Guide on Silver Futures Trading

02 Jan 2022|

1 min read |

by ICICI Securities Team

What is Silver Trading?

Among precious metals, gold and silver are considered to be most popular. They have been in use for many centuries as currency, jewelry, and as an investment option. Investing in silver Futures is also becoming an integral part of financial planning today.

What are Silver Futures?

Silver Futures is a contract between a buyer and seller to execute a transaction in the commodity. This is done by making an initial payment and signing an agreement to schedule the delivery on a later date.

Supply and demand of silver

While most silver is sourced from mines, a small part of it comes from the recycling of scrap. There is always a demand for silver. Aside from jewelry, silver is predominant in industrial applications. It is used in the form of electrical components, electronic products, solar cells, fabrication, and in the fashion industry.

Additional Read: How to choose the best Demat Account

Silver Futures Trading on MCX

Silver is available for trading on MCX. There are four variants of silver contracts:

Contracts	Lot Size	Expiry
Silver Futures	30 kgs	5^th day of the expiry month
Silver Mini Futures	5 kgs	Last day of the expiry month
Silver Micro Futures	1 kg	Last day of the expiry month
Silver 1000	1 kg	Last day of the expiry month

Who decides the rate of silver?

The price of silver is determined by international prices and currency movement, that is, the rupee vs the dollar. If the value of the rupee falls against the dollar, silver will become more expensive. Speculative positions in the trading market also influence the price of silver.

Additional Read: How to convert Demat to BSDA?

Advantages of silver trading

Demand

– The use of silver for industrial purposes improves the value of the metal.

Payment

– You get additional time for the final settlement. This is because a contract is signed on one date and delivery takes place at a pre-decided future date.

Flexibility

– A trader has provision to short sell silver.

Safe haven

– Silver as an investment is considered to be safe because it is valued as real money.

Liquidity

– Silver is adequately liquid on offer.

Risks of silver trading

Volatility

– Economic slowdowns can alter silver prices, which can lead to losses.

Shifts

– If silver is replaced by another element in its industrial usage, its value will drop significantly.

Limited prospective

– As a tangible commodity, it only offers benefits when you sell during a period of a rise in its price.

Risk

– There is a probability of default risk during such trades.

Price movement

– Since silver is used in various industries, its price can fluctuate widely.

Conclusion

Silver is more affordable than gold, and is a practical investment option which has the potential to be very profitable. However, unprecedented demand from various industries across the globe can lead to a slight deficit. This, in turn increases the risk of price fluctuations while trading in this precious metal.

Additional Read: How to convert physical shares into Demat?

Disclaimer

ICICI Securities Limited has its registered office at ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400025, India, Tel No:- 022 - 2288 2460, 022 - 2288 2470. The non-broking products / services like iLearn and Financial Learning are not exchange traded products / services and ICICI Securities Ltd. is just acting as a distributor/ referral Agent of such products / services and all disputes with respect to the distribution activity would not have access to Exchange investor redressal or Arbitration mechanism. iLearn is not an exchange traded product/service of ICICI Securities Ltd. All disputes with respect to the activity on the platform would not have access to Exchange investor redressal or Arbitration mechanism.

ICICI Securities Ltd. is a Member of National Stock Exchange of India Ltd (Member Code :07730), BSE Ltd (Member Code :103) and Member of Multi Commodity Exchange of India Ltd. (Member Code: 56250) and having SEBI registration no. INZ000183631. ICICI Securities Ltd. is a SEBI registered with SEBI as a Research Analyst vide registration no. INH000000990. Name of the Compliance officer (broking): Mr. Atul Agrawal, Contact number: 022-69997051, E-mail address: complianceofficer@icicisecurities.com Investments in securities markets are subject to market risks, read all the related documents carefully before investing. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. ICICI Securities Ltd. and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Such representations are not indicative of future results. The securities quoted are exemplary and are not recommendatory. AMFI Regn. No.: ARN-0845. PFRDA registration numbers: POP no -05092018. ICICI Securities Ltd. acts as a Composite Corporate agent having registration number -CA0113. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. Please note, Mutual Fund, Corporate Fixed Deposits, Bonds, Alternate investment funds, Tax planning, Succession planning, NPS, IPO, Investment Advisory and Loans related services are not Exchange traded products and ICICI Securities Ltd. is acting as a distributor to solicit these products. Please note, Insurance related services are not Exchange traded products and ICICI Securities Ltd. is acting as a corporate agent to solicit these products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The non-broking products / services like Research, etc. are not exchange traded products / services and all disputes with respect to such activities would not have access to Exchange investor redressal or Arbitration mechanism. The contents herein above are solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments or any other product. Investors should consult their financial advisers whether the product is suitable for them before taking any decision. The contents herein mentioned are solely for informational and educational purpose.

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