NEW YORK ( TheStreet) -- TheStreet's Joe Deaux spoke to Phil Streible of RJO Futures on Monday about the impact of new, smaller silver contracts.
The CME Group (CME) now offers a 1,000-ounce contract for silver, which carries a much smaller margin requirement than the bigger, 5,000-ounce contract, according to Streible.
Streible added that with silver trading around $21 per ounce, the mini contract's full value is only about $21,000, as opposed to the full contract's value of approximately $105,000.
By being one-fifth the size, it makes it easier for investors to get exposure to silver rather than paying the premium associated with pawn shops and coin stores.Deaux wanted to know why the contracts are just now hitting the markets. Streible agreed these smaller contracts have existed before, but they failed to gain traction until now because of liquidity issues and finding the proper market makers. He added that when things are going well in the silver market, the smaller contract has a very wide bid-ask spread, making it hard to get reasonable fills and can exacerbate the selling pressure. Streible said these problems have been addressed and that the contracts should receive positive feedback. As for the price of silver, it has generally lacked the upward move seen in platinum and palladium. Instead, it has been tracking the movement of gold and will likely experience some added volatility in the coming days with the Federal Reserve meeting, Streible said. "We've seen that type of V-shaped pattern the last three or four Fed announcements," he added, referring to the typical rally in precious metals from continued stimulus followed by some falling. -- Written by Bret Kenwell in Petoskey, Mich. Follow @traderboy23
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV