BIG LONG POSITION TRADE AT $40 IN THE SILVER JUNE CALL OPTION

The argument in respect of short-term investment isn’t totally convincing, considering the weak industrial demand. Also it is difficult to attract people towards long-term investment in the midstof global economic uncertainties. Even if we put aside these two side arguments, it seems that speculators across the world have become excessive bullish in the silver. Particularly hedge funds & money managers are becoming more wagers this year on high prices and doubling their long positions. The figure of Commodity Futures Trading Commission for the last week of January suggests that they have captured 16,034 contracts in futures & option, first time since mid-September. Besides, according to the Comex in New York data, maximum options entitle June 2012 call option holders to purchase silver at the price of $40, which is 21% than the current price.

If this isn’t enough, investors deposited 196 ton silver in January in the silver ETF product thus total stock has increased to 17492 ton. It is only 7% less than the record stock of last April. According to the American Mint’s website, investors have purchased 189 ton American eagle coins during last one month. According to the estimate of Berkley Capital, as industrial consumers increased silver use by 2.5% to be at 15415 ton during 2011, the glut of circulating commodity in the market decreased by 41% to be at 3297 ton, as per Morgan Stanley’s forecast, by the fourth quarter of the current year, the average price of silver would be 13% more than the current average to be at $37.5. Moreover, after selling 1300 ton silver in 2011, investors would purchase 2000 ton silver ETF during the current year.

In spite of weak global growth estimated by the International Monetary Find & World Bank, Investors have entered the bull market, with such confidence that global recession would be avoided. From the 11 months bottom prices of December, today silver has increased by 24% to be at $34.31. During last eight months it crashed by 46%, which means silver proved to be more volatile item for speculation in comparison of any other metals.

If we look from the 1:51.32 gold-silver ratio angle, silver still considered being cheap metal for the investment. Today 51.32 oz silver can be purchased at the gold price of $1759. In December 57.4 oz silver could be purchased. When Nelson and William Bunker Hunt Brothers scam (speculation) came on the fore in 1980, prices reached at the peak of $50.35 and average ratio was 32.4. According to the calculator of the Minneapolis branch of the US Federal Reserve Bank, if we have to adjust silver prices in the context of today’s global inflation, it should be $138.31 oz. Almost 12 gram silver is required to generate per watt electricity in the crystalline silicon solar panel. During the last year, global solar panel installation capacity increased by 70%, which is capable to provide electricity to 20 million homes. To manufacture a 32" plasma TV, 40 grams silver is being used.