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LME TAPO calculator

Price Traded Average Price Options the way the LME actually settles them — monthly averaging, remaining fixings and all — free in your browser.

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What is a TAPO?

A Traded Average Price Option (TAPO) is the LME's Asian-style option. Instead of paying off against a single price at expiry, it settles in cash against the monthly average of the exchange's official settlement prices over the contract month. TAPOs are widely used by producers, consumers and traders who price physical business off a monthly average and want option protection on that same basis — across all six base metals: copper, aluminium, zinc, lead, nickel and tin.

How a TAPO settles

Over the contract month, each business day contributes one fixing to an arithmetic average. At month-end the option pays the difference between that realised average and the strike (floored at zero), settled in cash. Because the settlement reference is an average of many daily prints, a single spike on any one day moves the payoff far less than it would move a vanilla option struck on a single expiry.

Why a TAPO isn't a vanilla with an average

The averaging changes the risk in ways a plain European doesn't capture:

• Gamma bleeds away as fixings lock in — each day that passes converts part of the option from uncertain to known, so the convexity steadily decays rather than peaking at a single expiry.
• Vega concentrates in the unfixed tail — only the remaining, un-fixed days carry volatility risk, so sensitivity to vol falls as the month progresses.
• Delta drifts as the realised average fills in, independently of where the forward sits today.

Price a TAPO like a plain European option and you will misjudge both the premium and the hedge — the error is largest late in the month, exactly when desks most need the mark to be right.

How PricerLab prices it

PricerLab models the seasoned average: it accounts for the fixings already set and prices only the remaining schedule, so vol decays as the month runs instead of behaving like a fresh option every day. Past expiry, the option marks to discounted intrinsic against the realised average. You get the premium and the full Greeks in the browser, checked against the LME's own conventions — no signup.

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