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Gold Futures & Their Relationship To Other Metals Futures - Jul 7, 2015 | Futures Measures
Understanding Futures contracts is no easy feat. Get introduced to the various Futures trading asset classes and the best Futures trading strategies with our expert, Pete Mulmat.
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      Market Data provided by CME Group & powered by dxFeed Technology. Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.
      Futures Measures

      Gold Futures & Their Relationship To Other Metals Futures

      Jul 7, 2015

      Pete makes a splash in the metals market by introducing us to gold futures and how you can create a gold/silver spread to play off of volatility.

      Comparing The Gold ETF (GLD) To Gold Futures (/GC)

      Gold futures (/GC) are a great alternative to buying gold bullion, coins, or other mining stocks. One share of the ETF GLD is equal to 1/10th of an ounce of gold, therefore 10 shares of GLD is equal to 1 ounce of gold.

      One gold futures contract represents 100 ounces of gold (1,000 shares of GLD is equal to 1 gold futures contract).

      There are many benefits to trading gold futures over GLD:

      • The volume of contracts traded is much higher (more liquidity)
      • The margin requirements are significantly lower (less than $5k* vs $58k*)
      • The futures contracts are accessible 23.5 hours/day, GLD is available for 7 hours/day.
      • Tax advantages

      Metal Product Specs:

      Gold Futures Specs
      Gold Futures (/GC):
      Index Multiplier (leverage) - 100
      Current Price - $1,170
      Notional Value
      - $117,000* ($1,170 x 100)
      Tick Size - .1 ($10.00/tick)

      Silver Futures Specs
      Silver Futures (/SI):
      Index Multiplier (leverage) - 5,000
      Current Price - $15.195
      Notional Value
      - $75,975* ($15.195 x 5,000)
      Tick Size - .005 ($25.00/tick)

      Copper Futures Specs
      Copper Futures (/HG):
      Index Multiplier (leverage) - $25,000
      Current Price - $2.52
      Notional Value
      - $63,087* ($2.52 x 25,000)
      Tick Size - .05 ($12.50/tick)

      *Values subject to change based on where the market is at

      Metal Futures Correlations

      When looking at 1 month correlations, we see that gold, silver, and copper have had little to no correlation, a fundamental breakdown from what is expected.

      When looking at the 3 month correlations, we see a high correlation between gold (/GC) and Silver (SI), but still low correlation between those two metals and copper.

      The Gold/Silver Ratio

      The gold/silver ratio will tell you the number of ounces of silver it would take to purchase 1 ounce of gold at a specified date.

      If we look at gold and silver prices going back over 100 years or more, the historical ratio is 30 ounces of silver to one ounce of gold (30:1).

      Over the course of the last year, this ratio has been at about 70:1 and over the course of the last 3 years, the ratio has fluctuated from about 35:1 all the way up to 85:1.

      How do you make a trade based of this information? See the next episode to find out!

      Strategies: N/A

      Products Discussed In This Episode: /GL, /SI, /HG

      This video and its content are provided solely by tastylive, Inc. (“tastylive”) and are for informational and educational purposes only. tastylive was previously known as tastytrade, Inc. (“tastytrade”). This video and its content were created prior to the legal name change of tastylive. As a result, this video may reference tastytrade, its prior legal name.

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