How to Trade Silver Futures: Strategies & Exchanges2015-06-24
Silver is one of the most popular and useful metals in the world. The majority of this commodity is mined in Latin America, while its consumption is spread all over the world.
With such a heavy global reach, it should be no surprise to see that silver is also a big-name financial instrument. For those looking to dabble in silver futures, there are a number of options available, leaving some to wonder where to begin. Below, we outline strategies for trading silver futures as well as a few other products that offer similar exposure.
First thing’s first, those looking to invest in futures will need to decide which exchanges they would like to utilize. We outline three of the most popular options in the world for trading silver futures.
- Commodity Exchange: The COMEX, a member of the CME Group, offers exposure to a number of commodities with a focuse on metals, including silver. The standard silver contract (which is also optionable) represents 5,000 troy ounces, though investors can also use the e-mini and QI miNY contracts, which represent 1,000 and 2,500 ounces respectively. One benefit to these contracts is that they trade Sunday to Friday between the hours of 6:00 p.m. and 5:15 p.m (CST), meaning that investors can make a play for approximately 23 hours every day (there is a 45-minute break period between each day).
- London Metal Exchange: The LME offers silver forwards curve data to any investor interested in signing up. Investors will be able to see 1-week forward curves as well as 1, 2, 3, 6, 9, 12, 24, and 36 months forward, giving you a great long-term view on the metal.
- Multi-Commodity Exchange: As of 2015, the MCX offers four different contracts. The standard silver futures represent 30 kg and trade in March, May, July, September and December. Silver M contracts are only available as launched and represent 5 kg of the precious metal. There is also the Silver Micro which represents 1 kg of silver and the Silver 1000 contract. The MCX is based in India so it may be a better option for investors outside of the U.S. or those looking to trade on an exchange beyond domestic borders.
Common Silver Trading Strategies
As far as futures contracts are concerned, playing silver is going to require a considerable amount of attention and should be left to only the most active of traders. Neglecting your position for even an hour can have a dramatic effect on the outcome of your investment. Silver’s big price drivers are inflation, emerging-market demand, and (believe it or not) the photography industry. Finally, it is important to remember that as a primary trading instrument, developing trends in markets and how the majority of traders are behaving can also skew silver prices. Remember, the trend is your friend [see also 25 Ways To Invest In Silver].
For those who choose to shy away from actual futures contracts themselves, there are still options available for trading. Perhaps the best alternative to outright owning the contracts is to utilize the iShares Silver Trust (SLV) which invests in physical silver. SLV is one of the best known silver ETFs on the market, but there are a number of other exchange-traded products that can offer profitable exposure to the precious metal.
Further Resources and Reading
For further reading on silver and related topics, check out some of the links below [see also Were Gold and Silver Manipulated Alongside LIBOR?].
- Commodity HQ Trading Center – Our free trading center offers details on your favorite commodity futures and exchange-traded products.
- Commodity HQ Heatmap Tool – Our free tool allows investors to easily compare the past performance of their favorite commodities.
- COMEX Silver Page – Home page for silver on the COMEX.
- LME Silver Page – Home page for silver on the LME.
- MCX Silver Page – Home page for silver on the MCX.
Disclosure: No positions at time of writing.