Who Invests and Trades Silver Futures?
Silver futures offer market participants a way to hedge their risk and offers traders the chance to capitalize on price opportunities.
Producers and Marketers of silver can minimize the risk of price fluctuations in the silver market by using a short hedge, which locks in a fixed selling price for the silver that they produce. Thus futures allow them to get the specified amount in the contract, even if prices fall in the future. Consumers of silver can use a long hedge to set a fixed purchase price for a specified quantity of silver as per their need.
Silver futures are also traded by speculators. Speculators have no vested interest in the underlying asset, that is, they will neither deliver silver nor take delivery for silver. They trade in and out of silver futures only based on speculations about the price fluctuations of silver over the trading period. They take on the price risk that hedgers are trying to avoid, because they hope to profit from the price movements. Silver speculators buy silver futures if they believe that the price of silver will go up, and sell silver futures if they believe that the price of silver will go down.