Silver Trading

Posted By Marcus Holland On Monday, January 21st, 2013 With 0 Comments

Silver is a highly popular precious metal that has many uses in every day like.  It is mainly used in the manufacture of jewellery and industrial products

How can I trade silver?

Purchasing silver outright and storing it in your home or in a storage vault is the first thing many people think to do when considering speculating on the price of silver.  Although this is a viable investment approach, it is also a very costly one with a number of disadvantages.  Some of the downsides are:

–          Storage.  Renting space in a bank vault costs money and if you decide to keep it at home, you might need to purchase a safe to store you silver.  Insurance is something else you might need to consider to protect you in the event of theft.

–          VAT.  In the UK and most other countries, you are charged VAT on silver purchases.

–          Tax on profits.  If you sell your silver stock for more than what you paid for it, chances are you will be required to pay some form of capital gains tax.

When you consider the points above, it is pretty obvious that purchasing silver bullion or coins, especially as a short investment, is a fairly complicated and expensive affair.  This is especially true when there are a host of tradable derivative instruments that can be used instead.

What is a derivative instrument?

A derivative instrument is a financial instrument that derives its price from the value of an underlying asset.  Ownership of the asset (in this case silver) never lies in the hands of the trader, they are simply speculating on whether the price of the underlying asset will increase or decrease.

Some of the most popular derivative instruments are:  binary options, vanilla options and the trading of CFDs.  Each has similar characteristics such including the ability to trade on margin and being able to open short positions.

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