London Metals Exchange

General discussions about futures.
Cantley
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London Metals Exchange

Post by Cantley » Tue Apr 22, 2003 10:40 am

I've heard horror stories about the difficulties involved in trading the LME. Does anyone out there have experience that they can share?

Best,
Steve

Chuck B
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Post by Chuck B » Tue Apr 22, 2003 11:17 am

Steve,

No direct experience with the LME, but I thought I wanted to add those markets to my portfolio a few years ago. I read the book, "Wolff's Guide to the London Metal Exchange" by Rudolf Wolff; ISBN: 0-947671-92-7.

After reading that book and talking with a friend who used to be a trader at the LME years ago before the LIFFE got started, I decided that I would have nothing to do with those markets. My main reason is that you don't trade a single futures contract; you trade forward contracts (most popular are 3month) that are new every day. In other words, there becomes a concentration of open interest in the certain ones (like big breakout days) as an example of one issue. I think there is always a spread market between each day's contracts until expiration. Also, the "pit" session lasts only a short amount of time and the rest of the trading is done around the ring. Honestly, I don't remember all the details, sorry. Anyway, it's a very strange market and requires a lot of study to implement (and the costs are high compared to "normal" markets too).

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Post by blueberrycake » Tue Apr 22, 2003 1:29 pm

Check out this page. They go into some detail on trading the LME:

http://www.aima.org/aimasite/articles/Feb99/edfman.htm

-bbc

Eclipse
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Post by Eclipse » Wed May 21, 2003 3:56 pm

With the 90 day prompt date trading style, how do you enter stops?
or do they accept stops?

Slave2MYT$
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London Nickel and other Metals on LME....

Post by Slave2MYT$ » Fri Oct 14, 2005 10:21 am

can some of the experienced traders on the board who trade these contracts explain how they're traded relating to US futures contracts...?

I'm stumped as to how these contracts would be traded? The slippage and commission would be killers if you're rolling over everyday the 3month forward contracts....

I've visited the LME website but it's not very helpfull in explaining how a speculator would trade...


Thanks,
Slave

PS
any help would be appreciated.

Chris67
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Post by Chris67 » Sun Oct 16, 2005 4:09 am

Ive been trading LME Nickel and Aly for 2 years using Veritrader and no Trading Blox - Its not a huge problem - Firstly in terms of getting the trade done and Slippage I've never had a problem yet - The slippage is in no way as criminal as NYBOT
In terms of the actual way to trade them - They are forwards contracts not futures so you are trading 90 day forward cash - this doesnt mean that you have to roll them everyday just like you wouldnt roll Yen futures everyday - If you trade yen currency futures then you may not know it but there is an adjustment thats made everyday to the price as it gets closer to the expiry date so that by the time it expires it's pretty much in line with the Dollar Yen spot price - Same in LME - but you have to be aware what the forward points are - Typically for example the LME nickel may trade about 150 Poinyts Higher than the cash - But overall You just buy then when you get an order and when you sell them you have to sell the date you bought NOT the new 90 day forward-
Example tomorrow I get an order to buy Nickel MOO so I buy Nickel - it's 90 days forward so say it expires Jan 17th. If in a weeks time I get an order to stop out MOO then I ring my broker and tell him to sell Jan 17 th Nickel .
Hope that helps
Chris

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Post by Slave2MYT$ » Sun Oct 16, 2005 2:06 pm

Chris...thank you for your post...i think i understand a little bit better, but still have additional questions/comments that i hope you have the time to clarify...

According to the contract specs on the LME, the delivery dates are...

"Daily for 3 months forward and then every Wednesday for the next 3 months and the every third Wednesday of the month for the next 21 months out to 27 months forward."

so "Daily" means it's a NEW 3 month forward contract. I just have to mindful of what the expiry date of the contract i've traded?

"Every Wednesday for the next 3 months..." would refer to 6 month forwards again being mindful of what the 6 month forward wednesday date is? etc...

