FxWirePro: Speculating silver more riskier than gold; use XAG/USD calendar spread for hedging

One can think of shorting not only on precious metals but investing in silver has proven highly riskier than gold. You can observe that from above technical charts and the nutshell that runs us through volatilities of ATM contracts.

From last 4 years or so both gold and silver has been ruthlessly tumbling, since Jan 2011 silver reduced almost upto 71.17%, a massive slumps from the peaks of 49.780 to the current 14.514 levels. While yellow metal has tumbled 43.72% from the same point of time from the highs of 1920.80 to the current 1086.36 levels.

Despite this huge losses in commodity both are still showing starvation for further slumps as you can figure out from the downward convergence on both leading oscillators.

Silver futures for September delivery shrunk 5.2 cents which is 0.36% dip to settle at $14.50 a troy ounce on the Comex division of the New York Mercantile Exchange snapping a five-week losing streak. While gold dipped $3.80, or 0.35%, to trade at $1,086.90 a troy ounce during European morning hours after hitting a session low of $1,083.90 overnight.

Hence, considering prevailing downtrend, businessmen in this commodity are advised to spare their negligible portions of profits and hedge any unexpected disruptions in this trend. We recommend selling near moth OTM calls and buy far month OTM calls, the hedger deploying this strategy being a bit skeptic on bullish momentum in the long term and is selling the near month calls with the intention to ride the long term calls for free.