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The price of silver has been on a wild ride the last year. It rose sky-high before tumbling in very fast in May. This tumble took many traders off guard  and left many other investors asking, “how to short silver?”.

The price of silver seems to have stabilized since the abrupt fall in May but uncertainty still remains in that market so it’s probably a good idea for you as a trader to learn how to short silver using ETFs. This will give you another weapon in your trading arsenal to take advantage of sudden movements in the commodity.

The simplest and easiest way how to short silver is by using the iShares Silver Trust ETF which trades under the symbol “SLV” and the price of it correlates to the daily movements in the silver market. There are a couple drawbacks to shorting silver using  this ETF. The first of which is that your broker may not have the shares available for you to short. The second of which is that this method is a more safe platform to short silver and you will not maximize your profits during abrupt movements down in silver.

The latter drawback may not be one at all if you want to play it safe and trade slow and steady like many traders like and even should do. But if you want to maximize your profits should silver tumble, then you should look into trading the ProShares UltraShort Silver ETF which trades under the ticker symbol “ZSL”.

The ZSL ETF is a 2x UltraShort trading vehicle which means that the price of it will fluctuate twice as much as the daily percentage change in silver. So if silver goes down by 5% in one day, the ZSL ETF will rise 10%. This provides you with maximum leverage in shorting silver.

However, while the ZSL leverage is a nice way on how to short silver, it does have its own share of drawbacks. The biggest one being is that it gets reset daily so you may notice that the value deteriorates quite quickly should silver rise. This is something that should always be kept in mind when trading 2x or 3x ETFs.

I hope this article was useful and helped you learn how to short silver using ETFs. Good luck.

This entry was posted on Tuesday, July 5th, 2011 at 10:10 pm and is filed under ETFs, Trading Tips. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.