paper silver trading

[Treetop]

Im considering trying my hand at trading paper silver, but know little of how it works. Are there premiums per trade? can you do it with only 1000 or so invested? Id like to try trading within a single days ups and downs, but if theres some type of premium it sure wouldnt work with as little money as I have to devote to it.... It would be neat to try though, and any profits Id pull and add to my physical stack...

[barrytrot]

1. 99% of brokers will give you a "free account" to play with prior to getting started.

2. Do a web search for "learning futures trading". There are a lot of decent free resources.

3. Most will charge you a "platform fee" if your balance is under around $10,000 to $12,000. Above that it is free other than to "trade".

4. Trading fees are generally $1 to $3 per "contract" or "option".

5. A "contract" is the ownership of commodity X on month Y. I'm going this from memory but I think you can get 15 to 1 leverage. I.e. if the contract value is $100,000 then you can get it with $6,600.

6. An "option" is the right to buy or sell commodity X on month Y at price Z. So you might have the option to buy May Silver at $40 per ounce. (Which might be a great deal!) The amount you pay is based on a formula of "volatility" and the "value" of the option. In other words, buying the "May Silver at $40" option is cheaper than buying the "May Silver at $35 option" because the "May Silver at $35" already has an intrinsic value of $2.42 at the time of this writing.

[Treetop]

That isnt sounding feasible for me then. Are the silver ETFs different then that?

[barrytrot]

There are a number of stock accounts that can be started for $500. Some even less.

The issue is that generally the fees are flat. So at $500 you are paying a higher percentage fee than at $20,000.

But you could definitely buy a few shares with $1,000 of SLV.

[Country]

I suggest you start out in an easy fashion. Seek out a discount brokerage account, some will require $2500 minimum to open an account. Initially, trade non-leveraged PM ETFs; commisions are $8 or less per trade. There are lots of PM ETFs to choose and you need to some research to choose. I like CEF because they've got the goods, but since you want to trade, others may suit you better. Stay away from margin and leverage until you have gained some experience on your trades and your portfolio has increased because of your trading ability. Don't be afraid to make mistakes, everyone who invests and speculates does it. The key is to learn from your experience. Good Luck...

[silverflake]

Open an account with TD-Ameritrade. You can do it with less than $500, you can trade commission free for the first 30 days and you can buy almost anything. If you are paper trading silver, theres SLV (ETF) and AGQ (leveraged etf) or silver stocks like SLW and PAAS or closed end bullion funds like CEF. You could even turbo charge things by buying options. Or buying the stock and generating income by selling out of the money covered calls. After first 30 days, commission is a flat $9.99 whether you buy 1 share or 10,000 shares. There's other brokerages just lusting for your business too. Shop around, do your due diligence.

[DeanStockwell]

Wow! I'm amazed at some of this advice.
I'm not trying to be condescending(to Treetop), I'm trying to keep you from losing 75%+ of your capital.
You need at least thousands of dollars(think $5k+) to even begin trading for real money.
With $1000 in an account at Scottrade(it's what I use), you will have to make 1.4%! on EACH trade you make in order to just break even. And that is with stocks and etfs. You are charged $7 for buying and $7 for selling(again, only with stocks and etfs). With options, you are charged $14 + $2.50 PER CONTRACT(100 block of options).
Take into the fact that commodities(especially silver) are extremely volatile. It is not uncommon for SLV calls and puts to fall and rise 25%+ in one day.
In fact, in the money calls of SLV @ 34 rose 30% today, with a move in the price of SLV by 2.5%. That's 900% leverage!
Futures can be even more volatile.
Instead of paper trading silver, if you think the price is going to rise in the mid-long term, buy SLV. I don't believe there are any inverse etf's for silver which aren't leveraged. Holding leveraged etf's over the long term is an extremely bad idea(rebalancing can cause the price of the leveraged etf to decline even if the price of what it tracks was flat or rose slightly.)
I recommend you join trading forums, get more capital to trade with, and read books on the subject of trading. Send me a PM with your email address if you are seriously interested and I will send you some ebooks which are extremely helpful in learning trading. Also, I recommend you use a simulator(with fake money) at a website such as Investopedia.
Good luck!

[oober]

I wouldn't start with anything less then 5k. unless you plan on buy one equity and holding, fees will eat you up if plan on day trading.

I've been in the game for a little more then a yr and have done very well, playing a ton of penny stocks, but these are very volitile and be prepared for huge swings, these stock require a lot of due diligence and staying on them daily. So they are NOT recommended for a small acct and for a new investor.

IMO, I would buy an equity instead of paper silver, SLW, GPL, etc will do very well this year.

[Copper Member]

you can open a pool acct on kitco

[Treetop]

Somehow this thread didnt help me narrow down where Id need to research to gauge the feasibility of this..... Now Im thinking of going to bullion direct... you can keep accounts there, they hold your metal free (as i understood it years ago anyway might of changed) and i could trade on the swings that I feel comfortable on. seems like a pretty reputable place.

[jeffisontheair]

Great topic! I trade options on the AGQ exchange traded fund. This ETF trades on the NYSE just like stock. You can also trade the SLV, but it's less volatile than the AGQ meaning that the price doesn't fluctuate as wildly.