Another question is which session would be traded (First session - 1st, 2nd ring etc, or Second session - 1st, 2nd ring etc..) or it doesn't really matter...just call up the broker and tell give them the order to execute?

Thanks again Chris for taking the time to answer my questions...

Cheers,
Slave

Slave2MYT$
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Post by Slave2MYT$ » Sun Nov 06, 2005 3:15 am

Just wondering which brokers will allow you to trade LME metals. Interactive Brokers don't, Refco Canada doesn't...

Thanks,
Slave

Slave2MYT$
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Post by Slave2MYT$ » Sun Nov 06, 2005 3:18 am

Just wondering which brokers will allow you to trade LME metals. Interactive Brokers don't, Refco Canada doesn't...

Thanks,
Slave

Trade Center
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LME

Post by Trade Center » Mon Nov 07, 2005 6:16 pm

We clear Refco, LLC and actually do quite a bit of LME trading.

Scot R. Hicks
Trade Center, Inc.

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Post by Wisdom » Tue Nov 08, 2005 2:41 pm

Slave2MYT$,
I would recommend placing market orders for "1st ring" execution. That is the most liquid session and will offer the tightest spread.
Best regards
Shane Wisdom
www.wisdomfinancialinc.com

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Post by dmbao » Wed Jan 18, 2006 10:16 pm

I create a perpetual contract that uses the spot and the 3 month forward to create a futures like contract. Not perfrect but better than looking only at say 3month data as you miss the carrying charge.

Been trading it for 10 years or more. Its a bit messy but some great trends. Increase your expected slippage for testing.

Dan

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Post by dmbao » Wed Jan 18, 2006 10:20 pm

Another concern. Try not to let your short positions get too close to expiration, seen a few ugly squezes in my trading experiences.

Dan

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Post by RedRock » Wed Jan 18, 2006 10:39 pm

dmbao wrote:I create a perpetual contract that uses the spot and the 3 month forward to create a futures like contract. Not perfrect but better than looking only at say 3month data as you miss the carrying charge.

Been trading it for 10 years or more. Its a bit messy but some great trends. Increase your expected slippage for testing.

Dan
Could you say how you construct this adjusted contract and how you trade with it. Do you begin a new contract data calculation at the time you enter a new position? Or do you mean a perpetual contract which somehow accounts for the carry cost? and "re sets" every 90 days. Finally, is the time decay linnear accross the life of a new 90 day contract? Or does the carry cost decay quicker as its prompt date nears? Whats the option term Theta. Time decay.. Making an earlier roll wise on a long position for example

Appreciate your thoughts,

Also, since im on a 'roll'.... I know that stops cannot be gtc, correct? So when entering a stop is this based on the spot price, or on the value of your prompt date contract. It gets confusing at times. Can you enter a stop for your prompt date but triggered based on the spot or 90 day price? I guess this relates to why you create your 'decaying' data...

cheers,
rr

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Post by dmbao » Thu Jan 19, 2006 10:27 am

RedRock wrote: Could you say how you construct this adjusted contract and how you trade with it. Do you begin a new contract data calculation at the time you enter a new position? Or do you mean a perpetual contract which somehow accounts for the carry cost? and "re sets" every 90 days. Finally, is the time decay linnear accross the life of a new 90 day contract? Or does the carry cost decay quicker as its prompt date nears? Whats the option term Theta. Time decay.. Making an earlier roll wise on a long position for example

Appreciate your thoughts,

Also, since im on a 'roll'.... I know that stops cannot be gtc, correct? So when entering a stop is this based on the spot price, or on the value of your prompt date contract. It gets confusing at times. Can you enter a stop for your prompt date but triggered based on the spot or 90 day price? I guess this relates to why you create your 'decaying' data...

cheers,
rr
What is created is a Mar,Jun,Sep,Dec contract. Yes, it is a perpetual contract which attempts to account replicate a normal futures contract (its not perfect, because it linnear for starters) and for the carry cost? Similar to what I have used in Forex trading between spot and 3 months.

