March EU CO2 Option Price Quadruples in Week as Futures Jump

The March 2012 European Union carbon-dioxide permit call option with a 10-euro ($13.19) a metric ton strike price has quadrupled in a week as futures contracts jumped.

The price of the March 2012 option surged to 55 euro cents a ton on Feb. 17, according to Bloomberg options data from the ICE Futures Europe exchange in London, the world’s biggest for carbon trading. That’s more than four times the record low of 13 cents a ton reached Feb. 13. There were 500,000 tons traded on that day, ICE data show.

Some traders may have been seeking protection against price rises as carbon jumped 17 percent last week, the most since May 2006. Carbon is rising on speculation that EU regulators will step into the market to at least temporarily limit supply.

Call options give the buyer the right to purchase at a set level. Put options give the buyer the right to sell at a certain price.

December carbon futures fell 3.5 percent today to 8.95 euros a ton as of 8:47 a.m. local time, after reaching a record low of 6.38 euros on Jan. 4.

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

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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