Silver — the volatile precious metal with dual demand from industry and investment. Learn to trade silver options on MCX with high-conviction strategies.
MCX offers silver in three contract sizes. Silver is more volatile than gold in percentage terms, making it attractive for options traders who thrive on big moves.
Lot size: 30 kg. Tick size: Re 1/kg. At Rs 90,000/kg, contract value = Rs 27,00,000. Premium quoted per kg. Highest liquidity among silver contracts.
Lot size: 5 kg. Tick size: Re 1/kg. Contract value ~Rs 4,50,000. Popular with retail traders. Good options liquidity in near-month contracts.
Lot size: 1 kg. Tick size: Re 1/kg. Contract value ~Rs 90,000. Lowest capital requirement. Ideal for beginners learning commodity options trading.
Option Type: European style (exercised only at expiry)
Strike Interval: Rs 500/kg for Silver, Rs 500/kg for Silver Mini
Expiry: Last trading day of the contract month
Settlement: Cash-settled against futures closing price
Premium Quotation: Rs per kg (multiply by lot size for total premium)
Unlike gold, which is primarily a monetary metal, silver has significant industrial demand — about 50% of total silver consumption. This dual nature gives silver unique price dynamics that options traders must understand.
Silver is a key component in photovoltaic cells. Global push toward renewable energy is driving structural demand growth. India's solar capacity expansion is a long-term bullish factor for silver.
Silver's superior conductivity makes it essential in circuit boards, connectors, and switches. 5G rollout and EV adoption are increasing electronic silver demand globally.
Silver's antimicrobial properties are used in wound dressings, water purification, and medical devices. A growing but smaller demand segment.
Silver coins, bars, and ETFs account for ~25% of demand. Investment demand is highly cyclical — surges during precious metals bull markets and collapses during bear markets.
The gold-silver ratio (GSR) measures how many ounces of silver it takes to buy one ounce of gold. This ratio is one of the oldest relative value trades in commodities and works well with options.
Historical Average: 60-70 over the past 50 years
Extreme High: Above 80 — silver is cheap relative to gold (buy silver, sell gold)
Extreme Low: Below 50 — silver is expensive relative to gold (buy gold, sell silver)
Current Range: Typically oscillates between 65-85 in modern markets
GSR is at 85 (historically high — silver is undervalued). You expect it to revert to 70.
Trade: Buy Silver Mini CE (bullish silver) + Buy Gold Mini PE (bearish gold)
Silver at Rs 90,000/kg — buy Rs 92,000 CE for Rs 1,200/kg = Rs 6,000 premium on Silver Mini (5 kg).
Gold at Rs 72,000/gram — buy Rs 71,000 PE for Rs 400/gram = Rs 40,000 premium on Gold Mini (100g).
If the ratio compresses to 70 through silver outperforming gold, the silver call gains substantially while the gold put provides a hedge. Total risk is limited to premiums paid.
Silver typically moves 1.5-2x the percentage of gold on any given day. While gold might move 1%, silver can move 2-3%. This higher volatility is both a risk and an opportunity for options traders.
Silver tends to consolidate in ranges and then break out sharply. Buy OTM call and OTM put when silver's IV is low (below 20%). Silver at Rs 90,000/kg — buy Rs 93,000 CE for Rs 800/kg and Rs 87,000 PE for Rs 700/kg on Silver Mini. Total cost: Rs 1,500/kg = Rs 7,500. You need silver to move beyond Rs 94,500 or below Rs 85,500 to profit. Silver routinely makes Rs 5,000-8,000/kg moves in a month.
If you hold silver futures or physical silver, sell OTM calls to generate monthly income. Silver at Rs 90,000/kg — sell Rs 94,000 CE for Rs 600/kg on Silver Mini. Income: Rs 3,000/lot. If silver stays below Rs 94,000, you keep the premium. Repeat monthly for consistent income. The higher IV of silver means richer premiums compared to doing the same on gold.
When the gold-silver ratio drops below 60 (silver overvalued), set up a bear put spread. Buy Rs 90,000 PE for Rs 1,800/kg and sell Rs 86,000 PE for Rs 600/kg on Silver Mini. Net cost: Rs 1,200/kg = Rs 6,000. Max profit: Rs 2,800/kg = Rs 14,000 if silver falls to Rs 86,000 or below. Risk-reward: 1:2.3.
Manufacturing companies restock silver at the start of the year. Chinese New Year buying adds to demand. Silver typically sees a seasonal bid in Q1.
Industrial demand slows during summer. Investment demand is also typically weak. Silver often consolidates or dips, making it a good time to sell options (collect theta).
Indian festival season (Navratri, Diwali, Dhanteras) boosts silver demand. Silverware and silver coin purchases increase. Prices tend to firm up alongside gold.
Fund managers rebalance portfolios. Tax-loss selling in the US can create temporary weakness. Often a volatile month with sharp moves in either direction.
Silver options have a distinct premium profile compared to gold, primarily driven by higher implied volatility. Understanding these differences helps in strategy selection.
ATM Gold Mini CE (Rs 72,000 strike): Premium Rs 600/gram = Rs 60,000 per lot. IV: 12%.
ATM Silver Mini CE (Rs 90,000 strike): Premium Rs 2,500/kg = Rs 12,500 per lot. IV: 22%.
Key insight: Silver options are cheaper in absolute terms but offer higher percentage premium due to higher IV.
For a strategy like iron condor, gold gives more predictable range but lower premium income. Silver gives higher premium income but the range is less predictable. Choose based on your risk appetite.
While correlated, silver has its own demand-supply dynamics (industrial usage) and can diverge significantly from gold. The gold-silver ratio can swing from 60 to 100. Silver is a distinct asset class with unique trading opportunities.
Higher volatility means higher premiums, which actually benefits option sellers if they manage risk properly. Sell far OTM strikes (2-3 standard deviations away) and use smaller position sizes. Higher IV = higher premium income for disciplined sellers.
Silver Micro futures have reasonable liquidity, but options on Silver Micro can have wide bid-ask spreads. Use Silver Mini for options trading — better liquidity and tighter spreads.
Just like gold, MCX silver prices include the USD/INR component. A 1% rupee depreciation adds ~1% to MCX silver prices. Always track both international silver (COMEX) and USD/INR when trading MCX silver options.
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