The book is not left one-sided.
The contracts settle to the same reference. Directional movement cancels between the legs; the captured difference is what remains.
Nor on gold, silver or natural gas. The strategy is not built to forecast direction — it is built to remove direction from the outcome and be paid for the residual.
Both legs reference the same underlying, so a move in the commodity affects them in opposite directions.
Legs are sized to offset, using the exchange's own contract ratio between standard and mini lots.
Trades are opened and closed inside a defined contract cycle rather than carried on an open-ended view.
A free-margin buffer is held at all times so that adverse mark-to-market moves do not force a liquidation.
In the single-exchange strategy, subscribed capital is not itself pushed into the market. It is placed on deposit and pledged as collateral; the exchange extends a trading line against it.
Investor capital is placed in a bank fixed deposit in the fund's name.
The deposit is pledged to the exchange as security. It is not traded.
The exchange extends a trading line against the pledged collateral.
Hedged positions are opened and closed on that line, inside the cycle.
Two sources of income. The deposit earns a contractual deposit rate while it is pledged, and the hedged book generates its own result. Deposit terms and rates are confirmed in writing with the bank before capital is placed.
Target exposure: crude oil 40%, natural gas 40%, gold 10%, silver 10%. Actual exposure varies with contract availability, liquidity and margin conditions.
Crude oil and natural gas carry the deepest liquidity and the most reliable standard-versus-mini contract structure.
Gold and silver diversify the book across a different demand cycle and a different set of participants.
The book runs at roughly 80–90% margin utilisation, with a 10–20% free-margin buffer maintained at all times.
All instruments are exchange-listed and centrally cleared. No over-the-counter or bilateral positions are taken.
Trade-confirmed reconciliations, strike-level matched positions, exchange statements and audited accounts — shared under a mutual confidentiality agreement.