Aluminum Options Explained

Aluminum options are option contracts in which the underlying asset is an aluminum futures contract.

The holder of an aluminum option possesses the right (but not the obligation) to assume a long position (in the case of a call option) or a short position (in the case of a put option) in the underlying aluminum futures at the strike price.

This right will cease to exist when the option expire after market close on expiration date.

Aluminum Option Exchanges

Aluminum option contracts are available for trading at London Metal Exchange (LME) and New York Mercantile Exchange (NYMEX).

LME Aluminum option prices are quoted in dollars and cents per metric ton and their underlying futures are traded in lots of 25 tonnes (55116 pounds) of aluminum.

NYMEX Aluminum options are traded in contract sizes of 44000 pounds (19.96 metric tons) and their prices are quoted in dollars and cents per pound.

Exchange & Product NameUnderlying Contract SizeExercise StyleOption Price Quotes
LME Aluminum Options25 ton
(Full Contract Specs)
NYMEX Aluminum Options44000 lb
(Full Contract Specs)
AmericanCalls | Puts

Call and Put Options

Options are divided into two classes - calls and puts. Aluminum call options are purchased by traders who are bullish about aluminum prices. Traders who believe that aluminum prices will fall can buy aluminum put options instead.

Buying calls or puts is not the only way to trade options. Option selling is a popular strategy used by many professional option traders. More complex option trading strategies, also known as spreads, can also be constructed by simultaneously buying and selling options.

Aluminum Options vs. Aluminum Futures

Compared to the outright purchase of the underlying aluminum futures, aluminum options offer advantages such as additional leverage as well as the ability to limit potential losses. However, they are also wasting assets that has the potential to expire worthless.

Additional Leverage

Compared to taking a position on the underlying aluminum futures outright, the buyer of an aluminum option gains additional leverage since the premium payable is typically lower than the margin requirement needed to open a position in the underlying aluminum futures.

Limit Potential Losses

As aluminum options only grant the right but not the obligation to assume the underlying aluminum futures position, potential losses are limited to only the premium paid to purchase the option.


Using options alone, or in combination with futures, a wide range of strategies can be implemented to cater to specific risk profile, investment time horizon, cost consideration and outlook on underlying volatility.

Time Decay

Options have a limited lifespan and are subjected to the effects of time decay. The value of a aluminum option, specifically the time value, gets eroded away as time passes. However, since trading is a zero sum game, time decay can be turned into an ally if one choose to be a seller of options instead of buying them.

Learn More About Aluminum Futures & Options Trading

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