According to a leading speculator, bulls are able to retain their control on futures still. In anticipation of lower out put, bulls are going heavily long on the future. The future opened at Rs 380 and dipped to Rs 363, then recovered to Rs 402.80 before dropping to Rs 380.

Since then it remained bullish. Firm trend in spot prices and tightness in cottonseed markets also helped the bull run. Cottonseed future ruled firm. It quoted at Rs 169 while spot seed ruled at Rs 172. Sentiment turned bullish, feel traders.

Cotton future: How it works

``It s quite unique, it runs in two parts. First part of future is non delivery based as crop of underlying commodity, Kalyan cotton normally arrive from January onwards. Second part of the future becomes delivery based, in which seller can issue delivery order. Delivery period startsfrom the 15th of March normally.

Players from all over the country take positions here, how ever players of north are more active. Fifty odd brokers are member of this closed club in which only local resident is allowed. Membership card costs Rs 2 lakh.'' said a local trader.

Trading a lot of future is in 200 maund or 400 kg. Price quoted in terms of 20 kg. Movement of a rupee translates in the gain or loss of Rs 200 per one lot. The committee decides the benchmark price and price sealing for the future to minimize default risk.

For the current part, benchmark price is being decided at at Rs 380. Sealing has been decided at Rs 60 from the benchmark price, hence cap is Rs 430 while floor is Rs 330. The sealing will last till 31 December.'' said a local trader.

During 25 to 28, December, the committee will decide new price sealing, which will last for second part of the future. April end is the last date for the future, he added.

Settlement taken place at every Tuesday and Saturday, how ever if pricefluctuate beyond Rs 3 from the last pay out, a special pay out declared to ensure financial safety of the future. said a broker.

Technically market seems overbought. Momentum oscillators like stochastic and ROC are highly overbought. Prices rose to Rs 413 from Rs 380. a single move of Rs 33. It requires at least 33 percent retracement. Technically speaking prices should go to 398.50-400 as a correction, said a technical analyst. MACD is still positive which indicates that main trend is bullish, he added.

Spot cotton remained firm due to trade buying and bullish advise from Maharashtra. In the long staple, Sanker prices rose to Rs 20500 from Rs 19000 per bales. Kalyan ruled at Rs 16500. Some leading mills have started buying. Inventory level seems low, mills may buy more cotton. Price variations are high due to quality problems. Cotton corporation of India is also buying cotton but procurement is not noticable, said traders.