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Senior Metals Demand Analyst, EMEA and Asia region
Open interest in traded options on the London Metal Exchange has climbed steadily for around a year and a half to record highs, as copper's AI-driven rally brings bigger and faster price swings. LME copper options are drawing more interest because copper has become too volatile for many participants to manage with outright futures alone. Copper has rallied more than 40% since the previous LME Week, and that rally is now closely tied to sentiment around AI and technology stocks. Thinner liquidity adds to the strain, with sharper copper moves showing up in both outright prices and spreads.
Giles Plumb, Head of Base Metals Trading at StoneX, brings more than 25 years in global commodities markets, including time as a dealer in the London Metal Exchange Ring, and follows liquidity and price formation on the exchange. He is joined by Philip Meijer, StoneX Options Sales Trade, Michael Price, StoneX Senior Base Metal Sales, Michael Cuoco, StoneX Head of Fund Sales, Metals and Bulks, and host Natalie Scott-Gray, StoneX Senior Metals Analyst EMEA & Asia, who has spent more than 12 years covering LME metals and battery materials across EMEA and Asia.
Copper volatility is rising because speculative positioning tied to the AI trade has stretched the copper market, leaving it exposed to bigger corrections and bigger rallies. Meijer links that pattern to positions getting stretched as copper prices climb. A hot U.S. inflation print showed how quickly that can turn, as AI and semiconductor stocks sold off and copper corrected with them. In Price's assessment, the copper move stemmed from a general macro risk-off rather than the headline that a strike at the Escondida mine was off the table. For copper hedgers, price risk now arrives through equity market sentiment as well as through mine supply.
Open interest in traded options on the London Metal Exchange has risen steadily over the last year and a half and has reached record highs. According to Meijer, market participants are recognizing that copper has become too volatile to manage by simply buying or selling futures. That recognition is evidenced by a shift toward longer-term option strategies on the exchange. Copper's larger price swings are the driver, since outright futures leave participants fully exposed to every sharp correction or rally. LME copper options are consequently taking a more central role in how metals market participants manage copper price risk.
Copper price moves are getting quicker on the London Metal Exchange because many participants are sitting back and watching from afar rather than trading, which thins liquidity. Plumb sees this on the trading side in extreme moves across both contango and backwardation spreads, as well as in the outright copper price. Dips in copper are deeper, yet they are still being bought into. Plumb ties the scale of copper volatility and illiquidity to the path of the AI trade, with much harsher conditions if the AI bubble bursts. For physical buyers and hedgers, wider spread swings mean the cost of rolling or adjusting copper positions can shift sharply in a short window.
--- Written by Frédéric Guétin, StoneX Media Producer
--- Expert: Natalie Scott-Gray, StoneX Senior Metals Analyst EMEA & Asia
--- Expert: Giles Plumb, Head of Base Metals Trading, StoneX
--- Expert: Philip Meijer, StoneX Options Sales Trade
--- Expert: Michael Price, StoneX Senior Base Metal Sales
--- Expert: Michael Cuoco, StoneX Head of Fund Sales, Metals and Bulks
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Open interest in LME traded options has climbed to record highs as copper's price swings grow faster and deeper. StoneX metals specialists explain how AI-driven positioning, risk-off selloffs and thin liquidity are pushing market participants beyond outright futures.
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