What are lumber futures?
Random Length Lumber futures contracts (LB) trade in random-length 2 x 4s, from 8-20 feet. Lumber futures are traded at the Chicago Mercantile Exchange (CME), the first exchange to offer price protection to the forest products industry. Primarily, the deliverable species is Western Spruce-Pine-Fir, and mills must be located in the states of Oregon, Washington, Idaho, Wyoming, Montana, Nevada or California, or the Canadian provinces of British Columbia or Alberta.
In recent years, lumber prices have reacted to supply and demand imbalances with frequent and often extreme changes. Domestic lumber supplies have been constrained due to mill closings, the spotted owl controversy, and other environmental concerns. In Canada, lumber supplies have been limited as provinces move toward sustainable yields, where only enough trees can be harvested as can be replaced in 40 or 50 years. And on the demand side, due in part to economic conditions and interest rate policies, housing starts over the past decade have ranged from record highs to 36-year-lows.
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Lumber futures contracts are offered through CME on the Globex® trading platform and are available to trade electronically through Schwab. An account approved to trade futures is required in order to trade lumber futures.
Lumber futures contract specifications
Considering trading lumber futures? Here are the lumber futures contract specifications.
|Exchange, Product Name, Product Code||Chicago Mercantile Exchange, Random Length Lumber Futures, LB|
|Contract Size||110,000 board feet|
|Minimum Tick Size and Value||0.10 per 1,000 brd. ft., worth $11.00 per contract.|
|Trading Times||Lumber futures trade electronically on the Globex® platform from 10:00 a.m. U.S. ET until 4:05 p.m. U.S. ET.|
|Principal Trading Months||Principal trading months for lumber futures include January, March, May, July, September, and November.|
At Schwab, you also get access to advanced trading platforms and education, where you can take advantage of market research, real-time lumber futures quotes, and other specialized tools.
Why trade lumber futures?
Companies that produce, process, market or use lumber and lumber products are able to hedge their risk exposure and reduce the risk of holding or acquiring inventory through trading lumber futures. Traders may wish to buy or sell Random Length Lumber futures contracts (LB) to speculate on whether lumber prices will rise or fall.
It is important to understand the benefits and risks involved with lumber futures before placing a futures trade. Lumber futures provide the ability to trade with greater leverage and allow a more efficient use of trading capital. However, trading leveraged products like lumber futures also involves the risk that losses can exceed the amount originally invested and may not be suitable for all investors.
Futures trading at Schwab
Futures trading at Schwab
Take advantage of competitive per contract pricing plus specialized tools, research, and support.
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