How to trade crude oil futures on MCX via Zerodha
Crude oil futures on MCX are the most actively traded non-agricultural commodity derivatives in India. A single lot represents 100 barrels, providing leveraged exposure to global crude oil prices – largely anchored to WTI and Brent international benchmarks – denominated in Indian rupees. Zerodha provides direct access through Kite once the commodity segment is activated.
This guide covers the complete workflow from account setup to exit, including the critical physical-delivery risk that distinguishes commodity futures from cash-settled instruments such as USDINR currency futures.
Regulatory and tax framework
Exchange and regulator
MCX (Multi Commodity Exchange of India Ltd) is a SEBI-regulated commodity derivatives exchange. SEBI became the unified regulator for commodity derivatives in September 2015, following the merger of the erstwhile Forward Markets Commission (FMC) into SEBI. MCX bye-laws, contract specifications, and risk-management regulations are available on the MCX website and are overseen by SEBI under the Securities Contracts (Regulation) Act 1956 as amended by the Finance Act 2015.
Zerodha holds MCX membership through Zerodha Broking Limited and provides access under SEBI registration. For membership details see Zerodha MCX membership.
Commodity Transaction Tax (CTT)
Unlike currency derivatives (which attract no CTT), non-agricultural commodity futures – including crude oil – attract Commodity Transaction Tax at the rate of INR 10 per lakh of turnover on the sell side of futures contracts. CTT was introduced by the Finance Act 2013 (effective 1 July 2013). This is separate from brokerage, transaction charges, GST, and stamp duty.
SEBI circular SEBI/HO/CDMRD/DMP/CIR/P/2021/020 and related MCX circulars govern margin methodology for commodity derivatives, including the SPAN-based framework applied to crude oil contracts.
Physical settlement
SEBI circular SEBI/HO/CDMRD/DMP/CIR/P/2018/96 dated 12 June 2018 mandated compulsory physical delivery for non-agricultural commodity derivatives (including energy and metals) on MCX. This replaced the earlier cash-settlement option that was available for some contracts. Traders who hold positions into the delivery period must either fulfil delivery obligations or face forced squareoff with penalty charges.
Contract specifications
| Parameter | Detail |
|---|---|
| Exchange | MCX (Multi Commodity Exchange of India) |
| Contract | Crude Oil Futures |
| Underlying | Domestic crude oil prices based on WTI and Brent benchmarks |
| Lot size | 100 barrels |
| Price quotation | INR per barrel |
| Tick size | INR 1 per barrel |
| Tick value | INR 1 x 100 = INR 100 per lot per tick |
| Contract months | Near-month and far-month series (up to six monthly contracts available) |
| Last trading day | Last calendar day of the contract month (or preceding business day if that day is a holiday) |
| Tender period | Begins approximately three to five business days before the last trading day |
| Settlement | Compulsory physical delivery at designated MCX delivery centres |
| Trading hours | 9:00 AM to 11:30 PM IST (Monday to Friday); extended hours track international markets |
| Daily price limit | 4 percent initially; relaxed to 6 percent and then no limit intraday if triggered |
Note: MCX also offers a Crude Oil Mini contract with a lot size of 10 barrels, suitable for smaller capital. The mini contract follows identical specifications but the lot value is one-tenth of the standard contract.
Step-by-step procedure
Step 1: Activate the commodity derivatives segment
Log in to Zerodha Console and navigate to Profile > Segments. If the Commodity row is not activated, click Activate. You may need to upload income proof (recent payslip, bank statement, or ITR acknowledgement). Zerodha completes activation by the next trading day in most cases.
The how-to guide for activating the commodity segment covers the full KYC document checklist. The Zerodha commodity segment overview describes the full range of instruments available.
Step 2: Transfer sufficient funds
Open Kite and go to Funds > Add funds. UPI transfers are credited within minutes during banking hours; NEFT/IMPS credits typically within two to four hours. Calculate the total margin for your intended position (see step 4), then add at least 15–20 percent more to absorb normal intraday volatility in crude oil prices, which can swing INR 100–300 per barrel on active days.
Step 3: Search for the MCX Crude Oil contract
In the Kite search bar, type CRUDEOIL (one word, no space) and press Enter. Select the MCX exchange tab in the results. You will see a list of contracts, each labelled with the expiry month, for example CRUDEOIL26JUN for the June 2026 contract. The near-month contract (the earliest expiry) usually carries the highest open interest and the tightest bid-ask spread. Add the contract to your watchlist by clicking the plus icon.
To add the Mini contract, type CRUDEOILM in the search bar.
Step 4: Check the margin requirement
Navigate to zerodha.com/margin-calculator/SPAN/ and select the MCX tab. Choose CRUDE OIL (or CRUDE OIL MINI for the mini contract), enter the number of lots, and read the SPAN and Exposure margin figures.
Under typical market conditions (crude at INR 6,500–7,500 per barrel):
| Lots | Approx. SPAN | Approx. Exposure | Approx. Total |
|---|---|---|---|
| 1 | INR 28,000–38,000 | INR 8,000–14,000 | INR 36,000–52,000 |
| 2 | INR 56,000–76,000 | INR 16,000–28,000 | INR 72,000–104,000 |
Margin requirements increase significantly during high-volatility periods (OPEC+ meetings, US EIA inventory releases, geopolitical events). The exchange can revise SPAN parameters intraday, so maintain an adequate buffer.
For a more detailed explanation of how SPAN margin is computed, see how to calculate SPAN margin on Zerodha.
Step 5: Place the order
Click the crude oil contract in your watchlist. Press B (buy) for a long position (profit if crude oil price in INR rises) or S (sell) for a short position (profit if price falls).
