LME (London Metal Exchange)LME (London Metal Exchange) – was established in 1877, more than 130 years ago, providing aluminum, copper, lead, zinc, nickel and tin futures contracts trading, and is a very high liquidity trading market. It provides reference price for the global non-ferrous metal market. In June 2012, was acquired by HKEx for US$ 2.2 billion.
- LME product is in the form of forward contracts, different from normal futures products which have only 1 delivery date each month. LME products have daily prompt date (expiry date) from each trade day.
- The most active contracts are three month products, e.g 3 month Copper, 3 month aluminum, etc.
- Different trade date contracts have different prompt dates, e.g Buy 1 lot Three month Copper at 1st May, the prompt date is 1st August. Sell 1 lot Three month Copper contracts at 7th May, the prompt date is 7th August. Since the prompt dates are different, different trade date contracts (long/short position) cannot be squared off.
- In order to close out positions, Carry Trade should be done to square off long/short position with different prompt dates.
3 Month contract - The same date after 3 months
Prompt date calculation method of (3M) futures contracts with the prompt date after 3 months
|Today||3M Contract Prompt date||Illustrate|
|1st September 2015||1st December, 2015 (Tuesday)||The same date after 3 months|
|7th August 2015 (Friday)||6th November, 2015 (Friday)||The same date after 3 months later will be 7th November, 2015 which is Saturday. So the prompt date is scheduled to 1 trading day before that.|
|3rd February 2015 (Tuesday)||4th May, 2015 (Monday)||The same date after 3 months later will be 3rd May, 2015 whichis Sunday. So the prompt date is scheduled to 1 trading day after that.|
Note: Only the latest (3M) futures contracts introduced by LME with the prompt date after 3 months are available at our Futures trading platform. Other LME contracts periods are not supported by our Futures trading platform.
*Our company does not offer “Physical Delivery”, please click here for points to note about "Prevention of Physical Delivery".
|Trading Hour (HK Time) :||08:00am to 02:00am (Summer Time)|
|09:00 am to 03:00 am (Winter Time)|
|Carry Trade Trading Hour (HK Time) :||08:00 am to 01:00 am (Summer Time)|
|09:00 am to 02:00 am (Winter Time)|
- Except for long/short position with same trade date and same prompt date, long/short position with different trade dates cannot be squared off directly. Clients should request for Carry Trade, otherwise, client account should reserve extra capital to meet spread margin requirements.
- Carry Trade request should be made on the same trade day of the long/short close out position to square off position.
- If a pair of long/short position is not requested to be squared off by Carry Trade, they will be treated as spread month contracts and spread margin will be required. Spread margin shall be determined by the Company from time to time.
- 1 side commission should be charged for Carry Trade.
- LME contracts can only be closed out on the prompt date, so all traded LME futures contracts will still be shown on the statement until the prompt date.
- The realized profit cannot be withdrawn until the prompt day. It can be used as margin only.
- All the related position(s) after Carry Trade(s) done will be displayed in futures trading platform on the next business day.
- Good Till Cancel (GTC) and Good Till Date (GTD) orders are not supported.
- The price of Carry Trade is determined by the contango/ backwardation of the product at the time which depends on the supply and demand of the market.
- If clients need to do Carry Trade, please buy or sell in the opposite position of the 3M futures contracts via futures trading platform and then call our Night Trading Hotline: 2826-0066 to do the carry trade.
Client bought 1 lot of LME 3M Copper futures contracts at $8,100 on 7 May with prompt day 7 Aug. It is 9 May today and Client squares off the position as following :
- First, Client sells 1 lot of LME 3M Copper futures contracts with prompt day 9 Aug. The trade is done at price $8,200.
- Client then calls our Night Trading Hotline on the same trade day for a Carry Trade with the provision of trade details and the date to execute the carry trade (i.e. to close out the long position of LME 3M Copper with prompt date 7 Aug by the short position with prompt date 9 Aug at $8,200)
- Our night trader contacts broker at once and confirms the spread of Carry Trade is $10 Contango (Price may fluctuate according to market condition).
- Meanwhile, the broker buys 1 lot of 3M Copper futures contracts at the same price $8,200, and sells 1 lot of Copper futures contracts with the prompt date 7 Aug at $8,190 (at $10 Contango) for Client.
- Our night trader notifies Client of the completion of the carry trade and the trade details.
When futures contracts are getting close to prompt date, the price may have a wider spread and lower liquidity. Clients are recommended to complete carry trade as soon as possible.