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What are Silver Futures?

July 14, 2011 By Leave a Comment

More and more questions continue to come regarding silver futures and what exactly they are. Simply put, silver futures are future’s contracts where the commodity that you deal in is silver. More often than not you will be dealing in silver weight form.

Silver futures and options are currently traded on many exchanges around the world. In the U.S. it is primarily traded on COMEX (Commodity Exchange), a subsidiary of the New York Mercantile Exchange. Other major trading countries all have their own futures and options (called derivatives) trading floors.

For just a little more insight, silver futures are basically a bet in which you are able to predict what the price of silver is going to be within an agreed upon time frame with the other party. Whether you are the buyer or seller, if you are wrong, then you are going to lose money, if you are right, then you will gain money. How much? That just depends on what price is settled on in the future’s contract.

Read More About Silver Futures

What is a Silver Future’s Contract?

How Does a Silver Future’s Contract Work?

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How Does a Silver Future’s Contract Work?

July 13, 2011 By Leave a Comment

The next part of Blog Silver’s “silver futures” stories involves getting you to understand how a silver future’s contract works. For those of you who have been wondering exactly how silver future’s contracts work, then this should help you tremendously.

The best way to explain a silvers future’s contract and how it works is to layout an example of one. This is a great example of how one would work.

You agree to buy 1,000 ounces of silver, in three months to the day from right now. You agree that in three months to the day you will purchase those 1,000 ounces of silver at $6 per ounce on that day. That future date is called the delivery date or final settlement date.

The pre-set price you agree to with the second party is called the futures price. The price of the underlying asset on the delivery date is called the settlement price.

Once that contract is agreed upon, then it is a waiting game until the agreed upon day arrives.

If an ounce of silver on that day is worth $10, then you win, as you are only paying $6 for an ounce of silver that is considered to be worth $10. You would have made a $4 an ounce profit. If you do the quick math on that, then you see that you have just purchased $10,000 worth of silver for only $6,000.

The seller loses of the future’s contract loses in this case, as you are only paying $6 an ounce for something that is worth $10 an ounce.

Conversely, if the price of silver goes down within the agreed upon 3-month time frame to say $3 per ounce, then you will find yourself paying $6 per ounce for something worth only $3 per ounce. If you do the quick math on that, then you can see you (buyer) lost $3,000.

The worst part about this situation is that you (buyer) do not get any of the silver. This is an all cash transaction, so if you lose, you come out with nothing. You don’t lose $3,000 and hold on to any leftover silver. The one saving grace – should you have the stomach for it, is that you can indeed rollover into another futures contract.

Here is what it boils down to. Silver future’s contracts are basically a huge gamble. While there are a few who come out on top, you may have a better chance of winning money at a casino then you do of banking huge off a silver future’s contract. There are also much better options available when it comes to investing in silver.

Read More About Silver Futures

What is a Silver Future’s Contract?

What are Silver Futures?

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What is a Silver Futures Contract?

July 11, 2011 By Leave a Comment

Silver futures is a confusing subject for many of us; even the seasoned silver investors sometimes struggle with what exactly silver futures are and how they work. Basically, to really understand what a silver future is, you need to understand what exactly a futures contract is.

Silver Futures Contract

A futures contract is a contract, traded on a special stock exchange called a futures exchange. In this case we are speaking about silver. The main idea is to buy or sell, what is called, a certain underlying instrument, in this case silver, at a certain date in the future, at a specified price. Confusing? Yes, a little. Breaking it down even more, you are basically betting that something will be worth something at sometime in the future. In this case you are betting that silver will be worth a certain amount in the future.

It seems kind of silly, as nobody can really predict the future prices of silver. However, you will definitely be able to find “experts” that will tell you they know what future prices will be.

Silver Futures Contract Obligations

A futures contract is different in the sense that you can’t just buy and sell at anytime. A futures contract contains, as part of the contract, an obligation. You are required by law to pay. Both parties involved in a futures contract must fulfill the contract on the settlement date unless you opt to rollover in to the next months contract.

Cash is transferred from the futures trader who sustained a loss to the one who made a profit. Most futures trading is done on a cash settlement basis these days. As currently cash is king and credit means almost nothing.

Keep an eye out for the rest of our articles on silver futures as we detail the rest of what is involved when you get into buying silver futures.

Read More About Silver Futures

How Does a Silver Future’s Contract Work?

What are Silver Futures?

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Do I Buy Silver Stocks or Silver Bullion?

