Читать книгу Investing in Gold & Silver For Dummies - Paul Mladjenovic, Paul Mladjenovic, Ted Sudol - Страница 45

What the heck is exchange risk? That sounds odd! Well, it’s not a reference to currency exchange; it’s a reference to the risks that could occur at the exchanges where futures and options are traded. When futures (see Chapter 12) and options (see Chapter 13) are transacted at an exchange, such as at the Chicago Board of Trade (CBOT) or the New York Mercantile Exchange (NYMEX), they are done so under the rules and regulations of the exchange. The exchange can either purposely or accidentally encourage market outcomes by changing the rules and regulations on an ongoing basis.

A real-life example happened in the spring of 2011 with silver futures at the NYMEX. Silver rallied to $49.85 (pennies away from matching its all-time high), and the exchange, in an effort to dampen what seemed like frenzied buying, aggressively raised the margin requirements on silver futures contracts to try to quell overspeculation. When normally you could put down 10 percent to speculate on a futures contract, the new amount would be raised to, say, 12 or 15 percent or possibly more. When you require people to put more funds in for the ability to speculate, then of course you’ll diminish that activity. If the margin requirements are raised too high, that will result in more selling. More selling results in prices dropping.

The exchanges want an orderly market, and they may change regulations or adjust requirements to encourage or exact an outcome. Sometimes that outcome may result either purposely or accidentally in a negative way for you. Here are the several events that may happen at an exchange:

 Margin requirements may change. I give an example earlier in this section, and this is the most common event that an exchange could enact.

 “Liquidation only” can happen. Although rare, this means that the exchange may temporarily restrict the buying side, and only selling can occur, thus forcing the price down. This occurred with silver in 1980 when it hit its then all-time high of $50.

 Trading is halted. Another rare event, the exchange may temporarily halt trading in a particular futures contract.