How useful depends on how you feel the carry impacts the price. Today if copper spot prices remain constant for a year being long the carry is profitable, or perhaps makes profitable short trades harder to achieve? In the LME carrys can get pretty big. Time duration of trades is a big factor in the importance as well.

In trading this, a signal is computed based on the perpetual contract and converted to a 3month price where the stop or other type of order is placed as. I wouldn't trade on the spot price.

How valuable? Not sure. I have been using a homemade pascal based trading platform for 20 years. While it does somethings well it doesn't have nbearly the capabilities of a TB or Mechanica they weren't available when I started. So I am grapeling with how important are some of my things like how I handle LME compared to the value of TB/Mechanica and continuous contracts based I guess on the 3 month price for the LME (I wouldn't use spot)? Don't really know what my more complex data hadling buys me. Not sure simulated results between the two give and answer. something I will be studying though.

Dan

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Post by Dean Hoffman » Thu Jan 19, 2006 1:25 pm

The volume at the LME dwarfs many US markets. You’ll have absolutely no problem trading on the LME (if you know how to do it.) Use a broker that understands it well and is willing to place the overnight orders and reward yourself with this great diversification opportunity. My only complaint with the LME is that they make it more difficult and expensive to get quotes. Heres a link for some good free charts on LME products.

http://www.basemetals.com/TBDChart.aspx ... de=XznFD08

The LME has been where all the action has been as of late, Copper, Zinc, Aluminum etc.

Dean Hoffman
www.TradersTech.Net

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Post by sluggo » Thu Jan 19, 2006 2:06 pm

Dean Hoffman wrote:Use a broker that understands it well and is willing to place the overnight orders and reward yourself with this great diversification opportunity.
Di-WORSE-ification opportunity, in my opinion. The great majority of multicommodity systems I've run on LME products, give much better historical performance on non-LME markets than on the LME products. I keep coming to the same conclusion: best to omit the LME. However, to be fair, there are very successful traders who insist on including EVERYTHING in their portfolios, even the LME. And these folks are profitable so the approach isn't completely nutso. But it ain't for me.

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Post by Dean Hoffman » Thu Jan 19, 2006 2:38 pm

I suppose it depends a lot on whether you believe that a commodities historical profitability is important in whether or not you will trade it today.. Personally I don’t care too much (although I don’t completely discount it, I avoid the S&P in trend following for certain reasons).

I have no problem putting on a trade in a market that has not done great in the past if I have a reason to believe that the market can trend in the right circumstances. I think the biggest moves always tend to come from surprise markets. The only thing consistent is unpredictable surprises!

In my own case LME trades have been my most profitable recently (of course past results are not necessarily indicative of future results.)
When I compare this against my “did good in the past onlyâ€

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Post by dmbao » Thu Jan 19, 2006 3:03 pm

Over the years I have made some great profits in the LME. Copper last year was huge. While I trade multiple strategies LME is ceratinly a part of it. Trading can be difficult. Slippage can be large but the markets for me have been profitable enough to put up with it.

I am mostly a long term trend follower. I like to cast my net far and wide. I have methods for including the not so good trenders with a strategy that doesn't lose much and I get some winners that way.

I didn't nearly make as much as I feel I should off in 05s LME moves outside of copper which was a homrun. Just never built up big enough positions in AL and ZN.

Anyone trade lead or Tin?

Dan

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Post by huss1652 » Thu Jun 20, 2013 5:40 pm

I know it has been a little while since anyone has posted in this thread but I am a new customer to CSI data and was trying to download some LME data. If I wanted to trade London Aluminum futures, could someone give me the CSINumber for the contract I would be looking to trade? I always here about professionals trading this contract. I am just not sure which one I am looking for. There is quite a bit of choices. Thanks in advance!

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