Natural gas futures on MCX via Zerodha
Natural gas futures on MCX are cash-settled energy derivatives listed on the Multi Commodity Exchange of India, a SEBI-regulated commodity exchange, that track the NYMEX Henry Hub benchmark in Indian rupees and rank among the most volatile contracts an Indian retail trader can access. MCX lists a standard contract of 1,250 mmBtu (symbol NATURALGAS) and a mini contract of 250 mmBtu (symbol NATGASMINI), both tradeable on Zerodha Kite once the commodity segment is active.
The contract sits in the energy segment of MCX alongside crude oil and Brent. It draws heavy retail interest because the lot value is modest relative to gold or crude, the price swings are large enough to produce fast gains or losses, and the mini contract lets a trader take a position for a few thousand rupees of margin. That same volatility is why the 90 per cent of retail F&O traders who lose money in the SEBI study include a heavy concentration of energy traders. This article sets out the contract specifications, the international price linkage, the expiry and settlement mechanics, and the margin profile, so the volatility is understood before any capital is committed.
Conflict-of-interest disclosure. This article is published by the WebNotes Editorial Team for informational purposes and is written independently. WebNotes operates a Zerodha account-opening referral programme, disclosed on the pages that carry the referral link; this article does not carry it and earns no referral commission from anything described here. All figures cite publicly available MCX and SEBI documentation and may change; verify current specifications before trading.
What MCX natural gas tracks
MCX natural gas is not priced on Indian gas supply. The contract references the Henry Hub natural gas price, the delivery point in Erath, Louisiana, that serves as the pricing benchmark for the CME Group’s NYMEX natural gas futures, the deepest natural gas market in the world. MCX converts the Henry Hub price, quoted in US dollars per million British thermal units (mmBtu), into Indian rupees per mmBtu at the prevailing exchange rate. A trader holding MCX natural gas is therefore taking a combined view on the US natural gas price and the USD/INR rate.
The mmBtu, the unit of quotation, is a unit of energy: one million British thermal units, roughly the energy in 28 cubic metres of natural gas. The price drivers are almost entirely external to India:
- US weather. Heating demand in winter and cooling-related power demand in summer drive consumption. A cold-snap forecast or a heatwave revision can move the price several per cent intraday.
- US storage data. The US Energy Information Administration (EIA) publishes a weekly Natural Gas Storage Report each Thursday at roughly 8:00 PM IST. A surprise against the consensus injection or withdrawal estimate routinely moves Henry Hub, and MCX natural gas with it, in a single tick burst.
- US production and LNG exports. Shale output and liquefied natural gas export volumes set the supply side. Pipeline outages and freeze-offs at wellheads cause sharp spikes.
- USD/INR. Because the contract is rupee-denominated against a dollar benchmark, a sharp move in the USD/INR rate shifts the MCX price even when Henry Hub is flat.
The Henry Hub linkage is why MCX natural gas trades late into the night: the MCX energy session runs until 11:30 PM IST, extended to 11:55 PM during US daylight-saving time, so the Indian session overlaps the active NYMEX hours and the EIA storage release.
Contract specifications
The two listed contracts share the same underlying and settlement basis but differ five-fold in size.
| Parameter | Natural Gas (NATURALGAS) | Natural Gas Mini (NATGASMINI) |
|---|---|---|
| Exchange | MCX | MCX |
| Lot size | 1,250 mmBtu | 250 mmBtu |
| Price quotation | Rs per mmBtu | Rs per mmBtu |
| Tick size | Rs 0.10 per mmBtu | Rs 0.10 per mmBtu |
| Tick value per lot | Rs 125 (0.10 x 1,250) | Rs 25 (0.10 x 250) |
| Underlying | NYMEX Henry Hub natural gas | NYMEX Henry Hub natural gas |
| Contract series | Monthly, several near-month contracts | Monthly, several near-month contracts |
| Last trading day | 25th of the contract month, or preceding working day | 25th of the contract month, or preceding working day |
| Settlement | Cash-settled against the MCX due-date rate | Cash-settled against the MCX due-date rate |
| Trading hours | 9:00 AM to 11:30 PM IST (11:55 PM in US DST) | 9:00 AM to 11:30 PM IST (11:55 PM in US DST) |
| Daily price limit | 9 per cent (4 per cent, then a further 5 per cent slab) | 9 per cent (4 per cent, then a further 5 per cent slab) |
The arithmetic that decides position size is the tick value. At a tick of Rs 0.10 per mmBtu, one tick on the standard 1,250 mmBtu contract moves the lot value by Rs 125; on the 250 mmBtu mini, by Rs 25. If MCX natural gas is quoting around Rs 250 per mmBtu, the notional lot value is roughly Rs 3,12,500 on the standard contract (250 x 1,250) and Rs 62,500 on the mini (250 x 250). A 1 per cent move in the price, ordinary for this contract, is therefore about Rs 3,125 per standard lot and Rs 625 per mini lot.
Because the search names matter on Kite: typing NATURALGAS returns the 1,250 mmBtu contract, NATGASMINI returns the 250 mmBtu mini. Contract codes carry the expiry, for example NATURALGAS followed by the month tag. The near-month contract carries the highest open interest and the tightest spread; far-month contracts thin out quickly.
Settlement: cash, not delivery
This is the single most important practical distinction between natural gas and the rest of the MCX energy and bullion shelf. MCX natural gas and natural gas mini are cash-settled. A position held to the last trading day is settled in cash against the MCX due-date rate, a rupee figure derived from the NYMEX Henry Hub settlement price on expiry, converted at the reference exchange rate. There is no warehouse receipt, no delivery centre, and no obligation to take or make delivery of physical gas.
