Copper ETFsCopper, including Copper ETFs, have become important for many investors. Long the domain of the futures market, the advent of copper ETFs has presented us with another venue for consideration for conservative options sellers. But why copper? And why now? Copper has been of use to people since pre-historic times. It was probably one of the first metals used by early man. It was important in early civilizations such as the Egyptians, the Romans, and continues to be important in the 21st century. Its use in alloys such as bronze and brass has been a mainstay in progressive cultures for centuries.
Today, the big drivers in the copper market are the Chinese and Indian economies. These formerly third-world countries are continuing to experience unprecedented expansion as they become first-world economic powers. As the citizens of these countries move into better jobs and modern homes and businesses, the demand for copper-based products to build out the required infrastructure has increased. There are several copper ETFs available, with more probably coming soon. iPath Dow Jones-UBS Copper ETN (JJC), Emerging Markets Metals and Mining ETF (EMT), and First Trust ISE Global Copper Index Fund (CU) currently round out the copper ETF inventory available on US markets. JJC is based on Copper Futures contracts whereas the latter two are invested in copper mining companies. Of the three mentioned above, two (JJC and CU) have listed options in $1 increments. These two, then, become candidates for safe-options-trades using cash-secured puts and covered calls. With a market like copper, which by its nature is not diversified and is controlled by the forward perception of economic growth in China and India, volatility is the rule. Hence, although the option premiums are attractive, the downside risk to any position is real. If you are going to use copper funds, it would be wise to keep positions a small part of your overall trading portfolio.
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