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Lead hedging in LME using option structures

Written by QuantArt Market

Forex Hedging | 10 min Read

Published on: 05 th  November 2020

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In LME, lead can be hedged using futures and options. The market participants like the miners, producers, traders, hedge funds, bulk consumers often find it difficult to choose the exact instruments, strikes, timing, etc. In the case of futures, the obligation is the biggest deterrent whereas in options the premiums are expensive. So, low-cost appropriate option structures with effective monitoring systems may provide sufficient flexibility at a much lower cost. Here the pricing plays a vital role. Because of the nonavailability of pricing easily, most of the participants do not use options or structures.

We intend to present the option pricing to the participants of the LME Lead market.

A few of the prices are given below with strategies.

Buy-side strategies for Lead :

3m Ref Price: 1804 Decl Date6 Jan 2021 Prompt Date20 Jan 2021
InstrumentBuy Call Strike Sell Call StrikeSell Put StrikeCost (USD)
Plain Call 177584.00
Plain Call 180071.00
Plain Call 182560.00
Plain Call 185050.00
Bull Spread1775187542.00
Bull Spread1800190037.00
Bull Spread1825192532.00
Bull Spread1850195028.00
Buy side Seagull17751875167517.00
Buy side Seagull1800190017006.00
Buy side Seagull182519251725-8.00
Buy side Seagull185019501725-3.00
Reverse collar1850167525.00
Reverse collar1850170019.00
Reverse collar1850172510.00
Reverse collar1825167535.00
Reverse collar1825170029.00
Reverse collar1825172520.00

Sell-side strategies for Lead :

Sell No InstrumentsBuy Eur Call StrikeSell Eur Call Strike Sell Eur Put Strike Cost (USD)
1Plain Eur Call1.18000.0169
2 Plain Eur Call1.17500.0197
3Plain Eur Call1.18250.0156
4Plain Eur Call1.19000.0123
5Eur Call Spread1.18001.21000.0108
6Eur Call Spread 1.18001.20000.0082
7Eur Call Spread1.18501.20000.0057
8 Eur Call Spread1.18501.21000.0084
9Eur long Seagull1.18001.21001.17000.0011
10Eur long Seagull1.18001.21001.17350.0000
11Eur long Seagull1.18251.21001.17000.0000
12Eur Range Forward 1.18251.17000.0060
13Eur Range Forward1.19001.17650.0000

For more pricing and discussion on the strategies, contact us 

Check out our other article on Daily Morning Update: Global market and USDINR 
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