Copper Financial Futures frequently asked questions

  • 27 Oct 2020
  • By CME Group
  • Topics: Metals

What is the Copper Financial futures contract?

The Copper Financial futures contract is a financially settled contract, settling against the average of the contract month for HG (Copper futures).

What is the contract symbol for the Copper Financial futures contract?

The contract symbol is HGS (the benchmark Copper futures contract is HG).

What are the contract specifications?

HGS is a 25,000 pound, financially settled contract, designed to capture the monthly average price of the HG contract. It is quoted in US dollars and cents per pound.

What are the listed contract months for HGS?

HGS is available to trade for 23 consecutive months, and any March, May, July, September, and December for 60 months.

When does an HGS contract expire?

Trading terminates on the last business day of the contract month and follows the US banking holiday schedule.

What are the hours of trading?

Trading hours for the HGS contract are the same as the Copper futures contract (HG), which are Sunday ‒ Friday 6:00 p.m. ‒  5:00 p.m. ET (5:00 p.m. ‒ 4:00 p.m. CT) with a 60-minute break each day beginning at 5:00 p.m. ET (4:00 p.m. CT).

How can I trade HGS?

HGS is available to trade via CME Globex and for submission for clearing through CME ClearPort.

What is the block trade minimum for HGS?

The block trade threshold is five contracts.

How does the HGS contract settle during the delivery month?

During the delivery month, the HGS settles to a rolling average of the HG settlement prices.  Since HG expires on the third last business day of the contract month and HGS expires on the last business day of the month, it is necessary to use the next listed contract month’s data of HG for the last two business days of the month in the HGS averaging calculation.

For example: the August HGS settlement price on August 14th is 2.8621.  This price is derived by averaging a combination of August and September HG settlement prices for all known and unknown days of the calendar month as follows:

Aug 3 – 14: Known HG August Settlement Prices

August 17 –27:  August HG price of trade date August 14

Aug 28 - 31: September HG Settlement price

Delivery Month HGS Calculation on Trade Date August 14

Business Days in August

HG Settles

 

3-Aug

2.9080

Known HG Settle

4-Aug

2.8895

Known HG Settle

5-Aug

2.9115

Known HG Settle

6-Aug

2.9055

Known HG Settle

7-Aug

2.7905

Known HG Settle

10-Aug

2.8585

Known HG Settle

11-Aug

2.8720

Known HG Settle

12-Aug

2.8870

Known HG Settle

13-Aug

2.8040

Known HG Settle

14-Aug

2.8560

Known HG Settle

17-Aug

2.8560

HGQ0 settle carried forward

18-Aug

2.8560

HGQ0 settle carried forward

19-Aug

2.8560

HGQ0 settle carried forward

20-Aug

2.8560

HGQ0 settle carried forward

21-Aug

2.8560

HGQ0 settle carried forward

24-Aug

2.8560

HGQ0 settle carried forward

25-Aug

2.8560

HGQ0 settle carried forward

26-Aug

2.8560

HGQ0 settle carried forward

27-Aug

2.8560

HGQ0 settle carried forward

28-Aug

2.8590

HGU0 settle for last two days

31-Aug

2.8590

HGU0 settle for last two days

 

 

 

 

 

 

 

 

 

 

2.862119048

HGS Rolling Average Settle for August 14th

In this example, by month end, the final settlement price is equivalent to the arithmetic average of all available August HG settlements, and the September HG settlement prices for the final two trading days of August.

How does the HGS contract settle during non-delivery months?

Daily settlement prices for non-delivery month HGS are calculated using a weighted average of the HG settlement prices for that month and two settlement prices of the next month.

For example: in June 2021, there are 22 trading days.  The HGS daily settlement calculation will use 20 HGM1 settlements and 2 HGN1 settlements (20/22=.9090 and 2/22=.0909 respectively). 

To calculate the June 2021 HGS settlement on any day before it becomes the spot month:

(HGM1 settlement * .9090) + (HGN1 settlement *.0909) = HGS settlement

Who can use the HGS contract?

The HGS contract can be used by producers, consumers, merchants, or any participant needing to capture the monthly average price of COMEX Copper.

How can the HGS contract be used?

The HGS contract can be used to hedge any deal that incorporates an average price component.

Example:

  • On November 3, a Copper producer has agreed to sell 100,000 lbs. of copper to a consumer at the COMEX Copper December spot average. To hedge this transaction, the producer sells December HGS
  • The producer sells four lots of December HGS at the current price, which hedges their physical copper inventory
  • At the end of December, when the average of the month has been established, the producer does not have to trade out of their HGS short position as it is a cash settled product and can be held through expiry.
  • Upon final settlement, there is a financial transaction debited or credited to the producers account as the difference between where they sold the HGS and the final spot average price of December.

Where are the official product rules for the HGS contract found?

Please see COMEX Rulebook COMEX 1190.

For more information on our Copper Financial futures contract, please visit www.cmegroup.com, or contact a member of our metals team at metals@cmegroup.com.

Neither futures trading nor swaps trading are suitable for all investors, and each involves the risk of loss. Swaps trading should only be undertaken by investors who are Eligible Contract Participants (ECPs) within the meaning of Section 1a(18) of the Commodity Exchange Act. Futures and swaps each are leveraged investments and, because only a percentage of a contract’s value is required to trade, it is possible to lose more than the amount of money deposited for either a futures or swaps position. Therefore, traders should only use funds that they can afford to lose without affecting their lifestyles and only a portion of those funds should be devoted to any one trade because traders cannot expect to profit on every trade.

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The information within this communication has been compiled by CME Group for general purposes only. CME Group assumes no responsibility for any errors or omissions. Additionally, all examples in this communication are hypothetical situations, used for explanation purposes only, and should not be considered investment advice or the results of actual market experience. All matters pertaining to rules and specifications herein are made subject to and superseded by official CME, CBOT, NYMEX and COMEX rules. Current rules should be consulted in all cases concerning contract specifications.

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