My strategy is to buy deep in the money call options on the AGQ (and other securities I like, AAPL most notably) that go out a month or two. For example, right now the AGQ is trading at $225/share. Normally, I'd wait for a reasonable pullback to maybe say $210 and buy a DITM call looking to profit on a rebound. But let's say I was ready to pull the trigger today. Look at the May call contracts for instance. To go deep in the money, look for a strike price where the ask price (the price you pay) + the strike price = no more than $5 above the market price ($225). The AGQ May 180 (strike price) call is asking $50. Add the two numbers together and you get $230, which is only $5 above the market price of $225. That $5 dollars represents what's called the premium, which gets smaller and smaller as you near expiration.

Now one options contract gives you the right but not the obligation to take delivery on 100 shares of the AGQ. So essentially, you have to put down $5,000 to purchase one contract of the AGQ May 180 call ($50 cost of the option x 100 shares). But what's nice is that let's say the AGQ goes from $225 to $250. If it happens immediately, your option would likely trade around $75. So essentially, you would have made $2,500... only you didn't have to put down $22,500 to buy 100 shares of the AGQ outright! For a mere $5,000 you got all the upside the same guy who bought 100 shares of the common got.

Some people will tell you options are very risky... but only if you don't know what you're doing!! Options are a great way to invest a smaller amount of money for an equal amount of profit versus owning the ETF or common stock, but you do need to learn about them first. The only disadvantage to options is that they expire (but you can take delivery... most options traders don't).

I've made some money doing this, but something this volatile will make you sweat bullets at times. That being said, it's fun to game and you can make really good money doing it. Keep in mind though, unlike the guy who owns the common, your only risk is what you paid for the option. If silver went worthless tomorrow, you're out $5,000 while the guy holding the common is out $22,500.

But most importantly, learn options before getting involved with them! Once you get the hang of it, it's easy... but only once you feel confident trading options should you get involved. This is the best way I've found to make short term profits on the fluctuations in the price of silver and other securities.

[exbingoaddict]

Call me an old fool from the old school.

I'm not a fan of being long gold or silver or any commodity ETFs. The correlation between ETF pricing and spot pricing is not always right. There is also the risk of ETF price manipulation vs. spot too. Those two issues could go hand in hand and may often do. And once/if you sell for gains, you're looking at potential 28% collectiable tax. (Contact your tax advisor)

On the short side, that can be of interest. If you want do the classic, 'short againest the box'. Where you have physical gold or silver holdings and you short the ETFs as a hedge.

Commodity trading is not for the light hearted. There's an old saw that if you can't figure out who the pasty at the poker table is within half hour, then it's you. Just something to keep in mind before making the jump with real dollars.

[exbingoaddict]

But most importantly, learn options before getting involved with them! Once you get the hang of it, it's easy... but only once you feel confident trading options should you get involved. This is the best way I've found to make short term profits on the fluctuations in the price of silver and other securities.

Agreed. Getting the hang them is the hard part though. I'd highly recommend getting a copy of "Getting Started in Options" by Michael C. Thomsett. His is the best book and I've found to date that will help novice to more advanced investors learn stock options.

http://www.amazon.com/Getting-Started-Options-Michael-Thomsett/dp/0470480033/ref=sr_1_5?ie=UTF8&qid=1300980208&sr=8-5

[OldPeddler]

If it will hurt to loose that $1000.00 don't use it to go into trading. Buy a CD at the bank. If it would make you feel a little sad, then buy some ASEs. look at them and feel good when their price to sell is higher than what you paid(don't be in a hurry). there is no get rich quick in treading anything. I have been treading for over 50 years and I didn't get rich. But i did make some money. I was lucky to have a broker, when I started that took the time to teach and advise me.

Most of the advice here I place in the HORSE Sht column. So my advice is above. but if you feel you must trade find a broker that will take an intrest in you and advise you on how to do it. Stay away from on line brokers untill you learn how.

So much for my 2 cent worth. that may be all it worth. Best of luck.

[exbingoaddict]

If it will hurt to loose that $1000.00 don't use it to go into trading. Buy a CD at the bank. If it would make you feel a little sad, then buy some ASEs. look at them and feel good when their price to sell is higher than what you paid(don't be in a hurry). there is no get rich quick in treading anything. I have been treading for over 50 years and I didn't get rich. But i did make some money. I was lucky to have a broker, when I started that took the time to teach and advise me.

Most of the advice here I place in the HORSE Sht column. So my advice is above. but if you feel you must trade find a broker that will take an intrest in you and advise you on how to do it. Stay away from on line brokers untill you learn how.

So much for my 2 cent worth. that may be all it worth. Best of luck.

Old Peddler speaks volumes. Take the amount of money you'd be ok with setting on fire just watch it burn. Lay it out in FRN's. Remember, you won't miss the money once it's burnt. Now that's how much you can use for speculation.

[Treetop]

I am looking for something directly related to the spot price, because certain shifts within that seem apparent to me, and Ive made money on them before. I dont think leveraging is my game, whether or not the money involved is able to be wasted or not. that would be a whole ew discipline to know, and one that seems rigged to me as an outsider anyway..... I think bullion direct would serve my needs if I cant find anything else...