How is average price calculated in commodities?
In commodities trading (like Gold, Crude Oil, Natural Gas, etc.), the average price is calculated in a similar way to futures in equities. The goal is to track your net open position and calculate unrealized profit or loss (MTM) accurately.
✅ Average Price in Commodities = Weighted Average Price
📘 Example – Commodity Futures (Crude Oil):
Assume lot size = 100 barrels
Trades:
- Buy 1 lot Crude Oil at ₹6,500
- Buy 2 lots at ₹6,600
👉 Calculation:
- Total quantity = 1 + 2 = 3 lots = 300 units
- Total cost = (1 × ₹6,500 × 100) + (2 × ₹6,600 × 100)
- = ₹6,50,000 + ₹13,20,000 = ₹19,70,000
Average Price = ₹19,70,000 / 300 = ₹6,566.67
🔄 When You Sell – Same Logic as Equity Futures:
Let’s say now you:
3. Sell 1 lot at ₹6,700
- Realized P&L = (6,700 - 6,566.67) × 100 = ₹13,333
- New open position = 2 lots at average price ₹6,566.67
📌 Key Points: Commodity platforms (like MCX in India) use FIFO for P&L calculation, but average price is shown for convenience.
Average Price
- What is “Average Price” in the context of trading?
- How is the average price calculated in the equity (cash) segment?
- Does selling shares affect the average price in the cash segment?
- What happens when I buy / Sell the same stock across different days?
- Is average price applicable in the derivatives (F&O) segment?
- How is the average price for Futures calculated?
- Does square-off affect the average price in F&O?
- How is average price calculated in commodities?
- What happens if I add to a position in the same commodity contract?
- Are positions across different contracts (e.g., Gold Aug vs. Gold Sep) averaged together?
- Why does the average price shown in my trading platform differ from my records?
- Can average price be edited manually?
- What happens to my average price when I purchase stocks in one DP and transfer them to another?
- How should I manage the average price when transferring stocks to a new DP?
- Does transferring stocks from one DP to another affect my P&L calculation?