Platinum Futures and Options are Derivatives Contracts which give investors exposure to the international price of platinum as determined by the New York Mercantile Exchange (NYMEX) through its COMEX division, a subsidiary of the CME Group. Platinum Futures contracts give investors the right to buy or sell at a fixed price on a future date. These contracts are traded by hedgers as well as speculators who assume the price risk that hedgers try to avoid in return for a chance to profit from a favourable price movement. Contracts are cash settled in rands and can be easily accessed via JSE Commodity Derivative members.
Who is this for?
Platinum is one of the rarest and most highly sought after metals because of its unique chemical and physical qualities. Commercial consumers and producers of platinum can manage platinum price risk by purchasing and selling Platinum Futures and Options. Producers can employ a short hedge while end users can utilise a long hedge. Speculators also use these contracts with a view to profiting on short term movements in the Futures Contract price. Investors can use the product to further diversify and enhance their investment portfolios.
- Extensive trading opportunities;
- Using Options alone or in combination with Futures, a wide range of strategies can be implemented to cater to a specific risk profile, investment time horizon, cost consideration and outlook on underlying volatility;
- Enables effective price risk management and evaluation of current and future world supply and demand;
- Enables identification of short and long term price and volatility patterns;
- Hedge or gain exposure based on expectation of directional price, spread movement or volatility;
- Suitable as a portfolio diversification element;
- Easy access to the international market with a contract traded in rands;
- Because of platinum’s importance as an industrial material, its relatively low production and concentration among a few suppliers and its sensitivity to global events, prices can be volatile; this appeals to some investors but presents significant downside risk;
- Given the risk for significant loss, investing in Platinum Metal Futures and Options is best left to experienced investors. Less aggressive platinum investors could consider platinum ETFs or ETNs.
How to get it
To access this product, investors need to register as a client with an authorised member firm, deposit the required initial margin and sell or buy according to their needs.
- No limits apply to individuals, foreigners or corporate entities;
- Pension funds and long term insurance companies subject to their 25% foreign allocation limits;
- Asset managers and registered collective investment schemes subject to their 35% foreign allocation limits;
- For the full details relating to qualifying factors, speak to your broker.