Trading volumes in European Union carbon call options surged to the most in more than a year last month, as futures prices sank to record lows. That trend is continuing into the new year as traders eye upside protection. There were 59.2 million tons of call options traded last month across all futures, compared with 11.4 million tons of puts, according to data emailed by ICE on Jan. 17. A month earlier, calls outweighed puts 48.2 million tons to 41.7 million. Yesterday, 8.75 million metric tons of call options changed hands for the December carbon contract on ICE Futures Europe, according to exchange data compiled by Bloomberg. That’s 15 percent of last month’s total volume for all futures on the exchange. There were no put options on the December future traded yesterday, according to ICE Futures data. Emissions are linked to levels of economic activity. European carbon for December has dropped 52 percent in the past year as the region’s debt crisis weakened the economy and supply rose. Prices reached a record 6.38 euros ($8.23) a ton on Jan. 4 and were down 1.6 percent today at 7.20 euros on ICE. “People may be taking the view that the downside risk is diminishing,” said Brett Genus, a broker at OTC Europe LLP in London. “It would appear from the lack of puts trading that participants are no longer willing to pay up for downside protection, while the persistent volumes of calls that have recently traded could point to an interim base having been established with the recent low at 6.38 euros.”
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