CME Group’s first copper futures contract was traded on July 29, 1988. Known as “high-grade copper,” the product provided traders and investors with a way to gain market exposure to one of the world’s leading base metals. Today, COMEX copper futures are a very popular market that has earned a reputation as “the new oil.”
In 2008, CME Group completed its acquisition of Commodity Exchange Inc. (COMEX). With him, CME Group expanded its reach into metals trading, offering contracts such as gold, silver and copper. Let’s take a look at COMEX copper and two essential strategies for trading this exciting market.
Learn about COMEX copper futures
Perhaps the biggest advantage of CME Group futures trading is transparency. Each contract is standardized and all specifications are available to the public. Monitoring specs applies to COMEX copper futures:
|Contract size||25,000 pounds|
|Prices||US dollars and cents per pound|
|Business hours||Sunday through Friday from 6 pm to 5 pm CT (60 minute break each day)|
|Tick size||0.0005 per pound|
|Tick value||$ 12.50 per tick|
|Expiration||Monthly (the nearest 24 months) and March, May, July, September, December in the nearest 63 months|
In addition to full-size copper, CME Group also offers E-mini (QC) copper futures. At half the size of HG’s contract, E-mini Copper is a way for active traders to contract silver on a smaller scale. However, the QA contract has limited liquidity, so maintaining efficient trading can be challenging.
Strategy n. 1: Bullish on Copper
The green energy revolution has brought a changing dynamic to the copper markets. The Copper Development Association estimates that the proposed transition to electric vehicles (EVs) will increase global demand for copper by approximately 1,700 kilotons by 2027. Given this sustenance, many professional metal traders are extremely bullish on copper.
The easiest way to capitalize on a bullish bias is to simply buy or “go long” one or more HG futures contracts (lots). To illustrate, suppose you want to invest in a batch of COMEX copper futures before the fall season:
- A limit buy order for one lot of HG August futures is placed on the market.
- The order is completed, opening a new long position.
- Your account publishes the initial margin requirement ($ 6.050). (Margin requirements are subject to change.)
- Your account is credited or debited by $ 12.50 as the price per pound increases or decreases by $ 0.0005. As the price rises above the entry, the trade generates unrealized profits; if the price falls, there is a reduction of the account.
- To close the long position, a lot of HG is sold on the market.
Strategy n. 2: bearish on copper
In commodity markets, there is a bear for every bull. And while it can be argued that EV demand will drive copper prices up, others may argue that a strengthened USD will be a commodity market deflator. If you are biased to the latter point of view, then COMEX’s bearish copper futures strategies are viable.
The best way to ensure bearish exposure to the copper market is by selling HG futures, or by “shorting the market.” Suppose you are interested in shortening a lot of copper in the late summer months. To execute this strategy, the following progression is implemented:
- A sell limit order for an HG August futures contract is entered into the market.
- The order is completed and a new short position is opened.
- Your account posts the initial margin requirement ($ 6,050). (Margin requirements are subject to change.)
- Your account is credited or debited by $ 12.50 as the price per pound increases or decreases by $ 0.0005. As the price falls below the entry, the trade generates unrealized profits; if the price increases from this point, there is a reduction of the account.
- To close the active short position, an order for one lot of August HG futures is placed on the market.
Bullish or bearish on copper?
Perhaps the biggest benefit of trading COMEX copper futures is flexibility. You can go long or short and define market exposure according to your own risk tolerance. However, to make money doing so, you must first understand the basics.
If you’re ready to get actively involved in copper futures, check out our free e-book Basic training for futures traders. It will help you get up to speed with disciplined trading, goal setting, futures functionality, and much more. Do not waitto download Basic training for futures traders today!