The first CME Group copper futures contract was traded on July 29, 1988. Known as “high-grade copper,” the product provided traders and investors a way to gain market exposure to one of the world’s leading base metals. Today, COMEX copper futures is an exceedingly popular market, earning a reputation as “the new oil.”
In 2008, CME Group completed its acquisition of the Commodity Exchange Inc. (COMEX). With it, CME Group expanded its reach into the metals trade, 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.
Getting to Know COMEX Copper Futures
Perhaps the single greatest advantage of trading CME Group futures is transparency. Each contract is standardized, and all specifications are available to the public. The following specs apply to COMEX copper futures:
| Symbol | HG |
|---|---|
| Contract Size | 25,000 pounds |
| Pricing | U.S. dollars and cents per pound |
| Trading Hours | Sunday to Friday 6 p.m. to 5 p.m. CT (60-minute break each day) |
| Tick Size | 0.0005 per pound |
| Tick Value | $12.50 per tick |
| Settlement | Physical delivery |
| Expiration | Monthly (nearest 24 months) and March, May, July, September, December in the closest 63 months |
In addition to full-sized copper, CME Group also offers E-mini copper futures (QC). At half the size of the HG contract, E-mini copper is a way for active traders to engage silver on a smaller scale. However, the QC contract features limited liquidity, so sustaining efficient trade can be a challenge.
Strategy No. 1: Bullish on Copper
The green energy revolution has brought a shifting dynamic to the copper markets. The Copper Development Association estimates that the proposed transition to electric vehicles (EVs) will spike the global demand for copper by approximately 1,700 kilotons by 2027. Given this underpinning, many professional metals traders are exceedingly 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, assume that you want to go long one lot of COMEX copper futures ahead of the fall season:
- A buy limit order for one lot of August HG futures is placed at market.
- The order is filled, opening a new long position.
- Your account posts the initial margin requirement ($6,050). (Margin requirements are subject to change.)
- Your account is credited or debited $12.50 as the price per pound rises or falls by $0.0005. As price rises above entry, the trade generates unrealized profits; should price fall, an account drawdown occurs.
- To close out the long position, one lot of HG is sold at market.
Strategy No. 2: Bearish on Copper
In the commodity markets, there’s a bear for every bull. And although a case can be made that electric vehicle demand will drive copper prices higher, others may argue that a strengthening USD will be a commodity market deflator. If you’re partial to the latter viewpoint, then bearish COMEX copper futures strategies are viable.
The best way to secure bearish copper market exposure is through selling HG futures, or “shorting the market.” Assume that you’re interested in shorting one lot of copper in the late-summer months. To execute this strategy, the following progression is put in motion:
- A sell limit order for one contract of August HG futures is entered at market.
- The order is filled 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 $12.50 as the price per pound rises or falls by $0.0005. As price falls below entry, the trade generates unrealized profits; should price rise from this point, an account drawdown occurs.
- To close out the active short, an order for one lot of August HG futures is sent to market.
Bullish or Bearish on Copper?
Perhaps the greatest 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 become active in copper futures, check out our free e-book Basic Training for Futures Traders. It will help you get up to speed on disciplined trading, goal-setting, futures functionality, and much more. Don’t wait―download Basic Training For Futures Traders today!
