CO2 Traders Buy 2012 Call Options in Hedge Against Price Jump

By Mathew Carr

Aug. 5 (Bloomberg) — Carbon traders bought call options on 2012 futures that give them the right to buy at fixed amounts in a hedge against potential price jumps.

Traders bought 1.5 million metric tons of European Union call options yesterday with a strike price of either 30 euros ($43.22) a ton or 31 euros, according to data from the European Climate Exchange on Bloomberg. December 2012 futures closed yesterday at 16.95 euros a ton, having risen 80 percent since a record low of 9.43 euros on Feb. 12.

Traders also bought 1.5 million tons of put options on 2012 futures today and yesterday that give them the right to sell at fixed levels and protect against potential price declines. Those were bought at a strike price of 11 euros a ton, according to ECX. Yesterday, there were 7.3 million tons of futures traded for the benchmark December 2009 contract on ECX.

A proposed U.S. emissions trading program starts in 2012, the final year of the initial compliance period of the 1997 Kyoto Protocol. That new system could potentially boost demand for carbon allowances and credits. The EU program is the world’s biggest greenhouse gas market.

To contact the reporter on this story: Mathew Carr in London at m.carr@bloomberg.net

Last Updated: August 5, 2009 08:23 EDT

taken from bloomberg.com 8-5-09