Zinc options market turns bearish; incoming mine supply shakes confidence

Investors trading the zinc market via options are betting the price will turn lower in December, according to London Metal Exchange data showing a sharp switch from bullish to bearish positioning over the past week.

With the LME cash zinc contract recently trading around $3,250 per tonne, open interest in December put options to sell zinc with a strike price of $3,000 have almost doubled in a week to 7,081 lots as of Monday November 14 from 3,682 lots last Monday. Over that time, open interest in December call options to buy zinc at a strike price of $3,300 per tonne have fallen to 2,090 lots from 7,530 lots. The flip in the market to bearish from bullish over the past week reflects newfound confidence in new mine supply that will ease and even reverse the global deficit and after LME prices set a fresh ten-year high of $3,316 per tonne on November 1. “There is a bit of supply coming on, particularly on the mining side, and that’s making people think...

Published

Archie Hunter

November 14, 2017

17:04 GMT

London