Introduction to Futures, Options & Commodity Derivatives (with LME & ICE Focus)

Course Overview

This introductory course is designed to ensure that delegates understand the basics of futures and options trading as they apply to the metals and energy industries. Delegates will see how traders take positions (trading) or reduce exposure (hedging) using exchange traded products. The practicalities of margin trading — maintaining variation and initial margins — are explored.

The course also examines option pricing, including a detailed breakdown of the Black-Scholes model, practical pricing along with delta, gamma and vega identification.

Numerous practical case studies cover the management of margin risk, basis risk, market strangulation and more.

We conclude with an examination of the various relationships clients typically have with exchanges, both at execution and clearing level, including sponsorship arrangements.

Agenda

Module 1: General introduction to futures and options — build a solid foundation in derivative instruments and their applications for risk management.

• What are futures and options?
• Physically settled vs cash-settled contracts
• Using futures and options to reduce risk
• Types of hedges and choosing the right instrument
• Basics of option pricing

Module 2: Understanding the LME (London Metal Exchange) — develop operational and strategic familiarity with LME contracts, trading structure and risk mechanisms.

• LME prompt date structure and trading procedures
• LME market terminology
• Delivery and settlement on the LME
• LME Clear: the clearing and risk management function
• Accessing the LME: role of member firms and brokers
• Carry trades, borrowing and lending
• Understanding and trading spreads
• Sponsored access walkthrough

Module 3: Introduction to the ICE energy derivatives market (oil focus) — a practical introduction to the ICE platform and oil derivatives trading.

• Overview of the ICE exchange
• Crude oil as a derivative product
• Oil futures and options contracts
• Hedging and speculation in oil markets
• Key market dynamics