ETF Silver Fund


Individual Retirement Account (IRA)

An Individual Retirement Account is a personal savings plan that allows you to contribute up to $3,000 a year. (If you're 50 or older, you can make an additional $500 "catch-up" contribution.) It is a tax-deferred, trusted savings account into which eligible individuals contribute funds for retirement up to annual contribution limits. Approved vehicles for IRAs include savings accounts and certificates at financial institutions, insurance annuities, mutual funds and certain self-managed securities accounts at stock brokerage firms.

Roth IRA

An IRA is better than a Roth IRA if your current tax rate is higher than your retirement tax rate. On the other hand, the Roth IRA is better if your current tax rate is lower than your retirement tax rate.

Choose a Roth IRA if you can do without the tax break right now. It's a more flexible instrument, because it allows you to withdraw your contributions at any time, penalty- and tax-free. Also, you do not have to take mandatory distributions at age 70 1/2. Contributions are not deductible but distributions can generally be withdrawn tax-free.

Choose a traditional IRA if you need that tax deduction right now, or you anticipate paying taxes at a significantly lower rate in retirement.

Retirement Funds 401(k)

An employer-sponsored retirement plan in which the employee directs a specified percentage or dollar amount of his or her pre-tax income to be contributed to an investment account. The employer selects the investment options that are made available under the plan and may or may not match a portion of the employee's contributions. In some cases the retirement plan may allow amounts from a 401(k) to be borrowed by the employee at favorable interest rates for certain limited purposes, with the amounts borrowed (together with interest) repaid by the employee back to the 401(k), generally no later than when the employee leaves the employer's employ. Premature withdrawals from a 401(k) account are subject to taxation and penalty.


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How Options Work

Options are the most versatile trading instrument ever invented. Since options cost less than stock, they provide a high leverage approach to trading that can significantly limit the overall risk of a trade or provide additional income. Simply put, option buyers have rights and option sellers have obligations. Option buyers have the right, but not the obligation, to buy (call) or sell (put) the underlying stock (or futures contract) at a specified price until the 3rd Friday of their expiration month. There are two kinds of options: calls and puts. Call options give you the right to buy the underlying asset. Put options give you the right to sell the underlying asset. It is essential to become familiar with the inner workings of both. Every strategy you learn from this point on depends on your thorough understanding of these two kinds of options.

There are no margin requirements if you want to purchase an option because your risk is limited to the price of the option. In contrast, option sellers receive a credit in their account for selling an option and get to keep this amount if the option expires worthless. However, option sellers also have an obligation to buy (put) or sell (call) the underlying instrument if their option is exercised by an assigned option holder. Therefore, selling an option requires a healthy margin. To trade options, you must be acquainted with the select terminology of the option market. The price at which an underlying stock can be purchased or sold if the option is exercised is called the strike price. Options are available in several strike prices above and below the current price of the underlying asset. Stocks priced below $25 per share usually have strike prices at 2 dollar intervals. Stocks priced over $25 usually have strike prices at $5 dollar intervals.

The date the option expires is referred to as the expiration date. A stock option expires by close of business on the 3rd Friday of the expiration month. All listed options have options available for the current month and the next month as well as specific future months. Each stock has a corresponding cycle of months that they offer options in. There are three fixed expiration cycles available. Each cycle has a four-month interval:

January, April, July and October

February, May, August and November

March, June, September and December

The price of an option is called the premium. An option's premium is determined by a number of factors including the current price of the underlying asset, the strike price of the option, the time remaining until expiration, and volatility. An option premium is priced on a per share basis. Each option on a stock corresponds to 100 shares. Therefore, if the premium of an option is priced at 2, the total premium for that option would be $200 (2 x 100 = $200). Buying an option creates a debit in the amount of the premium to the buyer's trading account. Selling an option creates a credit in the amount of the premium to the seller's trading account:

Example: Jane wants to buy a house. After a few weeks of searching, she discovers one she really likes. Unfortunately, she won't have enough money for a substantial down payment for another six months. So, she approaches the owner of the house and negotiates an option to buy the house within 6 months for $100,000. The owner agrees to sell her the option for $2,000.

Scenario 1: During this 6-month period, Jane discovers an oil field underneath the property. The value of the house shoots up to $1,000,000. However, the writer of the option (the owner) is obligated to sell the house to Jane for $100,000. Jane buys the house for a total cost of $102,000-$100,000 for the house plus the $2,000 premium paid for the option. She promptly turns around and sells it for a million dollars for huge profit of $898,000 and lives happily ever after.

Scenario 2: Jane discovers a toxic waste dump on the property. Now the value of the house drops to zero and she obviously decides not to exercise the option to buy the house. In this case, Jane loses the $2,000 premium paid for the option to the owner of the property.

How Options Work Review

Options give you the right to buy or sell an underlying instrument. If you buy an option, you are not obligated to buy or sell the underlying instrument; you simply have the right to.

If you sell an option and the option is exercised, you are obligated to deliver the underlying asset (call) or take delivery of the underlying asset (put) at the strike price of the option regardless of the current price of the underlying asset.

Options are good for a specified period of time, after which they expire and you lose your right to buy or sell the underlying instrument at the specified price.

Options when bought are done so at a debit to the buyer.

Options when sold are done so by giving a credit to the seller.

Options are available in several strike prices representing the price of the underlying instrument.

The cost of an option is referred to as the option premium. The price reflects a variety of factors including the current price of the underlying asset, the strike price of the option, the time remaining until expiration, and volatility.

Options are not available on every stock. There are approximately 2,200 stocks with tradable options. Each stock option represents 100 shares of a company's stock.

ETF Silver Fund

June 21, 2005

Barclays Global Investors International Inc. has applied to the U.S. Securities and Exchange Commission (SEC) to launch a silver-backed exchange-traded fund (ETF). Barclays wouldn't comment on estimates of when the ETF would be approved.

The move follows the January launch by Barclays Global Investors of an ETF based on the gold contract on the Comex division of the New York Mercantile Exchange. ETFs, designed to track the gold or silver price minus administrative expenses, provide individual investors greater access to the precious metals market.

March 22, 2006

Hi ho Silver, away - new ETF very near.
All that glitters is not gold, at least in the ETF world this week. The Securities and Exchange Commission has finally approved (PDF file) the American Stock Exchange's plan to trade Barclays' silver exchange-traded fund. Much like the State Street and Barclays gold funds, shares of the new ETF (trading under the symbol SLV) will represent ownership in the actual metal. In this case, each share will equal the value of 10 ounces of silver.

February 24, 2006
A Silver ETF will require 130 million ounces, according to the prospectus, and there is not even 130 million ounces over at the COMEX to buy. So, the Silver ETF will need to buy that 130 million ounces well before the ETF is approved, making prices soar (for a little while anyway).


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