Platinum Futures Trading, Rare Precious Metal On NYMEX
If you want to trade platinum futures on the New York Mercantile Exchange (NYMEX), you can use either an electronic trading platform or the traditional open outcry approach.
As the lead member of the Platinum Metals Group (PMG), platinum is a very important precious metal because of its rarity, in fact is is about thirty times rarer.
And yet it has wide industrial applications, from catalysts in petroleum refining to automobile exhausts and spark plug tips to fuel cells and jewellry.
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Deposits are found in the Urals, Russia, Montana and the Witwatersrand in South Africa, and annual global production is approximately 7 million troy ounces.
These precioius metal prices were reached mainly due to concerns about supply difficulties following power supply disruptions in South Africa, along with civil disturbance and concerns about economic stability in neighbouring Zimbabwe.
This is a clear example of how uncertainty over supply constraints can cause the market price to rise very quickly as it reflects a perceived shortage of the commodity.
You should remember, however, that these markets can be very volatile and that certain events or news reports may cause sudden sharp movements in the price.
While this can provide profit opportunities, it can also lead to a loss of capital.
Such an environment illustrates the investment possibilities of holding precious metals and particularly in this case, platinum futures.
Trading Platinum Futures
To trade this futures contract you can either use the open outcry system on NYMEX (from 8.20 am to 1.05 pm New York time, weekdays) or use the CME Globex electronic trading platform, which is growing in popularity. The CME Globex system is open from 6.00 pm to 5.15 pm Sunday to Friday, with a 45 minute break between 5.15 pm and 6.00 pm.
Trading is over a period of 15 months, which includes the current and next month and then in quarterly periods ending in the months January, April, July and October.
The last trading day is the third business day before the end of the delivery month.
The trade unit for platinum (trade symbol: PL) futures contracts is 50 troy ounces, and the contracts are priced in US dollars per troy ounce.
Exchange of Futures for Physicals
It is possible, if you are holding a platinum futures contract to exchange this for a physical position, that is the actual metal, with roughly the same quantity and value.
This is referred to as an EFP or Exchange of Futures for Physicals, and can be used when opening or closing a futures position. What about grade or quality?
To fulfill the contract (within the Commodity Exchange Act) the seller must deliver 50 troy ounces of platinum, either as ingots or plates. Each quantity must have a fineness of not less than 0.9995.
The ingot or plate should have the weight, grade, assayer logo and bar number together with the platinum symbol, marked into the metal surface.
Producers and commercial end-users such as automobile manufacturers will continue to hedge prices as part of commercial practice.
But there may be changes in the area of trading platinum and other precious metals.
One way may be that this class of metal commodity will be seen more as an investment for asset allocation rather than just for pure speculation.
The growth of exchange traded funds make this a possibility and there may also be more focus on platinum in some of the main commodity indexes going forward.
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