Commodity derivatives are not capable mitigate the causes of commodity price volatility but only intend to manage risks liked to the volatility. A study is focus on how to predict market price of selected commodities and also how exchange rate affected to the buying and selling of the derivative contract. Black Scholes model indicated variance on bid price and ask price. Researcher found that sustained imbalance of competing bids and offers can drive prices away from theoretically expected values. Imbalances can be caused by factors such as a sudden political event or unexpected news regarding a particular market. These factors cannot be quantified and can have an effect on both gold & crude oil.

Keywords: MCX Indices, Volatility, Correlation, Option Sensitivities, Gold Contract.