Silver futures contracts are an agreement for a buyer to purchase a fixed amount of silver from a seller, at a fixed price, at a specific time in the future. A simple example would be a buyer agreeing to purchase 5,000 troy ounces of silver, at $20/troy ounce, two months from present. If during those two months, the price of silver decreases $2, the seller would profit $10,000, as they could source the silver on the open market for $90,000 and then sell it via the futures contract for $100,000. If during those two months, the price of silver increases $2, the buyer would profit $10,000, as they have now purchased $110,000 worth of silver for only $100,000 cash.
Futures contracts also allow bullion dealers, including JM Bullion, to hedge their physical silver positions by electronically buying or selling metal out in the future to offset their physical inventory positions. As spot prices move up and down, the offsetting gains and losses between physical and futures positions ensure that movements in spot do not affect our company.
Metals futures contracts trade on a variety of worldwide exchanges, including the COMEX and NYMEX.