Hi there, Can anyone point me to a video or explain to me in simple noob terms how to go about hedging silver for price movements in the USA dollar etc.? I have been quite interested to know how to go about. At what point should someone start to think about hedging? And finally, out of curiosity can some hedge against a loan for silver? Thanks a lot...
if you asking such a question don't try hedging before you read several books otherwise you'll end up financialy broken ... videos tell only small part of the story and are misleading
I'm sorry, I can't help you on your question of hedging, I am investigating and reading up on this myself out of curiosity. I am highlighting the quoted part of your question, and admittedly, I am reading between the lines and possibly making an erroneous assumption - if so I apologise! That out of the way, I am not sure I'd be borrowing money to buy silver at this time (well, purely speaking, I'm not sure I'd ever do that)... interest rates seem to be on the upward climb, and secondly, the point of PM's are to hold something of value with no counterparty risk - borrowing to buy them immediately puts them back at risk of being repossessed etc?
Yeah cash out your AUD into silver before it crashes & before silver goes up.....ooops! missed again.
I agree with you, Borrowing does carry tremendous risk. I have done it in the pass and it has played out quite well, always in small amounts and paying the loan in 6 or so months in stead of 4 years. I also hold silver for the long run.
Do you have real physical that you want to hedge against a price fall? If so simply short the relevant ETF using a CFD or similar. If the price goes down your CFD will be in the money and will cover most of the loss on what you sell the physical at. If the price goes up, you sell some of the physical as required to cover the loss on your CFD. You can go to bed knowing that your $25/oz silver will still be worth roughly $25/oz in 6 or 12 months time. Saying that, if you are not a silver mining wanting to lock in a future production at current prices and this is what you are really after then probably easier just to sell now and put the $25/oz cash under the mattress.
Hedging is nothing but protecting against eventual dropping prices at the expense of losing gains due to eventual rising prices. For ex, imagine you had 10000 ounces silver that you want to hedge against a potential silver price drop. Imagine you want to play safe and hedge all 10000 ounces. You take then 2 Comex futures market short positions of 5000 ounces. When the price drops then you accumulate dollars on the account of your short positions. Later on, when you want to sell your silver, you will of course sell for that lower price, but the loss will have been compensated for by the gains accumulated on your short positions. When the price rises then you lose dollars on the account of your short positions. Later on, when you want to sell your silver, you will sell it for that higher price, but the gain will have been compensated for by the losses accumulated on your short positions. Hedging isn't harder than this. What IS hard is when deciding to increase / decrease hedging. Which is necessary, because if you don't throttle the hedging, then you could aswell just stay with dollars instead of silver, since a perma 100% hedge just gives away all gains too.
