Three Easy Ways to Buy Gold and Silver
Jan 31, 2022
The descent in metals following last week’s FOMC could present an interesting opportunity for those looking to add long gold and silver exposure to their portfolio or at least try their hand at trading this unique asset class diversified from equities on a historical extreme.
Futures have long been a low-cost, direct route to gaining precious metal investment without having to either physically own the commodity or pay a high capital requirement (50-100% of investment) for an exchange-traded fund or note. The relatively new Small Metals (SPRE®) futures let you access gold, silver, and platinum in one order that costs less than traditional and Micro Gold and Silver futures.
The long call option can give you close to 1-for-1 exposure in the underlying market if that market’s price is higher than your strike’s, and your loss potential is simply the amount you paid for the call. However, you trade probability of success for a defined amount of risk in this strategy in what is called the premium on the option.
The short put option can give you close to 1-for-1 exposure in the underlying market if that market’s price is lower than your strike’s, and you take near-full ownership as long as the market exists below your put strike. Since you are on the short side of options, however, your probability of success is boosted north of 50% given you are the seller of option premium. That said, you stand to lose exposure, the premium, and more as the underlying market rises.
Derivatives offer different ways to profit from the same old markets you hear about daily, and each derivative - futures, calls, puts - comes with its own tradeoffs. Gain exposure to gold, silver, and more in the way that best suits your portfolio.
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© 2022 Small Exchange, Inc. All rights reserved. Small Exchange, Inc. is a Designated Contract Market registered with the U.S. Commodity Futures Trading Commission. The information in this advertisement is current as of the date noted, is for informational purposes only, and does not contend to address the financial objectives, situation, or specific needs of any individual investor. The information presented here is for illustrative purposes only, and is not intended to serve as investment advice since the availability and effectiveness of any strategy is dependent upon your individual facts and circumstances. Trading in derivatives and other financial instruments involves risk.
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.
Jul 31, 2020
Gold is hanging around its most expensive prices since futures on the commodity started trading almost half a century ago in 1974. While the price levels have increased, the action around gold has not. Volatility has only risen slightly in gold products, and it is in fact still below its historical average. As gold feels out new highs in a more calculated manner, its metallic companion silver has almost doubled in volatility. Read more in this latest blog from Frank Kaberna.
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