Before Copper Prices Surged, Hedge Funds Made Big Bets and Take Big Profits

Published on: Jun 8, 2024
Author: Amy Liu

As hedge funds made significant moves into the copper market, Rokos Capital Management and Andurand Capital Management stood out with bold bets on a substantial rise in copper prices, and they have already achieved initial success.

Driven by speculative funds, copper prices soared to over a record-breaking $11,100 per ton last month. Subsequently, futures prices dropped 10% from their peak. However, Rokos and Andurand held large positions in copper before the price increase, drawing attention as they wagered on even greater price rises.

According to sources, Rokos has been buying a significant amount of options over the last few months, betting on copper prices potentially rising to $20,000 or higher in the coming years. Andurand recently predicted copper prices could reach $40,000. These forecasts significantly surpass even the most bullish predictions of Wall Street banks on copper prices.

Fund managers held long positions in the London and New York futures markets that doubled in value this year, reaching $45 billion by mid-May, surpassing the highest record since 2018.

The influx of new funds into the copper market has left some industry insiders puzzled, pointing out soft Chinese demand and ample supply in the metal market. However, a series of recent mining incidents over the past few months has led investment banks to increasingly bullish forecasts, suggesting that the long-predicted global shortage in copper may arrive sooner than expected. Investments in copper have also been buoyed by the recent hype surrounding artificial intelligence and data centers.

While long positions in the options market may hold little value if the rebound fails to materialize, Andurand and Rokos have reaped significant profits in this year’s surge.

In a letter to investors last week, Andurand mentioned that the company’s main commodity fund rose between 13% and 30% in April, mainly attributed to its copper positions. We believe we are at the beginning of a copper bull market, and the recent price increases are just the start. Copper faces a decade-long supply shortage caused by the growing demand from energy transition and insufficient investment in mine expansions.

Rokos purchased out-of-the-money options contracts at low prices before the copper price took off this year, resulting in substantial profits calculated at market prices. With the rebound in copper prices, the company has made profits on some positions. If most positions are profitable, Rokos could earn several hundred million dollars, with the potential for even higher profits if the upward trend continues.

Other funds have also significantly entered the copper industry. David Einhorn’s Greenlight Capital stated in April that they had established a “moderate-sized macro position to benefit from the rise in copper prices.”

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