In the world of metal trading on the London Metal Exchange (LME), understanding price structures is key. Whether it’s aluminium, copper, or other metals, futures pricing provides valuable insights for hedging and market strategy. Let’s break down the basic concepts: Flat Curve: A flat curve occurs when the price for a nearby date is the […]
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The aluminium futures market operates on a fascinating and highly structured pricing system, offering unparalleled clarity for traders and stakeholders. Here’s a snapshot of how it works: The Futures Timeline: Daily Prices for the Next Three Months Every single working day has a dedicated aluminium price, whether it’s December 9th or February 20th. This allows […]
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The futures market is a fascinating financial instrument that allows traders to lock in prices for commodities on a future date. Today, we’ll dive into the concept of cash settlement and its role in futures trading, using an example involving aluminium. A Quick Recap: Futures Trading Basics Let’s say today is November 28, and you’re […]
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Hedging has been a cornerstone of economic stability for centuries, offering both producers and consumers a way to mitigate financial uncertainty. Let’s embark on a historical journey, beginning 1,000 years ago in China, to see how this financial tool has evolved. Hedging in Ancient China: Securing the Rice Market In ancient China, rice producers and […]
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Aluminium producers face constant price volatility. The London Metal Exchange (LME) plays a crucial role as the global benchmark for aluminium pricing, making it the preferred reference for smelters worldwide. Why the LME matters:For decades, the LME has been recognized as the standard for aluminium prices. Smelters often tie their sales contracts to LME quotations […]
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This week, we’re diving into hedging, a strategy used to protect against risks, unlike speculation, which aims to profit from price movements. We will break it down with an example of an aluminium producer. Speculation vs. Hedging Speculation: A trader starts without a position, choosing to go long (buy) expecting prices to rise or short […]
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In our last discussion, we explored the concept of going short in the futures market, focusing on how this position performs when prices rise or fall. We also clarified the role of guarantees. Now, let’s dive into an intriguing new topic: the concept of carrying a short position forward into a new contract period—also known […]
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Going “short” in the aluminium futures market is a common strategy for speculators anticipating a market decline. Here’s a breakdown of how a short trade works in this scenario. In futures trading, “going short” means selling contracts based on the belief that prices will drop, allowing the trader to buy back the contracts at a […]
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Today, I planned to talk about short positions, but Wednesday’s sharp commodity price drop, some down by 3-5%, deserves immediate attention. Was it a disaster? No, it was largely anticipated. This decline coincides with the U.S. election outcome, as markets react to expectations of lower interest rates under the new administration starting in January. Interestingly, […]
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Today, let’s talk about the concept of “going short” in the futures market. Unlike a typical sale where you sell something you already own, going short allows you to sell something you don’t yet possess. This approach is popular among speculators who anticipate a price drop in commodities like aluminium or copper. Here’s the secret […]
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