Spread trading is a widely used trading strategy in the futures markets that offers some key advantages over outright futures trading i. CLEAR FILTER SHOW RESULTS. It also points tradinv the need to successfully monitor ratio changes over the short and medium term in order to catch the more likely "extremes" as they emerge. Thus, the spread bet would be made by purchasing three silver futures while selling short two Gold Futures contracts. Passive Management: Exchange Traded Funds ETFs. All other trademarks are the property of eilver respective owners.

I honestly don't know how it got there, but I suspect one of my Canadian friends I would have preferred him leaving some of his Molson behind. But that's the thing about this condiment, a combo of mayonnaise and pickled vegetables. You either love it or hate it. I know no one who's ambivalent about it. So it goes with another type of spread: that which pits one futures contract against another. Spreads can precisely provide the nuanced approach desired by some traders, while boring the hell out of others.

A lot of misconceptions abound about spreads, largely because they're unique to futures. There are no direct analogs in securities we're talking stocks vs. Breakouts in the ratio of Gold Prices to Silver Prices are a favorite of spread traders. So why not look at the trade through their eyes? First, a spread consists of two or more related futures positions. Note the word "related" here. In order for a spread to be recognized for margin purposes — more on that in a moment — there has to be an economic connection between its constituents.

Plainly, gold and silver are fellow-traveling precious metals, but formal recognition of the spread by the exchange clearinghouse is required to derive the spread's benefits. Well, in most cases, reduced margin requirements. Purchasing silver outright, however, means you're only going to make money if the price advances above your buy point. Using the futures market instead, in contrast, you can sell gold against a silver purchase, betting instead on an improvement in silver's buying power, whether it derives from a rise in silver's price or a decline in gold's.

A spread, therefore, gives you greater flexibility. You won't be required to meet the outright margin requirements for each of the spread's legs, but you do have to meet the clearinghouse spread rules. This means that for every two gold contracts bought or sold, you must take an opposite position in three silver contracts. Thus, the spread bet would be made by purchasing three silver futures while selling short two Gold Futures contracts.

Banking spread trading in gold and silver an increase in silver's purchasing power means you're looking for berbagai tips dan trik forex ratio to decline in other words, the number of silver ounces bought by one gold ounce diminishes. The ratio could decline as metal prices advance, or as they decline, giving you a profitable return just as long as your short position in gold paid you more or cost you less than your spread trading in gold and silver position in silver cost or earned.

A widening of the ratio could subject you to open-ended losses, whether prices advance or decline. So what are the odds? This pattern is a typical setup for a breakout move. So the question spread traders now ponder is the probable direction of the breakout — to a higher or lower multiple? So if volatility remains constant, the odds of a breakout through a standard deviation are, logically, small: However, the essence of a breakout is increased volatility.

We saw the gains and losses attained from a narrowing of the ratio to 60x as well as those garnered from a widening to 68x. What are the odds of either level being attained at a Traders heeding the odds would then Buy Gold futures against the short sale of silver contracts. There's something else these probability tables tell us. Downticks in the ratio would indicate more enthusiasm for silver and its industrial applications in an improving economy.

Forewarned is forearmed, I always say. But all this has made me hungry for a sandwich Want Physical Gold or Silver today, not derivatives with leverage and counterparty risk? For the maximum security at the lowest costs, go to the award-winning world No. Published by Van Eck Associates Corporation, the site offers an educational resource for both individual and institutional investors interested in learning more about commodity equities, commodity futures, and gold — the three major components of the hard assets marketplace.

See full archive of Hard Assests Investor. Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events — and must be verified elsewhere — should you choose to act on it.

Gold Price 'Likely to Rebound' But Silver Tests Uptrend as Trump's Tax Plan Sees Stock Markets Drop. Now, suppose we use the December contracts for our ratio trade. We can apply a little probability theory here to better visualize the odds:. Over the past year, the average for the ratio was Volatility has been clocked at That makes for a one standard deviation range bounded by a So if volatility remains constant, the odds of a breakout through a standard deviation are, logically, small:.

If volatility remains constant at However, the essence of a breakout is increased volatility. Daily Mail 26 January The case for gold 14 mins. Gold Investor Index 4 April Gold investing extends 5-year record. Chris Evans Breakfast 7 March So how much gold is there in the world? Step inside the vault. Exclusive video: Secure gold vault. Buy platinum VAT-free at lowest costs. India's Gold Buying 'Strong' for Akshaya Tritiya. Platinum Price Below Gold for Longest Since 19th Century.

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The gold-silver spread was trading at as of August 2, Where’s the Gold-Silver Spread Headed in August? The gold-silver spread. How To Trade The Gold/Silver Spread. Trading The Spread. we don't need to move the ratio needle very far to make a handsome profit on a gold/silver spread. Spread trading is a widely used trading strategy in the futures markets. New Opportunities in Trading Gold, Silver, Platinum and Palladium. Share This Page.