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<p>[QUOTE="desertgem, post: 3176060, member: 15199"]I do disagree with this part as the contract issuing company to satisfy regulations have to provide reasonable financial backing on their contracts since the early 30s. Since almost all do not have near the dollar backing to issue contracts naked one way, they have to issue offsetting contracts. So for every sell@set date/price they have a corresponding buy@date/price. They make their millions in that they will keep the commissions each way, the customers can win or lose big if they are wrong, and half will be wrong. If investors perceive that PM will go more one way than the other, the prices of a contracts to be issued changes accordingly, and investors/users of silver or bullion dealers change their prices accordingly also and their future needs by buying offsetting contracts themselves. Contracts can be extremely useful for investors hold large amounts of physical bullion as investments. By buying straddles ( contracts on both sides of the current value of their holdings) they will be protected from dramatic and costly changes in the monetary value of their investment downward and yet get rewarded if instead the price goes back up. They only lose if the value stays near the same until expiration. Paper contracts/options are a tool, but they do not often affect the physical value one way on their own, they reflect the expectations of the purchaser. </p><p><br /></p><p>Probably why it seems to cause downward movement is that unaware bullion investors mainly buy physical when it is going up and sell when it is far down or hold forever. Gut reaction is not investing. IMO Jim[/QUOTE]</p><p><br /></p>
[QUOTE="desertgem, post: 3176060, member: 15199"]I do disagree with this part as the contract issuing company to satisfy regulations have to provide reasonable financial backing on their contracts since the early 30s. Since almost all do not have near the dollar backing to issue contracts naked one way, they have to issue offsetting contracts. So for every sell@set date/price they have a corresponding buy@date/price. They make their millions in that they will keep the commissions each way, the customers can win or lose big if they are wrong, and half will be wrong. If investors perceive that PM will go more one way than the other, the prices of a contracts to be issued changes accordingly, and investors/users of silver or bullion dealers change their prices accordingly also and their future needs by buying offsetting contracts themselves. Contracts can be extremely useful for investors hold large amounts of physical bullion as investments. By buying straddles ( contracts on both sides of the current value of their holdings) they will be protected from dramatic and costly changes in the monetary value of their investment downward and yet get rewarded if instead the price goes back up. They only lose if the value stays near the same until expiration. Paper contracts/options are a tool, but they do not often affect the physical value one way on their own, they reflect the expectations of the purchaser. Probably why it seems to cause downward movement is that unaware bullion investors mainly buy physical when it is going up and sell when it is far down or hold forever. Gut reaction is not investing. IMO Jim[/QUOTE]
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