Aluminium futures and option contracts are traded on a number of global commodity exchanges. Management of price risks is a crucial premise of aluminium trading since everyone in the supply chain, including smelters, fabricators and scrap processors, incur a certain amount of risk. Aluminium futures and option contracts enhance efficiency in management of price risks in different market segments. Futures help buyers in making proper advance cost assessments while options help sellers value their inventories before selling their products.
The leading global exchanges where aluminium contracts are traded include the London Metal Exchange (LME) and New York Mercantile Exchange (NYMEX). In India, aluminium is traded on exchanges such as the Multi Commodity Exchange (MCX) and the National Commodity and Derivatives Exchange (NCDEX). There are different contract specifications such as price quotations, trading hours and months, delivery dates, clearable currencies and minimum price movement. Given these specifications, market players trade the contracts and exercise the futures or options with the objective of mitigating price risks.