Commodity Investing: How To Trade Copper Futures (JJC)
Jared Cummans: As one of the most popular industrial metals in the world, copper has cemented its place into the commodity world as a prime trading instrument for many. The metal is used in everything from circuit boards and plumbing, to brakes and even makes an appearance in the Statue of Liberty (copper in fact makes up 80 tons of Lady Liberty). For those looking to dabble in copper futures, there are a number of options available, leaving some to wonder where to begin. Below, we outline strategies for trading copper futures as well as a few other products that offer similar exposure [see also Jim Rogers Says: Buy Commodities Now, Or You’ll Hate Yourself Later].
First things first, those looking to invest in futures will need to decide which exchanges they would like to utilize. Below, we outline three of the most popular options in the world for trading copper futures.
- Commodity Exchange: The COMEX, a member of the CME Group, offers exposure to a number of commodities with a focus on metals, including copper. The standard copper contract represents 25,000 pounds of the reddish-brown metal, while the mini-copper futures, intended for those with lower capital bases, are made up of 12,500 pounds of copper. One benefit to these contracts is that they trade Sunday-Friday between the hours of 6:00 p.m. and 5:15 p.m (CST), meaning that investors can make a play for approximately 23 hours every day (there is a 45 minute break period between each day).
- London Metal Exchange: The LME is also a big player for copper and is a good bet for those seeking to move beyond U.S. exposure. In fact, the copper contracts on the LME are the second most popular futures option available. Standard futures are representative of 25 tons, though there are also swaps and options available. Note that current contracts extend out to the end of 2015, giving investors a healthy timeline to tinker with [see also 13 Ways To Invest In Copper].
- Multi-Commodity Exchange: The MCX offers two popular options for copper, both a standard and mini contract. Standard contracts fall during the months of February, April, June, August, and November with contracts representing 1 MT. Mini contracts are available as launched and are made up of 250 kilograms of the industrial metal. Note that this exchange is based in India, so it will be another good option for those looking for a more global play on the commodity.
Common Copper Trading Strategies
As far as futures contracts are concerned, playing copper is going to require a considerable amount of attention and should be left to only the most active of traders. Neglecting your position for even as long as an hour can have a dramatic effect on the outcome of your investment. Copper’s big prices drivers are the construction industry as well as the overall health of emerging markets, so keep a close eye on news concerning those. Finally, it is important to remember that as a primary trading instrument, developing trends in markets and how the majority of traders are behaving can also skew copper prices. Remember, the trend is your friend [see also What Are Futures? The Ultimate Beginner’s Guide].
For those who choose to shy away from actual futures contracts themselves, there are still options available for trading. Perhaps the best alternative to outright owning the contracts is to utilize the DJ-UBS Copper Total Return Sub-Index ETN (NYSEARCA:JJC). This ETN tracks front-month copper futures and trades an average of 79,000 times per day, ensuring liquidity. Note that even if this volume sounds shallow to you, ETNs can undergo the process of creation whereby new shares are put onto market, meaning that there will never be a liquidity issue. Over the trailing three year period, this fund has jumped more than 40%.
Further Resources and Reading
For further reading on copper and related topics, check out some of the links below [see also The Ten Commandments of Commodity Investing].
- Commodity HQ Trading Center - Our free trading center offers details on your favorite commodity futures and exchange traded products.
- Commodity HQ Heatmap Tool – Our free tool allows investors to easily compare the past performance of their favorite commodities.
- COMEX Copper Page – Home page for copper on the COMEX.
- LME Copper Page – Home page for copper on the LME.
- MCX Copper Page – Home page for copper on the MCX.
Written By Jared Cummans From CommodityHQ Disclosure: No Positions.
CommodityHQ offers educational content, analysis, and commentary on global commodity markets. Whether you’re looking to speculate on a short-term jump in crude or establish a long-term allocation to natural resources, CommodityHQ has the information you need.