That separates natural gas sharply from MCX crude oil, gold, and silver, which became compulsorily delivery-settled for non-agricultural commodities under SEBI circular SEBI/HO/CDMRD/DMP/CIR/P/2018/96 dated 12 June 2018. A retail trader who forgets to square off an MCX crude oil futures or gold futures position before the tender period faces a physical-delivery obligation ; the same lapse on natural gas simply produces a cash settlement at the due-date rate. The risk on natural gas is the size of the price move, not a delivery scramble.
Margins on natural gas
Margins on natural gas are driven up by its volatility. The total margin to carry a position overnight (NRML) on Kite is the sum of the SPAN margin, the exposure margin, and the extreme loss margin (ELM), all computed by the exchange and reflected in the Zerodha margin calculator .
- SPAN margin is the exchange’s risk-array initial margin under the Standard Portfolio Analysis of Risk methodology. It rises with the scanned volatility of the contract, so on a high-volatility commodity like natural gas the SPAN component is proportionately larger than on a calmer contract.
- Exposure margin is an additional buffer over SPAN, generally about 2 per cent of the contract value on commodity futures.
- Extreme loss margin (ELM) is levied at 1.25 per cent on open futures positions to cover moves beyond the SPAN scan range.
For the detail of how these layers combine and how SEBI peak-margin rules require the full margin upfront, see SPAN margin on Zerodha , exposure margin on Zerodha , and energy futures margins on Zerodha . Because SEBI’s peak-margin framework removed the old intraday leverage, the same margin is needed for an MIS intraday natural gas trade as for an NRML overnight trade. A trader cannot take a natural-gas position on a thin intraday margin.
The mini contract is the lever retail traders use to size down. At one-fifth the lot, the NATGASMINI margin is roughly one-fifth of the standard contract, bringing a single position within a few thousand rupees of margin rather than tens of thousands.
Options on natural gas
MCX lists options on both the natural gas and the natural gas mini futures. These are options on futures, not options on a spot index. An in-the-money option that is not squared off by its expiry devolves into a position in the underlying natural gas futures contract at the strike price, which then needs futures-level margin to carry overnight. Crude oil and natural gas options on MCX expire roughly two business days before the underlying futures, a timing quirk that surprises traders who assume the option and the future share an expiry date. The devolvement mechanic, the close-to-the-money (CTM) strike handling, and the margin consequence are covered in detail in commodity options on Zerodha .
Trading costs
| Charge | Rate |
|---|---|
| Brokerage (Zerodha) | Rs 20 or 0.03 per cent of turnover, whichever is lower, per order |
| Commodity Transaction Tax (CTT) | Rs 10 per lakh of sell-side futures turnover |
| STT | Nil on commodity futures |
| MCX transaction charge | Per the MCX schedule, levied on turnover |
| SEBI turnover fee | Rs 10 per crore of turnover |
| GST | 18 per cent on brokerage and transaction charges |
| Stamp duty | Per the state of registration |
Natural gas, as a non-agricultural commodity, attracts Commodity Transaction Tax at Rs 10 per lakh on the sell side of futures, introduced by the Finance Act 2013. STT does not apply to commodity futures. For the full broker-side computation see Zerodha commodities and Zerodha commodity brokerage .
What retail traders underestimate
The recurring error on natural gas is treating it like a gentle commodity because the mini lot value is small. The price is anything but gentle. A weather revision or an EIA storage surprise can move Henry Hub, and MCX natural gas with it, by 5 to 10 per cent in a session, and the MCX daily price limit is set at 9 per cent in slabs precisely because moves of that size occur. The contract can gap through a stop-loss when the EIA report prints against the consensus, because the spike happens in seconds around 8:00 PM IST. A trader holding an oversized position into the Thursday storage report or into a US weather event can see the margin wiped out before a manual exit is possible.
The second error is ignoring the USD/INR leg. A trader who is correct on the direction of US gas prices can still lose on MCX natural gas if the rupee moves the other way, because the contract carries the currency exposure embedded in the rupee conversion of a dollar benchmark.
See also
- Multi Commodity Exchange (MCX)
- Crude oil futures
- Gold futures
- Energy futures margins on Zerodha
- Commodity options on Zerodha
- How long MCX contracts can be held
- Bullion mini contracts on Zerodha
- SPAN margin on Zerodha
- Exposure margin on Zerodha
- Zerodha margin calculator
- Zerodha commodity segment
- Zerodha commodities
- Zerodha commodity brokerage
- Zerodha MCX membership
- Zerodha MCX trading hours
- Commodity Transaction Tax
- How to trade crude oil futures on MCX via Zerodha
- How to trade gold mini futures on Zerodha
- How to handle commodity physical delivery risk on Zerodha
- How to trade USDINR futures on Zerodha
- F&O taxation in India
- Kite, Zerodha’s trading platform
- SEBI Investment Management Department
- 90 per cent of retail F&O traders lose money: SEBI study
External references
- MCX natural gas product page
- MCX contract specifications
- SEBI commodity derivatives circulars
- Zerodha support: commodity trading
- US EIA Natural Gas Weekly Storage Report
- CME Group Henry Hub natural gas futures
References
- MCX Contract Specifications: Natural Gas and Natural Gas Mini 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.
- SEBI Circular SEBI/HO/CDMRD/DMP/CIR/P/2021/020, Margining framework for commodity derivatives, Securities and Exchange Board of India.
- Finance Act 2013, Chapter VII, Commodity Transaction Tax, Ministry of Finance, Government of India.
- US Energy Information Administration, Weekly Natural Gas Storage Report methodology, eia.gov.
- CME Group, Henry Hub Natural Gas Futures contract specifications, cmegroup.com.