Copper Futures and Options
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reliable. No guarantees are being made to the content's accuracy or
The History of Copper and Copper Futures Trading
The word copper comes from the ancient name of the island Cyprus that was a
primary source of copper in the past. Copper has been used by men for more than 10,000
years. Archeologists recovered a portion of a water plumbing system from the
Pyramid of Cheops that was in serviceable condition after more than 5,000 years.
Copper weapons have also been found dating back many thousands of years.
Copper is a commodity whose prices can directly reflect the
current state of the world economy because of its many
uses in industrialized countries. It is the world's third most widely used metal, only iron and
aluminum are used more, and is primarily used in highly cyclical
industries such as electrical uses, infrastructure, construction and industrial
machinery manufacturing. A typical house has about 400 pounds of copper in it.
Copper is also biostatic which means bacteria will not grow on its
surface which is why it is used in air-conditioning systems, food
processing surfaces and doorknobs to inhibit the spread of disease.
Here is the option strategy guide for metals courtesy of the
softness, color, and presence in nature enabled it to be easily mined and
fashioned into primitive utensils, tools, and weapons. Two thousand years
later, the West learned to alloy copper with tin, producing
bronze and giving rise to a new age, The Bronze Age.
Copper has been called by many future trading
fundamental analysts as the only commodity with a
PhD. in economics because its rising prices
sometimes precede periods of economic growth. This
has been attributed to copper’s industrial uses in
electrical and plumbing for new homes and other
Copper market participants across the board use
COMEX Division high-grade copper futures and options to hedge price risk, and the copper future and
copper option contracts are used as investment
vehicles by large and small copper future and copper option
traders. Learn More >>>
During the September 11 terrorist attacks the COMEX
was destroyed but within days of the disaster the
copper futures and copper options markets were
trading again. This stands as a testament to the
strength and reliability of the industrial metals
future markets and the commodity exchanges.
Are you a
copper hedger? If so,
click here to learn more.
Copper Options on Futures Contracts Explained
A copper call option gives the purchaser the right
but not the obligation to purchase the underlying futures contract
for a specific time period and a specific price (strike price).
Let's say that you wanted to purchase a March copper $2.50 call
option and pay a premium of $1,500.
This means that you bought the right but not the obligation to buy
25,000 pounds of May copper for $2.50 per pound. Of course, very few
options are bought for the purpose of taking delivery but that is
one potential outcome. Chances are that you either bought the copper
option to hedge your price risk in the physical copper market (maybe
you own a copper mine or you use large quantities of copper pipe in
your plumbing business) or you are speculating that copper prices
will go higher in an attempt to make a profit.
A copper put option gives the purchaser the right
but not the obligation to sell the underlying futures contract for a
specific time period and a specific price. Let's say that you wanted
to buy a March copper $2.00 put option and pay a premium of $1,600.
This means that you have the right but not the obligation to sell
25,000 pounds of March copper at $2.00 per pound.
What is the delta factor?
The delta factor of an option represents the estimated percentage of
change an option will receive based on the movements in the
underlying futures contract.
Let's assume the March copper $2.50 call option above has a 30%
delta factor. This means that if the underlying futures contract
were to rally by $1,000, then the call option would accrue by
approximately $300 or 30% of $1,000 in the copper futures contract.
What is theta?
Options are wasting assets which means that they lose value as time
passes. The theta of an option is the measure of time decay.
Let's assume that you bought a May copper $2.50 call option with 60
days left until expiration. Let's also assume that the copper
futures prices have moved very little over the last month and are
exactly the same price 30 days later. Your option will have lost 30
days worth of time and therefore will be worth less today that it
was when it had 60 days left until expiration.
Vega is a measure of the implied volatility of
an option contract as it relates to its underlying futures contract.
For instance, if the underlying futures contract is extremely
volatile then the implied volatility of the options of that futures
contract will be affected.
In a high implied volatility environment option
premiums tend to expand. Conversely, in a low implied volatility
environment the option premiums tend to decrease.
*Contract information changes from time to time. Please
click here to see the most recent
contract specifications and
click here for the most recent trading hours.
High Grade Copper Futures and Copper Options
one COMEX Division high-grade copper futures
Futures and Options:
8:10 A.M. to 1:00 P.M. for the open outcry session. (verify with exchange)
Trading is conducted for delivery during the current
calendar month and the next 23 consecutive calendar
Copper options are offered for trading in each of the
following contract months: March, May, July,
September, and December up to one year to
expiration. Serial months are also listed so there
are always three consecutive nearby months traded.
Twenty-four-month copper options are listed when
July and December become the 24th month.
The options are American-style and can be exercised
at any time up to expiration.
Futures and Options:
cents per pound
Minimum Price Fluctuation
Futures and Options:
Price changes are registered in multiples of five
one hundredths of one cent ($0.0005, or $0.05) per
pound, equal to $12.50 per contract. A fluctuation
of $0.01 is equal to $250 per contract.
Maximum Daily Price Fluctuation
Initial price limit, based upon the preceding day's
settlement price, is $0.20 per pound. Two minutes
after the two most active months trade at the limit,
trading in all months of futures and options will
cease for a 15-minute period. Trading will also
cease if either of the two active months is bid at
the upper limit or offered at the lower limit for
two minutes without trading.
Trading will not cease if the limit is reached
during the final 20 minutes of a day's trading. If
the limit is reached during the final half-hour of
trading, trading will resume no later than 10
minutes before the normal closing time.
When trading resumes after a cessation of trading,
the price limits will be expanded by increments of
Last Trading Day
Terminates at the close of business of the third
last business day of the maturing delivery month.
Expire on the fourth last business day of the month
prior to the delivery month of the underlying
Exercise of Options
Until 3 P.M., New York time, on any business day for
which the option is listed for trading. On
expiration day, the buyer has until 4P.M., New York
time, to exercise an option.
Option Strike Price Intervals
$0.01 per pound apart for strike prices below $0.40.
$0.02 per pound apart for strike prices between
$0.40 and $1.20, and $0.05 apart for strike prices
Copper may be delivered against the high-grade
copper futures contract only from a warehouse in the United
States licensed or designated by the Exchange.
Delivery must be made upon a domestic basis; import
duties or import taxes, if any, must be paid by the
seller, and shall be made without any allowance for
Margins are required for open copper futures and short
options positions. The margin requirement for an
options purchaser will never exceed the premium
Futures Ticker Symbol:
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