How do I buy gold or silver futures/options? I'm expecting the price of gold/silver to rise in mid-late 1999. Are there any mutual funds that invest in these types of futures/options contracts?

-- Bob Watson (jane_bob@worldnet.att.net), July 02, 1998

Answers

1. You need to open an account with a commodities broker. Try to get local references. The broker doesn't have to be local. Many large houses operate out of Chicago because many of the primary exchanges (grains, stock options, some metals) are there, and they all have 800 numbers to reach the trade desks or brokers.

2. You need to give the broker money for your account. BTW, there are full service brokers and discount brokers. Full service brokers will give you the benefit of their experience, and a lot of it is good. (Some advice isn't, but you'll have to learn to sort things out.) Discount brokers don't say a thing. They just take your money and do what you want them to do.....even if they know you're doing teh wrong thing. Full serivce brokers charge more than discount brokers. Expect to pay from $35 to $60 a transaction.

3. Futures contracts are traded regularly on various exchanges. The COMEX contracts are the big boys (5000 oz. of silver or 100 ox of gold.) Options are then traded on the futures contracts. [Remember, the option is on the futures contract price, not on the metal price.]

4. There are also smaller contracts-----1000 oz silver, and kilo gold. Because these are smaller contracts you don't make as much if the market moves in your favor -and you don't take the risk if it moves against you.

5. Be advised that futures are heavily leveraged. For example a COMEX silver contract may require a 'margin' of $1800 to $2000. Not bad when you consider that you're buying the right to 5000 ounces, at about $5 an ounce, or $25,000 of silver. BUT - if you've bought, and silver drops, you can get a little surprise in the form of a phone call from the broker asking for immediate money to maintain the required margin. This is important. Let's say that you believe that silver is going up and you buy. You're right, it does go up ---- but first it goes down. You've just learned that the market doesn't move in a straight line.....and you may have to pony up more money to maintain your contract. Keep it in mind.

Good luck

-- Rocky Knolls (rknolls@hotmail.com), July 02, 1998.

Are there any good web links that anyone knows of for further advice about trading options or futures. There seems a to be a lot of industry jargon to get to grips with.

-- Patrick Coghill (patrick.coghill@virgin.net), July 06, 1998.

Bob-I am trading in options. Recently, I wrote a report on the subject you may find interesting. This could be construed as a commercial; however, I think it is important to share this information. You can check my web site at http://www.broz.com/ It is still being constructed.

-- Franklin J. Broz (zachbroz@broz.com), July 06, 1998.

Why not just buy the metal or gold stocks for Pete's sake? Otherwise just go play the lotto; it's much more convenient than having to secure a broker but just about as successful at making people rich as options. There's no such thing as a sure thing.

-- Franklin Journier (y2kready@juno.com), July 06, 1998.

Check out my post in the new questions area. "Gold coins at an all time high demand" AC

-- A Cumm (acumm@intergate.bc.ca), October 24, 1998.

This message is written as I have read many postings in the greenspun forum regarding positioning in precious metals with investment accounts including IRA and other retirement accounts. The alternative to purchasing Gold Eagles is to purchase shares of Central Fund of Canada Limited (est.1961). The shares qualify for inclusion in retirement accounts and might be the alternative that you have all been searching for. Central's shares trade on the AMEX (CEF) and the TSE (CEF.A). They are backed by over 97.5% with physical gold and silver bullion that is stored in Central's segregated vault within the vault complex of Canada's second largest bank the CIBC. The bullion is audited on a semi-annual basis and is fully insured with an "ALL RISKS" insurance policy. Central is the most cost effective way, that I know of, to purchase, store and insure bullion at under 1% per year. I invite you to review our website located at www.centralfund.com and would welcome any calls at 905-648-7878 at anytime. Central Fund continues to fulfill its mandate as "The Sound Monetary Fund".

-- J.C. Stefan Spicer (sspicer@nas.net), November 01, 1999.

Be careful, Bob. Be VERY careful.

I never bought options until last month. I went to my broker (Paine and Webber) and she sent me to the "big boy" upstairs. Definately not a discount broker!

Told him I wanted to buy options for gold to go up by year's end. He said, no, too risky, buy stock options instead. OK, so I get a bunch of contracts for XAU. What he didn't tell me (because he didn't know) was that some mines in XAU were hedged and actually HURT by increasing gold prices.

By the time I got educated enough to understand what was happening, my investment was worth zip.

Luckily, it was only butter and egg money, so not too hard to hide from the missus. But remember, the money your broker looses will be YOURS.

-- Lon Frank (lgal@exp.net), November 01, 1999.