A growing number of copper traders are utilizing options on futures to express market opinion or manage price risk through the implementation of hedging strategies. So far in 2022, COMEX Copper futures (HG) established new contract highs above $4.91 per pound, followed shortly thereafter with new yearly lows near $4.10 per pound, followed by an approximate 10% recovery over $4.55 per pound, and again, new yearly lows established below $3.90 per pound . This volatility highlights the importance of hedging market exposure. As a result of this recent volatility, interest in trading COMEX Copper options (HX) has surged, resulting in accelerated growth in 2022 and are on pace to surpass the record numbers posted in 2021.
Record volumes and increased open interest
Copper options volumes reached record levels in 2021, posting average daily volumes (ADV) over 2,900. Through May 2022, ADV is just shy of 3,500 contracts YTD. Should this volume continue, it would result in an increase of over 20% YoY.
With this increased volume, open interest has more than doubled in 2022, from under 30,000 contracts to begin the year to over 80,000 by May. The highwater mark for Copper options open interest is 96,644 contracts in June 2021. As of May 31, participants are holding positions in options out to December 2023.
The surge in trading of Copper options has not only been through organic growth from existing clients but has come from new participants entering the market. The number of unique participants to trade Copper options has increased every year since 2014, and in 2022 is on pace to surpass 2021’s total by nearly 30%.
Introducing Monday and Wednesday Copper options
In addition to the American-style Copper options with monthly expiry, on May 2, CME Group launched weekly Copper options with Monday and Wednesday expiries. These new options products were introduced to complement the already existing Friday expiry weekly options.
Accessing Copper option markets
On-screen execution and liquidity is available for all Copper options through CME Globex. However, if you need a more competitive quote, the Request-For-Quote (RFQ) functionality can be used to uncover interest that may not be on screen. Read more in Uncovering Copper Option Liquidity via RFQ - CME Group.
As markets mature, so do the tools available to manage the risk that is associated with those markets. If you are interested in expressing market opinion or hedging exposure to the copper market, either long or short term, CME Group provides the tools to do so with traditional monthly expiration or weekly expiration option products, now offered for Monday, Wednesday. and Friday expiries.
All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.