Platinum and Palladium
Futures and Options
Platinum and palladium are the most widely used of the six platinum
group metals (PGM); the group also includes rhodium, ruthenium, osmium, and iridium. These
metals posses unique chemical and physical qualities that make them vital industrial
materials. They are especially valued for their catalytic functions, their conductivity,
and their resistance to corrosion. They are essential in key manufacturing processes in
the automobile, chemical, petroleum refining, pharmaceutical, and electronics industries.
Platinum is also increasingly being used by the jewelry industry as designers are taking
advantage of its durability and luster to create striking pieces.
Another characteristic of PGM demand is that most of it
originates far from the sources of supply. U.S. industry consumes close to 40% of annual
world production of platinum and palladium, but more than 90% of the world's supply
originates South Africa and the Soviet Union (Canada is the only other significant producer).
Platinum and palladium are among the world's scarcest metals.
Only about 4.5 million troy ounces of platinum and approximately 5 million ounces of
palladium entered Western markets in1994. By comparison, worldwide mine production of gold
totaled approximately 70 million ounces in 1994, while supplies of newly mined silver
totaled approximately 440 million ounces.
Why Trade NYMEX Division Platinum Group Metals Futures and Options?
Platinum's importance in world markets and responsiveness to world
events make NYMEX Division platinum group metals futures and options and important risk
management tool for commercial interests as well as an exciting, potentially rewarding
opportunity for those investors who seek to profit by correctly anticipating price changes.
Futures
Futures contracts are firm commitments to make or accept delivery of a
specified quantity and quality of a commodity during a specific month in the future at a
price agreed upon at the time the commitment is made. Less than 3% of all metals futures
contracts traded each year result in delivery of the underlying commodities. Instead,
traders generally offset their futures positions before their contracts mature. The
difference between the initial purchase or sale price and the price of the offsetting
transaction represents the realized profit or loss.
Options
Because of the global nature of the metals markets, their prices can be
volatile. The metals industry and other commercial market participants have learned to
cope with this price uncertainty by actively hedging against adverse price movements.
While futures are among the primary risk management tools
available, options on futures open a host of versatile, economical trading strategies.
Options on futures provide:
NYMEX Division Platinum Futures and Options
Trading Unit
Futures: 50 troy ounces.
Options: One NYMEX Division platinum futures contract.
Trading Hours
Futures and Options: 8:20A.M. to 2:30P.M., for the open outcry session.
Trading Months
Futures: Trading is conducted over 15 months beginning with the
current month and the next two consecutive months before moving into the quarterly cycle
of January, April, July, and October.
Options: Trading is conducted in the nearest three contiguous
calendar contract months, plus the next two months of the quarterly cycle of January,
April, July, and October.
Price Quotation
Futures and Options: Dollars and cents per troy ounce. For example: $425.20 per troy ounce.
Minimum Price Fluctuation
Futures and Options: Price changes are in multiples of $0.10 per troy ounce, $5 per contract.
Maximum Daily Limit
Futures: $25 per troy ounce ($1,250 per contract). There is no
maximum daily limit during the current delivery month and the three business days
preceding it. If the settlement price reaches the maximum daily limit for two consecutive
days in any of the outer months, the expanded daily limit schedule will go into effect.
The maximum expanded daily limit is $50 per troy ounce ($2,500 per contract).
Options: No Price Limit
Last Trading Day
Futures: Trading terminates at the close of business on the
fourth business day prior to the end of the delivery month.
Options: Second Friday of the month prior to the delivery month of the futures contract traded.
Exercise of Options
By a clearing member to the clearinghouse no later than 5:30P.M., or 45
minutes after the underlying futures settlement price is posted, whichever is later, on
any day up to and including the option's expiration.
Options Strike Price Intervals
Strike prices are in increments of $10 per troy ounce. At least seven strike prices are listed at all times.
NYMEX Division Palladium Futures
Trading Unit
100 troy ounces
Trading Hours
8:10A.M. to 2:20P.M. New York time.
Trading Months
Trading is normally conducted over 15 months beginning with the current
month and the next two consecutive months before moving into the quarterly cycle of March,
June, September, and December.
Price Quotation
Dollars and cents per troy ounce. For example: $98.85 per troy ounce
Minimum Price Fluctuation
Price changes are in multiples of $0.05 per troy ounce ($5 per contract).
Maximum Daily Limit
$6 per troy ounce ($600 per contract). There is no maximum daily limit
during the current delivery month and the three business days preceding it. If the
settlement price reaches the maximum daily limit in any one of the outer months, the
expanded daily limit schedule will go into effect the next day. The maximum expanded daily
limit is $12 per troy ounce ($1,200 per contract)
Last Trading Day
The close of business on the fourth business day prior to the end of the delivery month.
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