Macro-driven - Trade industrial metals sector as unified exposure
| Strategy Type | Portfolio / Basket Trading |
| Market Outlook | Macro-driven - Trade industrial metals sector as unified exposure |
| Risk Profile | Moderate Risk (Diversification reduces single-metal risk) |
| Reward Profile | 1.5:1 to 2.5:1 Risk-Reward with smoother equity curve |
| Time Horizon | Medium to Long-term (Weeks to Months) |
| Iv Environment | Works across environments with allocation adjustment |
| Breakeven | Portfolio weighted average entry ± costs |
| Primary Instruments | Individual metal CFDs through MAS-licensed brokers; LME futures via futures brokers |
| Mas Compliance | MAS regulated; retail trading permitted with licensed broker holding CMS license |
| Contract Sizes | LME: Copper/Aluminium/Zinc/Lead 25 tonnes; Nickel 6 tonnes; Tin 5 tonnes |
| Trading Hours | LME: 3 PM - 1 AM SGT; CFDs nearly 24 hours |
| Execution | Execute basket as individual positions with coordinated timing |
| Settlement | Cash settlement for CFDs; manage LME futures rolls separately |
| Tax Treatment | No capital gains tax for individuals in Singapore; trading income may be taxable if deemed business |
| Stamp Duty | No stamp duty on commodities derivatives |
| Cdp Account | Not required for commodities |
| Portfolio Note | Basket approach requires sufficient capital for meaningful diversification |
Basket provides diversification - reduces risk from single-metal events (like nickel 2022). Smoother equity curve. Better risk-adjusted returns. Ideal for macro view on industrial metals without specific metal conviction.
Recommended volatility-adjusted weights: Copper 30%, Aluminium 25%, Zinc 15%, Nickel 10%, Lead 10%, Tin 10%. Lower weights for volatile metals (nickel) equalize risk contribution.
Meaningful basket requires S$25,000+. Smaller accounts may use 3-4 metals (copper, aluminium, zinc). Full 6-metal basket benefits from S$50,000+ for proper position sizing.
Global Manufacturing PMI (>50 bullish), China Manufacturing PMI (>50 bullish), and US Dollar direction (weak dollar = bullish metals). All metals share these common drivers.
Enter individual metal positions sequentially. Start with most liquid (copper, aluminium). Size each according to weight and risk budget. Aim to complete basket within same session.
Monthly calendar rebalancing recommended. Also trigger if any metal drifts >5% from target weight. Only rebalance if drift >3% to reduce costs. Sell overweight, buy underweight to restore targets.
For metal-specific events (Indonesian nickel policy), consider: reducing that metal's weight, hedging with opposite position, or reducing overall basket. Don't necessarily close entire basket for single-metal events.
If fewer than 3 metals aligned with macro, don't enter. Mixed signals suggest market uncertainty. Wait for clearer picture. Patience prevents whipsaw losses in unclear conditions.
Options: Portfolio trailing stop (2× weighted ATR). Macro reversal (PMI flips). Time stop (45 days max). Scale-out: 25% at 1.5× risk profit, another 25% at 2.5×, trail remainder.
Options: Close just that metal (maintains rest of basket). Or close entire basket (signal failure across sector). If copper hits stop, lean toward closing basket as it often leads.
Calculate volatility-adjusted weights monthly. Generate macro score from PMIs, metal score from technicals. Combined score triggers entry (>2 long, <-2 short). Size by risk budget per metal. Track portfolio value with weighted ATR trailing stop. Rebalance on 5% drift.
Buy protective puts on copper as proxy hedge (30% weight covers significant basket risk). Sell covered calls on overbought metals for income. Collar strategy for uncertain periods. Consider base metals ETF (DBB) options for easier execution.
Trade spreads between metals. Long undervalued metal, short overvalued based on ratios (copper/aluminium typically 2.5-3.5). Reduces market risk, captures relative move. Can overlay on directional basket.
Historical scenarios: 2008 crisis (-50%), 2020 COVID (-30%), 2022 energy crisis (mixed). Custom scenarios: China hard landing, global recession, single-metal supply disruption. Calculate VaR and expected drawdowns.
Start with volatility-adjusted base. Apply fundamental views (max 10% tilt). Mean-variance optimization risks overfitting. Use Black-Litterman to incorporate views. Monthly review. Target Sharpe >0.5, high diversification ratio.
Full guided lessons, quizzes, and a complete strategy library for the Singapore market. One-time purchase. No subscription, ever.
Get Singapore access →