July 9, 2011 By 1 Comment

This topic seems to be brought up quite a bit around the silver investors community. Like any other investment, silver investors want to invest in as close to a certain and secure investment as possible. With that being said, should you buy silver bullion or silver stocks?

This is the answer; owning one kilo of silver in storage is worth one kilo of silver regardless of the price. On the other hand, owning one kilo of silver represented by an investment in a mining company can be wildly different, especially if the company has other issues that affect the share price and regardless of the actual value of the silver.

When you look at this from a historical perspective, the price ratio between silver and gold has always been around 10 ounces of silver to one ounce of gold. Recently however, the ratio has increase with over 50 ounces of silver to one ounce of gold. Even though the trend of both metals as remained the same, the actual gap between them has widened.

Silver is extremely undervalued right now, and there is a lot of room for decreasing the gap between silver and gold. When it comes to silver stocks, an ounce in the hand is certainly better than two ounces in the bush. In other words, go with the stock.

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What Did We Learn From the Silver Sell Off?

June 13, 2011 By 1 Comment

The last month has been filled with some pretty amazing market activity. So much so, that the wild movement in the market did not allow investors to really digest or understand what was happening. Now, a month later, investors have had a moment to realize a few key points regarding silver. What did we learn during the sell off?

 

Gold and Silver Have a Very Close Relationship

While these two precious metals have never really been tied to one another in any “official” capacity, they are indeed tied to each other by certain market actors. As most of us know, silver dropped by 33% while gold was virtually unchanged, having lost only 7% from top to bottom. The gold to silver ratio now stands at a reasonable 40:1.

Financialized Silver is Still Very Important

Among the several key elements that lead up to the silver correction was the build-up in investment interests in financialized silver. In other words, silver that is bought and sold in intangible form. Local coin shop prices are still set by Comex and by the major institutional investors who bully prices for most financial products.

Silver Miners Do Matter

For the most part, Wall Street is still a crazy game of “who is smarter than whom.” Wall Street is currently looking for cash flow, instead of protection for wealth. This is due to the fact that our economy is still basically in the toilet. In the silver correction, traders were swapping bullion (supposed future delivery of bullion) for shares in silver miners, which produce cash, not silver. Miners equal future cash flow for Wall Street for silver production, not silver.

These three things tell us – if looked at closely, that silver is still a very strong investment. Investors just need to be patient and ride out the market’s irrationality if they are able to. The long-term — after all markets find efficiency and normalcy, means significantly higher values for Silver Bars.

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Get Out of Debt by Investing in Precious Metals

June 10, 2011 By 1 Comment

Investing in precious metals is a great way to try and pull yourself out of debt. We like to cover this topic periodically, and now is a great time to let people know that precious metal investing can help them gain some of their lost money back.

With the recent economic struggles, people have lost more than just a few dollars here and there. It seems that every time you turn around you are reading a story about how an individual lost their entire retirement fund, or how more and more people past retirement age still have to work to survive.

Investing in precious metals is just one way to help get yourself out of debt. There are other avenues that should be explored; precious metals investing is just one way to help build some money back up. While the prices of silver and gold are both volatile, there is great reward to be had, as gold continues to grow and silver jumps at staggering percentages all the time.

Debt management in today’s economy is important, especially for those with families who want to be able to live a decent life during their retirement years.

Take some time to go and get some information regarding gold prices and silver prices. These—and other precious metals, may be your ticket back to regaining some of that lost retirement fund.

 

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How Should You Invest in Silver?

May 22, 2011 By 1 Comment

Investing in silver, the precious metal, used to be tricky business. If you weren’t able to buy futures contracts for delivery of large quantities of silver (or the option for the delivery at some future date) you had to scrounge. Be it at a local Jewelry store, at a pawn shop, or from a friend, finding silver bullion was difficult.

Now, it’s extremely easy. I’ve bought and sold silver from stores, from eBay, and from online resources that sell coins and bars, by the bar, or in bulk, whatever your pleasure. And the price isn’t very much over spot. It all depends on how much you buy, how many ounces that is, but it’s pretty easy.

The first place I’ve purchased silver from and probably one of the easiest places is online at a place called APMEX Gold and Silver. You can buy all sorts of previous metals from them and you can easily use a credit card (which we don’t suggest investing on margin unless you know what you’re doing, and even then it’s more often than not a bad idea.) But I digresss.

APMEX allows you to buy in all sorts of sizes and amounts. You can buy 100 oz bullion bars, 1 oz coins, and many many options in between. Another good idea is just to search buy silver on Google and you’ll find a few of the top places to buy silver. But remember to read reviews on them before you buy, not all are reputable. We’ll try and keep you posted on these.

