An option is the right, but not the obligation, to buy or sell a futures contract at a price (the strike price) agreed today.
They give hedgers and investors a more flexible alternative to futures. When buying an option the purchaser is not entering into a firm obligation - they are simply buying a choice of action.
This choice allows a hedger the opportunity of locking in a fixed price, or a speculator the chance of benefitting from price movements, while maintaining the ability to simply walk away from the contract if it doesn't suit.
The American-style options trade monthly up to 63 months.
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Register for our Hedging with Options training course to learn more about the basics of hedging on the LME. The course looks at market terminology, trading strategies and margining of LME contracts.