In the order form:
- Product: NRML for overnight or multi-day positions; MIS for intraday (auto-squareoff by Zerodha RMS before market close).
- Order type: Limit (recommended) or Market.
- Quantity: in lots (1 lot = 100 barrels for the standard contract, 10 barrels for Mini).
- Price: in INR per barrel, to the nearest tick (INR 1).
The order window shows an approximate margin required. Confirm execution in the Orders tab and then check the Positions tab for the open position.
Step 6: Monitor the open position and daily MTM
Open the Positions tab. Unrealised P&L updates continuously during trading hours:
- Long P&L per lot = (Current price - Entry price) x 100
- Short P&L per lot = (Entry price - Current price) x 100
At end of day, the exchange computes the Daily Settlement Price (DSP), typically the volume-weighted average price (VWAP) of trades in the last 30 minutes of the evening session. The MTM difference between the DSP and your trade price (or the previous DSP for positions carried overnight) is debited or credited from your ledger.
Watch the Available margin in Kite > Funds. If adverse MTM depletes available margin to near zero, Zerodha’s RMS may square off the position without prior notice.
Step 7: Square off, roll, or manage delivery
To square off an open position, click Exit next to the position in the Positions tab. A counter-order is created; select limit or market price and submit before the end of the trading session.
To roll (carry a trade past the current contract’s expiry into the next month), square off the near-month contract and open a new position in the next-month contract. Do this at least five trading days before the last trading day to ensure adequate liquidity and to avoid the tender period.
Tender period and delivery. MCX crude oil futures enter a tender period (also called the delivery period) starting approximately three to five business days before the last trading day. During this period, the exchange may assign delivery obligations to open positions. Zerodha will attempt to square off positions that have not been closed, but if squareoff fails due to circuit limits or illiquidity, the client must fulfil physical delivery requirements. This risk is explained in detail in how to handle commodity physical delivery risk on Zerodha.
Charges on MCX crude oil futures
| Charge | Rate |
|---|---|
| Brokerage (Zerodha) | INR 20 or 0.03% of turnover, whichever is lower, per executed order |
| CTT | INR 10 per lakh of sell-side turnover |
| STT | Nil on commodity futures |
| MCX transaction charge | Approximately INR 26 per lakh of turnover (buy + sell) |
| SEBI turnover fee | INR 10 per crore of turnover |
| GST | 18% on brokerage and transaction charges |
| Stamp duty | As per state of registration (typically INR 0.002 per lakh for futures) |
CTT is levied only on non-agricultural commodity derivatives. For detailed brokerage calculations see Zerodha commodities and commodity transaction tax.
What can go wrong
- Segment not activated. Attempting to add an MCX instrument to the watchlist without commodity segment activation results in an error. Complete the activation process first.
- Price limit hits (circuit breakers). MCX applies a 4 percent daily price limit initially. If the limit is hit, trading is halted briefly. If crude oil gaps through the limit at market open (common on OPEC decision days or major geopolitical events), limit orders at prices beyond the circuit will not execute. Factor this into stop-loss placement.
- High-volatility margin call. EIA weekly inventory data (released every Wednesday at approximately 8:00 PM IST) and OPEC+ communiques can move crude oil INR 200–400 per barrel. Holding large overnight positions without adequate margin buffer risks an RMS auto-squareoff.
- MIS auto-squareoff timing. Zerodha typically squares off MIS commodity positions from approximately 11:00–11:20 PM IST (before the 11:30 PM MCX close). If you want to hold until the session end, use NRML.
- Delivery period entry. Failing to close positions before the tender period is the most consequential failure mode for retail traders. Monitor the contract’s last trading day on the MCX website and square off at least five business days earlier.
- Basis risk on mini vs standard contract. The mini (10-barrel) and standard (100-barrel) contracts can trade at marginally different prices. Do not assume perfect price correlation when hedging one against the other.
Conflict-of-interest disclosure
The WebNotes Editorial Team has no financial relationship with Zerodha, MCX, or any commodity broker. No brokerage referral arrangement exists. All charge figures cited are drawn from publicly available exchange and broker documentation and may change; verify current rates on the relevant platform before trading.
Related guides
- Zerodha commodity segment
- Zerodha MCX membership
- How to activate the commodity segment on Zerodha
- How to handle commodity physical delivery risk on Zerodha
- How to compute commodity margin on Zerodha
- How to trade gold mini futures on Zerodha
- How to calculate SPAN margin on Zerodha
- How to trade USDINR futures on Zerodha
- MCX
- Zerodha commodities
- Commodity transaction tax
- SEBI
- Kite, Zerodha’s trading platform
References
- MCX Contract Specifications: Crude Oil Futures, Multi Commodity Exchange of India Ltd, mcxindia.com.
- SEBI Circular SEBI/HO/CDMRD/DMP/CIR/P/2018/96 dated 12 June 2018, Compulsory delivery in commodity derivatives, Securities and Exchange Board of India.
- Finance Act 2013, Section 116, Commodity Transaction Tax, Ministry of Finance, Government of India.
- SEBI Circular SEBI/HO/CDMRD/DMP/CIR/P/2021/020, Margining framework for commodity derivatives, Securities and Exchange Board of India.
- MCX Bye-Laws and Business Rules, Multi Commodity Exchange of India Ltd (current version), mcxindia.com.
- Zerodha support article: “Commodity derivatives on Zerodha”, support.zerodha.com.
- EIA Weekly Petroleum Status Report methodology, US Energy Information Administration, eia.gov.