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Silver Futures and Options

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Silver Futures - Silver, pleasing to the eye and easy to work with, has attracted man's interest for thousands of years. In ancient times, silver deposits were plentiful on or near the earth's surface. Relics of ancient civilizations include jewelry, religious artifacts, and food vessels formed from the durable, malleable metal.

Today, silver is sought as a valuable and practical industrial commodity, and as an appealing investment. The largest industrial users of silver are the photographic, jewelry, and electronic industries.

Newly mined metal provides most of the needed supply, and Mexico, the United States, and Peru are primary producers. Secondary silver sources include coin melt, scrap recovery, and dishoarding from countries where export is restricted. Secondary sources are particularly price sensitive.

The New York Mercantile Exchange merged with the Commodity Exchange, Inc., in August 1994 to become the world's largest physical commodity futures exchange.

As the dominant exchange for futures and options trading in gold, silver, copper, and platinum, and palladium futures, as well as energy futures and options, the Exchange's liquidity, price transparency, and financial integrity makes it a benchmark for these markets worldwide.

Silver Futures: Why Trade COMEX Division Silver Futures and Options?

Silver's importance in world markets and responsiveness to world events make COMEX Division silver futures and options an important risk management tool for commercial interests as well as an exciting, potentially rewarding opportunity for those investors who seek to profit by correctly anticipating price changes.

Silver Futures: Trading on the COMEX Division offers a number of advantages:

  • The contracts are standardized by quality and quantity, are widely accepted, and, therefore are liquid financial instruments.

  • The Exchange offers cost-efficient trading and risk management opportunities.

  • COMEX Division silver prices are widely and instantaneously disseminated, serving as world reference prices.

  • COMEX Division markets allow hedgers and investors to trade anonymously through futures brokers, who act as independent agents for traders.

  • The depth of the market allows the contracts to be easily liquidated prior to required receipt or delivery of the underlying commodity.

  • While futures contracts are seldom used for delivery, if delivery is required, performance is guaranteed. Counterparty risk is absent from transactions executed on the Exchange.

  • Contract performance in the silver futures and options contract is supported by a strong financial system, backed by the COMEX Division clearing members, including some of the strongest names in the banking and financial services industries.

  • The Exchange offers safe, fair, and orderly markets protected by its rigorous financial standards and surveillance procedures.

Silver Futures

Futures contracts are firm commitments to make or accept delivery of a specified quantity or quality of a commodity during a specific month in the futures at a price agreed upon at the time the commitment is made. Approximately 1% of silver futures contracts traded each year result in delivery of the underlying commodities. Instead, traders generally offset their futures positions before their contracts mature. The difference between the initial purchase or sale price and the price of the offsetting transaction represents the realized profit or loss.

Trading in COMEX Division silver futures is conducted for delivery during the current calendar month, any January, March, May, and September thereafter falling within a 23-month period and any July and December falling within a 60-month period, beginning with the current month.

Silver Options

Because of the global nature of the metals markets, their prices can be volatile. The metals industry and other commercial market participants have learned to cope with this price uncertainty by actively hedging against adverse price movements. While futures are among the primary risk management tools available, options on futures open a host of versatile, economical trading strategies.

Silver Options on futures provide:

  • A limit on potential loss to the buyer.

  • The ability to hedge without foregoing the benefits of favorable price movements.

  • The availability of hedging insurance at many different levels of cost and degrees of protection.

  • A way for business and investors to act aggressively or conservatively on views about the direction and volatility of precious metals and silver prices.

By using options alone, or in combination with futures contracts, strategies can be found to cover virtually any risk profile, time horizon, or cost consideration.

COMEX Division silver options are offered for trading in each of the following contract months: March, May, July, September, and December. Additional contract months - January, February, April, June, August, October, and November - will be listed for trading for a period of two months. A 24-month option is added on a July and December cycle. The options are American-style and can be exercised at any time up to expiration.

There are two types of options, calls and puts. A call gives the holder of the option the right, but not the obligation to buy the underlying futures contract. Conversely, the put gives the holder the right, but not the obligation to sell the underlying futures contract. Puts are usually bought when the expectation is for neutral or falling prices, a call is usually purchased when the expectation is for rising prices. The price at which an option is bought or sold is the premium.

Silver Futures and Options COMEX Division

Silver Futures Contract Specifications

Trading Unit

Futures: 5,000 troy ounces

Options: One COMEX Division silver futures contract

Trading Hours

Futures and Options: 8:25A.M. to 1:25P.M., New York time, for the open outcry session.

Trading Months

Futures: Trading is conducted for delivery during the current calendar month, the next two calendar months, any January, March, May, and September thereafter falling within a 23-month period, and any July and December falling within a 60-month period beginning with the current month.

Options: The nearest five of the following contract months: March, May, July, September, and December. Additional contract months - January, February, April, June, August, October, and November - will be listed for trading for a period of two months. In addition, a 24-month option is added on a July - December cycle.

Price Quotation

Futures and Options: Dollars and cents per troy ounce.

Maximum Price Fluctuation

Futures: Price changes for outright transactions, including exchanges of futures for physical (EFP), are in multiples of one-half cent ($0.005) per troy ounce, equivalent to $25 per contract. For straddle or spread transactions, as well as the determination of settlement prices, the price changes are registered in multiples of one-tenth of a cent ($0.001) per troy ounce equivalent to $5 per contract. A fluctuation of one cent ($0.01) is equivalent to $50 per contract.

Maximum Daily Price Fluctuation

Futures: Initial price limit of $1.50 above or below the preceding day's settlement price. Two minutes after either of the two most active months trades at its limit, trades in all months and in silver options will cease for a 15-minute period. Trading will also cease if either of the two active months is bid at the upper limit or offered at the lower limit for two minutes without trading. Trading will not cease if the limit is reached during the final 20 minutes of a day's trading. Trading will resume no later than 10 minutes before the normal closing time.

Options: No Price Limit.

Last Trading Day

Futures: At the close of business on the third last business of the maturing delivery month.

Options: Second Friday of the month prior to the delivery month of the underlying futures contract. Two-month options - second Friday of the calendar month which is two months after the month in which the option is listed.

Exercise of Options

Until 3:00P.M., New York time, on any business day for which the option is listed for trading. On expiration day, the buyer has until 4:00P.M., New York time, to exercise an option.

Option Strike Price Intervals

Twenty-five cents ($0.25) per ounce apart for strike prices below $8.00, $0.50 per ounce apart for strike prices between $8.00 and $15.00, and $1.00 per ounce apart for strike prices above $15.00.

See Also: Silver News Blog,  Silver Futures Special Report, Gold Futures, Copper Futures,Platinum Futures, Palladium Futures