InvestorQ : What is the Big Zinc and the Zinc Mini contracts?
Siya Saran made post

What is the Big Zinc and the Zinc Mini contracts?

shrinidhi Rajan answered.
3 years ago

Both the Big Zinc and the Zinc mini contracts are among the most liquid contracts on the MCX. There is normally a spread between the Big Zinc price and the Zinc mini price despite having the same underlying. This difference creates arbitrage opportunity wherein a trader is able to buy the lower priced contract and sell the higher priced contract.

Big Zinc has a lot size of 5 MT (5000 KG). Considering the current price at around Rs.180/KG, the minimum lot value will be Rs.900,000/-. With the initial margin fixed at 5% (SPAN of 4% and extreme loss margin of 1%), the margin payable on one lot comes to around Rs.45,000/-. Of course, the Zinc Mini contract has a minimum lot size of 1 MT. Hence the Mini Zinc contract will have notional value of Rs.180,000 and a margin requirement of Rs.9,000. Of course, to create a perfect spread between the Big Zinc contract and the Zinc Mini contract, one will have to match 1 lot of Big Zinc with 5 lots of Mini Zinc.

There are 12 monthly contracts on zinc available at any point of time. The contract on Zinc begins on the 01st of the month and expires on the last day of the calendar month. Contracts on Zinc can be for actual physical delivery or for square-off trading positions. The trader is required to intimate the exchange of his intent at least 4 days prior to the actual day of expiry.