Home >> Collecting >> Other Collecting

Precious Metals Options

Precious metal options are based on underlying futures contracts which traders buy and sell in anticipation of price movements. The five precious metals traded are gold, silver, platinum, palladium and copper. They are traded through the CME Group in their respective exchanges. Options on futures contracts are considered risky investments because of rapid price fluctuations. Conservative traders hedge with different combinations of options, known as spreads.

Gold
- Gold is the top precious metal. Traded on the New York Mercantile Exchange (NYMEX) and the Tokyo Commodity Exchange (TOCOM), gold options are traded in contract sizes of 1,000 grams (32.15 troy ounces). The code for gold in the NYMEX is GC. Traditionally, gold is viewed as a hedge against rapid inflation. Gold does not drop in value at the same rate as currencies. The underlying gold futures are traded in units of 100 troy ounces. You can also invest in gold bars, coins and certificates. The price of gold is driven by supply and demand, in addition to speculation on the direction of the U.S. or world economies.
Silver
- Silver is a strong, shiny precious metal that is also considered a safe-haven investment such as gold. Silver is a very malleable metal with degrees of thermal and electrical conductivity considered the highest of all known metals.Traded on the NYMEX, the code for silver is SI. Silver futures options are traded in lots of 5,000 troy ounces. Silver often follows the price of gold. You can invest in silver bars, coins and certificates.
Platinum
- Platinum has a much shorter history than either gold or silver. Traded on the NYMEX, the code for platinum is PL. Platinum future options are traded in lots of 50 troy ounces. The price of platinum fluctuates based on supply and demand. When the economy is sound, the price of platinum can be as much as twice the price of gold. However, during periods of economic uncertainty, the price of platinum tends to decrease because of reduced demand, often falling far below the price of gold. Platinum is traded as coins and exchange-traded funds.
Palladium
- Palladium is a hard, silver-white metal that has excellent channeling properties and is often used as catalysts, such as in converters on automobiles. Traded on the NYMEX and the Tokyo Commodity Exchange (TOCOM), the code for palladium is PA. NYMEX Palladium futures prices are quoted in dollars and cents per ounce and are traded in lot sizes of 100 troy ounces. TOCOM Palladium futures are traded in units of 500 grams (16.08 troy ounces), and contract prices are quoted in yen per gram. Palladium is traded as exchange-traded funds and bullion coins and bars.
Copper
- Copper is a malleable metal with high thermal and electrical conductivity. It is used as a thermal conductor, an electrical conductor and in building materials. Traded on the London Metal Exchange (LME) and NYMEX, the code for Copper is HG. LME Copper 'A' Grade futures prices are quoted in dollars and cents per metric ton and are traded in lot sizes of 25 tones (55116 pounds). NYMEX Copper futures options are traded in units of 25,000 pounds and contract prices are quoted in dollars and cents per pound.

Other Collecting