Another option is to buy silver via eBay. Although this can be a little more dangerous to know exactly what you’re going to get. It’s an option. We’ve sold on eBay before but have yet to purchase silver from a seller. But we like to believe the ratings, especially on those that have a lot of ratings that are high.

Another way to invest in silver is via the ETF NYSE:SLV. This you can buy and sell just like a stock from your trading account online. No matter who you use, TradeKing, Scottrade, E-Trade, etc, they’ll probably allow you to trade ETFs.

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Buying Silver Has Never Been So Right

April 5, 2011 By Leave a Comment

The price of silver bullion just hit $39, yet another 31 year high, and another reason we think the price of silver will hit $50 by the end of the year.

Silver has skyrocketed this year going from $30.67 to this new high reached today of $39.14, in just a little over 3 months. That’s a little over a 21 percent increase. Just check out the silver chart below for the years run up.

The latest price comes amidst rising prices in pretty much everything. The price of oil is high, the DOW is on the rise, inflation doesn’t seem to be stemmed in any country, and some countries have started to raise interest rates. So why the push up.

Some say it’s because inflation is finally catching up to both metals and because precious metals are becoming easier and easier to buy and sell. Silver ETF Trusts have become a very hot topic as of late, along with gold and other precious metals trusts.

NYSE:SLV the iShares Silver Trust that buys physical silver and stores enough on hand to pretty much keep the price of the ETF in line with the price of silver has grown at massive rates, no doubt one of the reasons for a higher demand on silver. Also in there is NYSE:PSLV, the Sprott ETF Silver Trust that is trading at a little below half the price of silver.

While these are both nice, those that feel the price of silver is a little too high can also get into the “easy to trade silver” game and buy into the ProShares Ultrashort Silver ETF that looks to produce double the inverse of the price of silver.

Or, for those that don’t mind storing physical silver can just head over to APMEX Gold and Silver and buy silver bullion and silver coins. We’ve done that before, and although we don’t own SLV, we’re thinking of adding some to our portfolio.

Filed Under: Silver Investing, Silver Prices

The Price of Silver Rises 22% This Quarter

April 1, 2011 By Leave a Comment

Wow, silver, and gold for the matter were on a role this year already. Out pacing the market by nearly 15%. That would be a great mark for any investor to meet.

The precious metal has become the talk of the town as the price of an ounce of silver is approaching all-time highs of $48 and change. A high that was artificially reached in the early 80′s.

Maybe the markets are finally adjusting for inflation or maybe there really is an industrial growing demand for the metal. Whatever it is, it’s causing the price of silver to climb drastically. Last week the metal hit a 31 year high of $38.18 per troy ounce.

People are buying gold and silver from places like APMEX Gold and Silverand stock piling regular old silver bullion (we own some). They’re also buying into the new craze of ETF trusts like SLV, GLD, and IAU. These trusts hold physical silver and gold while the ETF can be traded on the open markets just like a stock or bond. From your online trading account. Easy.

With the price of oil skyrocketing this month, a lot of investors are heading into commodities thinking that inflation will finally get the best of this economy that has witnessed some of the lowest interest rates in history.

Silver sits at $37.71 today and now that we’re into a new quarter, the bulls that cleared their first quarter contracts can get back to work trying to make this commodity rise higher.

Filed Under: Silver Investing, Silver Prices

Silver Prices Rebound This Week

March 30, 2011 By Leave a Comment

The price of silver looked like it touched on it’s highest level and was ready to recede with early week pull backs that brought the price of an ounce of silver back down to the $35 range. But that all looks like it’s going to change.

Silver hit a high of $38.18 per ounce and that looked like it was all she wrote. No $50 per ounce silver like I had predicted. But the $35 mark looks to provide some resistance even as the stock market and dollar rebound. It appears investors think the price of silver still has some upside potential.

So why does silver have such upside potential? Well, for the first time during this rally (aka the last 2 years) that we’ve seen, there appears to be evidence of a shortage in silver. If you believe this article then you may think that silver is not fulfilling the demand and that the price of silver, inevitably has to go up.

Although futures is really only one indicator as to the actually inventory of silver, the fact that there are so many contracts out there and that we’ve recently observed in the news that the iShares ETF SLV is adding to it’s silver stores, that could mean good things for those of you long silver.

Filed Under: Silver Investing, Silver Prices
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