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The History of Silver and Silver Futures
As early as 700 B.C., the
Mesopotamian merchants used silver as a form of
exchange. Later, many other civilizations also came
to recognize the inherent value of silver as a
The ancient Greeks minted the drachma, which
contained 1/8th ounce of silver; and in Rome, the
basic coin was the denarius, weighing 1/7th ounce.
And letís not forget the English shilling
"sterling," originally denoting a specific weight of
silver, which has come to mean excellence. Silver is considered by many
investors to be an inflationary hedge and a currency hedge against devaluing
COMEX Silver Futures and Options Quick Facts
5000 ounce contract size
one cent move equals $50
trades Jan., Mar., May, July, Sep., Dec.,
Silver futures symbol (SI)
Here is the option strategy guide for metals courtesy of the
In 1792, silver assumed a key role in the United
States monetary system when Congress based the
currency on the silver dollar, and its fixed
relationship to gold. Silver was used for the
nation's coinage until its use was discontinued in
1965. In 1972 President Richard Nixon took the United States off of the gold
standard which led to the dissolution of the Bretton Woods currency system.
Mexico is the only country that still uses silver in its coinage.
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 often use silver futures and options to hedge their risk. Silver
conducts heat and electricity better than any other metal. Silver is
used in cell phones, plasma TVs, computers and many other electronic devices.
Unlike gold, silver is considered non-recyclable because
of its minute density within the electronics that it is used for. In other
words, it is unlikely that someone will break apart their cell phone to reclaim
10 cents worth of silver used in its production.
During the September 11 terrorist attacks the COMEX
was destroyed but within days the silver futures and silver options
markets were trading again. This is a testament to the strength and reliability
of the silver futures markets and the commodity exchanges.
A silver call option gives the
purchaser the right but not the obligation to purchase the
underlying futures contract for a specific time period and a specific
price (strike price). Let's say that you wanted to purchase a July
silver $20.00 call option and pay a premium of $1,925.
This means that you bought the right but not the
obligation to buy 5,000 ounces of July silver for $20.00 per ounce.
Of course, very few options are bought for the purpose of taking
delivery but that is one potential outcome. Chances are that you
either bought the silver option to hedge your price risk in the
physical silver market (you may be a producer and own a silver mine
or an end user like a jewelry fabricator) or you are speculating
that silver prices will go higher in an attempt to make a profit.
A silver put option gives the
purchaser the right but not the obligation to sell the underlying
futures contract for a specific time period and a specific price.
Let's say that you wanted to buy a July silver $19.00 put option and
pay a premium of $1,150.
This means that you have the right but not the
obligation to sell 5,000 ounces of July silver at $19.00 per ounce.
What is the delta factor?
The delta factor of an option represents the
estimated percentage of change an option will receive based on the
movements in the underlying futures contract.
Let's assume the July silver $20.00 call option
above has a 30% delta factor. This means that if the underlying
futures contract were to rally by $1,000, then the call option would
accrue by approximately $300 or 30% of $1,000 in the silver futures
What is theta?
Options are wasting assets which means that they
lose value as time passes. The theta of an option is the measure of
Let's assume that you bought a July silver
$20.00 call option with 60 days left until expiration. Let's also
assume that the silver futures prices have moved very little over
the last month and are exactly the same price 30 days later. Your
option will have lost 30 days worth of time and therefore will be
worth less today that it was when it had 60 days left until
Vega is a measure of the implied volatility of
an option contract as it relates to its underlying futures contract.
For instance, if the underlying futures contract is extremely
volatile then the implied volatility of the options of that futures
contract will be affected.
In a high implied volatility environment option
premiums tend to expand. Conversely, in a low implied volatility
environment the option premiums tend to decrease.
*Contract information changes from time to time. Please
click here to see the most recent
contract specifications and
click here for the most recent trading hours.
COMEX Division Silver Futures and Options
5,000 troy ounces
One COMEX Division silver futures contract
Futures and Options:
8:25A.M. To 1:25P.M., New York time, for the open
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.
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 -
Futures and Options:
Dollars and cents per troy ounce.
Maximum Price Fluctuation
Price changes for outright transactions, including
exchanges of silver 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
Maximum Daily Price Fluctuation
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.
No Price Limit.
Last Trading Day
At the close of business on the third last business
of the maturing delivery month.
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
Silver delivered against the silver futures
contract must bear a serial number and identifying
stamp of a refiner's officially listed brand.
Delivery must be must be made from a warehouse or
vault licensed or designated by the Exchange
specifically for the storage of silver.
delivery day is the first business day of the
delivery month; the last delivery day is the last
business day of the delivery month.
of Futures for Physicals (EFP)
The buyer or
seller may exchange a silver futures position for a
physical position of equal quantity by submitting a
notice to the Exchange. EFPs may be used to either
initiate or liquidate a futures position.
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