Wanted to trade in silver futures and options contracts, but don’t have a large sum of money to put into it? Worry not, now you can trade in Silver Mini. The difference between the two is that Silver F&O’s trading unit is 30 Kg of silver whereas Silver Mini only presents 5 Kg of silver.
In this article, we’ll understand some important specifications of Silver Mini and how you can start your trading journey in Silver Mini.
5 Key Points for New Traders in Silver Mini
Here are the key points to know.
1. Open the Options Trading Account
The first thing is to open an option trading account. It allows you to seamlessly trade in Silver Mini. You can open the account in a few minutes and you can start trading in Silver Mini by analyzing the real-time payoffs of calls and puts you want to trade.
Just keep an eye on the Silver Mini contract which is started on the 16th day of the contract launch month i.e. February, April, June, August, and November.
2. Buy and Sell Indication
If you expect that the price of silver will rise in the future. You can take a long position in F&O and buy the call option contract. If you expect a fall in silver price. You can take the short position in F&O contracts or buy the put option.
3. Initial Margin & Premium
In futures, both parties are required to maintain the margin. While in options, only the seller has to maintain the margin. In the Silver Mini option chain, the buyer has the right to exercise the contract and has to pay the premium payment which is blocked on the very first day.
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4. Keep an Eye on the Market
While trading in Silver Mini it is important to be updated on the factors that affect the prices of silver. This includes government trade policies, geopolitical events, demand for silver at the industrial level, etc.
Accordingly, the difference between the Silver Mini futures price or options prices and the current silver price will fluctuate. In return, you can deploy different F&O strategies to safeguard yourself from losses or to maximize returns.
5. Delivery and Settlement
In futures, you get the delivery of 5 silver bars each with 1 kg which means 5 kg of silver. The grade and fineness of silver bars is 999. In the last 5 trading days before the expiry, the silver can be delivered based on the intentions of the two parties. Otherwise, on the expiry day it is a compulsion to deliver the silver.
In options, the strike price is in multiples of 3 USD. The final settlement price is the daily settlement price of the underlying futures on the options contract’s expiry day. The final settlement is done on the T+1 day.
Conclusion
Silver Mini allows you to trade in the silver underlying-based F&O contracts at a lower cost. You can buy F&O contracts when you have a bullish view of the silver price and vice versa. After that, you need to pay the margin and check on the silver’s price fluctuations. Finally, you get the delivery of the silver on the expiry day.
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