COMEX Copper

COMEX Copper - NatCopper

Image via Wikipedia

COMEX copper has become an interesting investment addition to even the individual investor’s portfolio.  Copper can be purchased through futures contracts, not unlike contracts for precious metals such as silver, platinum, and gold.  As part of CME Group, COMEX gives you access to the largest and most diversified derivatives arena on the planet.  The contracts are priced in U.S. Dollars.  Being listed with COMEX, the contracts are subject to all COMEX rules and regulations.  They present an intriguing alternative to a plain bullion fund.

COMEX Copper And Whether Should You Invest In Copper?

Copper is central to many aspects of modern living.  Copper is critical to housing construction.  It is a key ingredient in electrical wiring.  It is also used in plumbing.  Even appliances, such as refrigerators, contain copper.  Vehicles can contain fifty pounds or so of copper.  Aircraft and locomotive engines consume vast quantities of it.  As nations with massive populations continue to modernize their way of life and increase their standard of living, copper demand will continue to rise.

COMEX copper may have previously been viewed as an investment vehicle for big players and money managers.  Sure enough, standard size futures contracts are quite large.  These may be inefficient, if not impossible, for individual investors.  However, today there are E-mini contracts available.  These can decrease the amount of metal at issue by as much as 90%.  In the case of copper, the contract size is cut in half, at just 12,500 pounds.  The minimum price fluctuation for such a contract is $.0020 per pound of copper at issue.  This makes a big difference, since the full contract size is twenty-five thousand pounds.  This creates a more manageable size for small investors, without overweighting their portfolio and putting all of their eggs in one basket.

COMEX Copper Touts Massive Liquidity

COMEX copper, along with other metal markets, offer notable liquidity due to the size involved.  The metals markets feature well over two hundred thousand futures and options contracts as an average daily volume.  This is the most liquid trading environment available for these plays.  In fact, gold futures offer significantly more volume than gold ETFs.

The contracts are able to be traded right on the New York trading floor.  They are available on the CME Globex electronic trading platform.  Users discover both convenience and transparent pricing.  This attracts a large number of players, which again lends itself to liquidity.  This creates a brilliant opportunity for those wanting to tap the price movement of copper and other commodities.

COMEX Copper – Logistics

COMEX copper is the staple used throughout the copper industry.  It thus serves as the reference point, or benchmark, for copper.  The price of copper, of course, is highly related to its primary applications.  As such, there is correlation between copper prices and the current health of the housing sector of the U.S. economy.

As for metal storage, there are warehouses located in various places through the United States.  For instance, there are warehouses in both Amarillo and El Paso Texas.  They are spread along the East Coast, with locations in Panama City, Florida, Camden, New Jersey, and Baltimore, Maryland.  Further west, there is a storage facility in Salt Lake City, Utah.  If you should end up taking delivery, you’d get your bullion direct from one of these places.

Trading ends on the third last business day of the delivery month.  Physical delivery can occur on any business day starting with the first business day of the delivery month.  It can also take place at any point in the delivery month, so long as it is not later that the last business day of the current delivery month.

As for the technical details for the grade of the copper at issue, the grade for the Grade 1 copper contract is intended to be Grade 1 Electrolytic Copper.  It conforms to the chemical and physical specifications for Grade 1 Electrolytic Copper Cathode as found in the American Society for Testing and Materials guidelines.

COMEX Copper Cost & Financial Factors

Investors have a centralized source of pricing, transparency in that pricing, as well as risk management with COMEX copper.  There is both mitigation of counter-party credit risk and CFTC oversight.  One can determine forward price curves, since contracts are available for twenty-three months on top of the current month.  Over the counter trades can be quite flexible.  They can be cleared through CME ClearPort and still allow for price negotiation and centralized counter-party clearing.  This all but eliminates counter-party risk.  CME Clearing basically becomes the buyer and seller as need be based on whether you are buying or selling COMEX copper futures contracts.