Metal options liquidity during London market hours

  • 4 Mar 2020
  • By Gregor Spilker

Metal option traders have greatly increased their use of CME Group products. 2019 Gold options volume increased by 36% year-on-year, reaching an all-time high average daily volume (ADV) of 66,000 contracts. The percent increase in Copper option activity was even higher, with volumes doubling versus last year and reaching 2,800 daily traded contracts. In both cases, a significant part of the volume increase can be traced back to higher liquidity during EMEA market hours – as below charts show in greater detail. Looking forward, market fundamentals indicate that 2020 could continue to be a very busy year for metal markets.

Gold options

Comparing volumes in 2018 (ADV of 49,000 contracts) to 2019 (ADV of 66,000) shows that liquidity in Gold monthly and weekly options has increased across all trading hours. The bulk of trading is still done during the US trading day, with the highest activity recorded in the London afternoon. However, in percent terms, the most noticeable increase occurred in non-US hours, with activity during the London morning and during Asia hours growing significantly.

Figure 1: Option Spread Strategy Volume as a Percent of Total Volume

Source: CME Group

Looking further back, the share of Gold options volume done during the London trading day (defined as 8 a.m.- 4 p.m. London time) has steadily increased and now amounts to more than half of total options volume. The share of trading done in the London morning (8 a.m.- 12 p.m. London time) supercharged this growth and surpassed 10% of total ADV in 2019.

Source: CME Group

For Gold monthly options, average top of book bid-ask spreads for ATM options on CME Globex were 5.02 ticks1 during European hours, nearly as competitive as during American market hours (4.58 ticks).

Copper options

For Copper options, the picture is very similar. From a base of 1,400 contracts ADV in 2018, volumes doubled to 2,800 contracts ADV in 2019. The increase in liquidity extends to virtually all trading hours, with a large percent increase observed in London early morning liquidity.

Source: CME Group

Over the past years, the London trading day has accounted for a growing share of total volume traded in Copper monthly and weekly options. Approximately 60% of total trading is done in London hours, with the share of early morning London trading growing at a high rate.

Source: CME Group

Market fundamentals

In early 2020, gold broke through levels of $1,650 – prices not reached since 2013. This triggered renewed interest in the precious metal. Many factors played a role – notably safe-haven demand in the light of trade wars, geopolitical tensions and the evolving coronavirus situation. Monetary policy is becoming more accommodative, reducing the opportunity cost of holding gold as real rates decrease. In a world of low- or negative yielding bonds, the relative attractiveness of gold is providing support to the metal. With that background, gold may continue to figure prominently in financial markets this year – also considering that a US presidential election is on the horizon.

Perhaps more than any other commodity, copper market sentiment is linked to China--the world’s largest consumer of the metal. The coronavirus has currently brought the Chinese economy to a halt, and the long-term effects that the virus may have on the local and global economy are poorly understood. Copper could benefit from additional demand in the case of fiscal and monetary stimulus in China and beyond, but the timing is uncertain.


With record high liquidity, London- and EMEA based metal options traders might be able to find competitive pricing to express their views before the US trading day begins. Liquidity in the early hours of the London trading day has increased significantly. With plenty of risk factors coming into play in 2020, option strategies might help to manage risk and capture opportunities in global metal markets.


  1. Based on top of book B/A spreads for OG DEC-19 expiries during 2019. European hours (11 p.m.- 7 a.m. CST), Americas hours (7 a.m.- 4 p.m. CST).

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