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July 2 (Bloomberg) — European Union carbon traders bought a record amount of put options last month to protect themselves against declining prices for emission allowances.
They purchased put options on a record 24.2 million metric tons of EU carbon dioxide allowances, according to data compiled for Bloomberg by the European Climate Exchange in London. The put options included 14.1 million tons for the December 2009 contract, the most traded.
Buyers of put options profit when prices fall below an agreed strike price. EU carbon allowances for December have plunged 55 percent from a year ago as the recession pulled down economic output and demand for permits to emit greenhouse gas. Call options, which pay off when CO2 prices rise above an agreed strike price, fell to 3.1 million tons last month, the lowest since October 2008, according to European Climate Exchange data.
“Traders are simply hedging against lower outright prices,” Alessandro Vitelli, an analyst at IDEAcarbon in London, said today by e-mail. June was the first month this year when sales of put options exceeded calls, he added.
Carbon dioxide allowances for December dropped 22 cents, or 1.7 percent, to 13.03 euros ($18.24) a metric ton on the European Climate Exchange at noon in London.
European Central Bank President Jean-Claude Trichet said today the region using the euro will start to recover in mid- 2010. Still, the ECB predicts the regional economy will contract about 4.6 percent this year and 0.3 percent in 2010.
UN Credits
Traders bought put options last month on 8.8 million metric tons of United Nations Certified Emission Reduction credits, the most since June of last year, exchange data showed. UN credits can be used in the EU cap-and-trade program, the world’s largest market for CO2 allowances.
For both the EU and UN markets, a total of 41.7 million put and call options were purchased last month, the exchange figures showed. That’s less than the 59.2 million tons in May and 51 million tons in June 2008.
By Mathew Carr
To contact the reporter on this story: Mathew Carr in London at [email protected]
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