| about|futures exchanges|commodity trading|map | ||
|
||
|
see also:
Silver and Gold Futures and OptionsFor hedgers and speculators, gold and silver futures contracts are precious metals contracts that are legally binding agreements to accept delivery of the metal at an agreed upon futures price.Generally hedging looks to reduce risk by buying and selling while speculators look for a risk return in the form of profit. Hedgers reduce their risk against spot prices (on physical commodity prices, for immediate delivery) for gold and silver (also see hedge ratios). While speculators aim to gain from expected pricing. A long position is one in which there is an obligation buy; accept delivery of the gold or silver. A long position, for example, can be used by hedgers who think prices for gold or silver may rise. To illustrate, a long position trader on gold at $700 who sells at $750 will make a $5,000 gain ($50 difference X 100 ounce contract = $5,000). A short position is one where there is an obligation to sell; make deliver of the silver or gold. A short position is a position is to hedge against a possible fall in metal prices. To illustrate, a CBOT short position trader on silver at $10 who sells at $12 will lose $10,000 on a full contract (the $2.00 difference X 5,000 ounce contract = $10,000) and will lose $2,000 on a mini contract ($2.00 difference x 1,000 ounce contract= $2,000). Remembering that CBOT trades silver at 5,000 ounce full size and 1,000 ounce mini contracts and CMOX at the 5,000. Traders do have set position limits by the exchanges, which places limits on the maximum number of futures contracts a trader can hold. This is based on whether the trader is a speculator or a hedger and helps maintain orderly markets. Which applies to gold and silver trading alike. Keeping in mind, too, that many contracts are offset. Meaning where an opposite position is taken by the trader (long to short, or short to long) before the appointed delivery date. Options TradingThe option instrument can either be used in conjunction with futures – more popularly known as an option on a futures contract; as with a put option where the holder gains the right to sell the futures contract; or with a call option - where the holder gains the right to buy the contract. Options may also be used by themselves.Typically, position traders hold contracts for a number of trading sessions while day traders, hold position only within a day. Scalpers operate in single sessions. Buying and Selling Gold FuturesIts no secret that the price of silver trails and has somewhat of a relationship with gold. One way investors and traders look at the relationship is with the gold/silver ratio, which expresses the number of ounces of silver that are required to buy an ounce of gold at current prices. (with the ratio was set at 1:15.5 in earlier years by the US and Europe but now it can move above this)Right or wrong, traders often sell either gold or silver futures, to buy or sell the other, based on which of the metals is going up or down. |
Copyright © 2006 - 2008 FuturesOption.com. All rights reserved. |