How To Buy Copper Futures
Copper futures trading is the act of buying or selling anexchange-traded copper futures contract in which the purchasing party agrees toaccept delivery for a specific quantity of copper, in this case 25 tonnes percontract, for a pre-established price on a pre-established date. There isalways a demand for copper, so many who trade copper see it as an insurancepolicy and will use it to hedge against risker trades.
how to buy copper futures
You can buy copper futures by opening an account with a futures broker and purchasing a copper futures contract through your account. You will need to maintain a large enough balance in your futures trading account to fulfill your margin requirements on your copper contract. However, before purchasing a copper futures contract it is important to familiarize yourself with copper futures fundamentals and to learn how the copper exchange works. The best way to do this is to look at historic copper futures charts and copper futures prices. This will give you a better understanding of how the copper and metals market works.
You can trade copper futures by purchasing or selling copperfutures contracts through your brokerage account. When you buy a copper futurescontract, or any futures contract for that matter, you are acquiring a ton ofleverage of whichever commodity you are purchasing. Leverage refers to owning alot of a certain commodity while only having to put up a fraction of what thecontract is worth. This fraction is called margin. The margin requirement forcopper futures is roughly $4,000. Essentially, you are controlling over $90,000worth of copper for only $4,000. Copper futures and options can be a veryenticing investment for traders because they are relatively safe, and their valuecan signify a growing or expanding economy.
Like any commodity the copper futures price fluctuates dailybased on several factors. Some of these factors include demand for thecontract, demand for physical copper, copper supply, U.S. dollar value, metaldemand, and several others. At the time of this writing, copper is trading at$4.33/lb. This puts the copper futures contract price at roughly $108,000.Again, this price can move and change by the day, but you can always count onit being quite a bit of money. However, remember that you do not have to put upthe total value of the contract upon purchase, you are only responsible foryour margin requirement.
Unlike its other metal cousins, gold and silver, copperfutures are traded as a commodity, not a precious metal. The reason copper isconsidered a commodity is because of its wide use in large quantities worldwide.Copper is used in plumbing, communication, and everything in between. You canfind copper futures listed as a commodity on the London Metal Exchange (LME),the Comex, and on the Multi-Commodity Exchange.
RJO Futures has a team of knowledgeable and experienced Senior Market Strategists that would be more than glad to assist you in trading copper futures. Please feel free to contact us with any questions or concerns and a Senior Market Strategist will reach out to you right away. You can also visit our Copper Futures page to see a real-time copper chart along with the latest movements and price quotes.
Copper is a soft, reddish-gold metal that is used to make currency in addition to having industrial applications such as piping, electrical wiring, car radiators, air conditioners, home heating systems, and steam boilers. These qualities make copper a versatile commodity and a financial asset that can be used as an investment.
Investments in copper can be either direct or indirect and can be made through copper bars, copper coins, futures, mutual funds, stocks, exchange-traded funds (ETFs), or options on eligible stocks and ETFs.
To invest in copper directly, investors can hold it in physical form, which can be done through the purchase of copper bullion bars or copper coins. Although not as direct as the purchase of coins or bullion, investors can also gain exposure to the value of copper through the purchase of futures.
Warning: Although copper is a widely used metal, it is not necessarily a suitable investment for all investors' portfolios. For example, the price of copper can be influenced by multiple factors, including the health of global economies, and supply and demand for industrial use. Thus, the price of copper is not predictable, especially in the short term. The type of investors that typically gain exposure to copper through futures and options are those who are willing to take on the added risk of short-term price fluctuation. Some investors use copper and other commodities for diversification and hedging strategies.
Tip: Indirect investments in copper may have wildly varying degrees of exposure to the metal and different degrees of leverage and risk from other assets. Investors should be sure to understand the nature of the assets in any copper investment and their expected relationship to the metal itself.
There are multiple resources for researching copper investments but investors should be wary of depending on research sourced from parties who are trying to sell direct or indirect copper investments.
Tip: Investors are encouraged to research sector funds that invest in copper, copper mining stocks, or any investments in the natural resources category. Use Seeking Alpha's ETF screener to search for commodities funds in the subclass "precious metals".
Investors who wish to add copper to their portfolio have a wide range of options, including physical copper bullion and coins, copper mining stocks, copper ETFs, and certain commodity-based mutual funds. Investors should carefully assess the benefits and risks of various copper investments before buying.
Futures and futures options trading services provided by Charles Schwab Futures and Forex LLC. Trading privileges subject to review and approval. Not all clients will qualify. Prior to a name change in September 2021, Charles Schwab Futures and Forex LLC was known as TD Ameritrade Futures & Forex LLC.
Options on futures are not suitable for all clients and the risk of loss in trading futures and options on futures could be substantial. Additionally some options expire prior to the final settlement or expiration of the underlying futures contract. Option writing as an investment is absolutely inappropriate for anyone who does not fully understand the nature and extent of the risks involved and who cannot afford the possibility of a potentially unlimited loss. It is also possible in a market where prices are changing rapidly that an option writer may have no ability to control the extent of losses.
TD Ameritrade Network is brought to you by TD Ameritrade Media Productions Company. TD Ameritrade Media Productions Company and TD Ameritrade, Inc., are separate but affiliated subsidiaries of TD Ameritrade Holding Corporation. TD Ameritrade Holding Corporation is a wholly owned subsidiary of The Charles Schwab Corporation. TD Ameritrade Media Productions Company is not a financial advisor, registered investment advisor, broker-dealer, or futures commission merchant.
Among the commodities known as industrial or base metals, only iron ore and aluminum are more in demand than copper. Homes have copper in the air conditioning units, water pipes and appliances. Electric cars will have more copper in them than gasoline-powered vehicles. Charging stations for electric cars and many future infrastructure improvements will need copper. Any uptick in economic activity usually fuels home building and sales from which copper will benefit. Hospitals are changing many surfaces that you can touch to copper since viruses and bacteria cannot live on the metal. All of this leads to a potential increase in copper demand and even more interest from investors.
Investing in copper has inherent risks due to the nature of the copper mining operation. It is expensive due to the capital requirements. It requires companies to take on a lot of debt, which could lead to bankruptcy. Copper mining is environmentally and socially controversial. A copper mine covers a large geographic area. This leads to corporate governance concerns.
Copper is a frequently traded commodity. But, there are only a few traditional investment vehicles for copper because of the limited number of companies in the business. Investing in the available ETF or exchange-traded note is a less risky possibility. Even then, familiarity with the copper market is necessary.
Despite the risks of investing in copper, there are benefits. Global demand is supposed to skyrocket due to the global recovery and the myriad of uses of copper both in the housing and building industries and many consumer industries. Increasing amounts of copper will be needed as we use more renewable energy and move toward electric vehicles. China, as it further develops, will continue to be an important importer of copper.
Copper can provide the individual investor with diversification in their portfolio. Although scarce, it is lower in price than gold and silver. It provides you a way to enter the semi-precious metals market with a more economical investment. However, copper is not like gold, which is a counter-cyclical metal. Copper, on the other hand, is cyclical; it moves with the broader market.
The price of copper is a leading indicator of economic growth. The recovery of the global economy will be evident in the price of copper, which is set by the free market. Investors looking to diversify their portfolios through commodities and futures investing have an opportunity due to the increased demand for copper. Barring unforeseen events, the demand for copper will likely continue to grow due to its versatility. Since it is a commodity, it has the price volatility associated with the commodities market. Copper can serve as a hedge against inflation, something that has been growing in 2021. If you want to invest in copper, there are a number of options ranging from the physical copper to the futures and options market. 041b061a72