Silver futures mechanics: contracts, margin, curve, rolling and the LBMA price

What you will learn

• The key specifications of the standard and micro COMEX silver futures
• How percentage-based margin, maintenance margin and margin calls work for silver
• Why silver's futures curve depends on interest rates and lease rates, and what a roll costs
• What the LBMA Silver Price is and why leveraged positions are closed at bad moments

Explanation

General futures mechanics, contango and backwardation were taught in the Derivatives course; here we apply them to silver. Contract details and margins change, so check the exchange and your broker before trading. Futures are leveraged and can lose money very quickly, even more than your deposit.

The COMEX contracts

COMEX, part of CME Group (Chicago Mercantile Exchange), is the main venue for silver futures. As of 2026:

The standard contract's main months are March, May, July, September and December, plus nearby months. Trading ends on the third-last business day of the delivery month; most retail brokers require you to close or roll well before delivery.

Notional value = futures price × contract size. At $30, one SI contract controls $150,000 of silver and one SIL contract $30,000.

Margin

Initial margin opens a position; falling below maintenance margin triggers a margin call (a demand to add money). On 13 January 2026, CME switched precious metals margins from fixed dollar amounts to a percentage of notional; for silver the rate was then about 9% for standard accounts. Consequences:

• When silver rises, margin per contract rises automatically.
• The exchange can raise the rate in volatile markets, and brokers often demand more.

Silver's futures curve

For silver, a simple cost-of-carry estimate is:

F = S × (1 + (r − l) × days ÷ 360)

where S is spot, r the dollar interest rate and l the lease rate, the interest earned by lending silver. Normally r exceeds l, so later contracts cost more: contango. When physical silver is scarce in a market centre, lease rates can jump above interest rates and the curve can move into backwardation. The Silver Institute's World Silver Survey 2026 described elevated lease rates and regional liquidity tightness in 2025.

Rolling means closing the expiring contract and opening a later one. In contango, a long position sells low and buys high at every roll.

The LBMA Silver Price

The LBMA Silver Price is London's daily silver benchmark, set at 12:00 London time in US dollars per troy ounce through an electronic auction administered by ICE Benchmark Administration (IBA). Many ETCs, supply contracts and valuations refer to it. It is one price per day and can differ from your chart at other times.

Closed out at the worst moment

If you cannot meet a margin call in time, the broker can close your position at market. This tends to happen in fast falls, after weekend gaps or when margin rates are raised, exactly when prices are worst. A stop order does not guarantee its price in a gap.

Worked example

Hypothetical example: you buy one SIL contract at $30.00. Account balance $4,000. Initial margin 9% of notional; broker maintenance margin assumed at $2,450. Commissions and taxes are excluded.

1. Notional: $30.00 × 1,000 = $30,000. Leverage on the account: $30,000 ÷ $4,000 = 7.5.
2. Initial margin: 9% × $30,000 = $2,700.
3. Price falls to $29.00: loss $1.00 × 1,000 = $1,000; equity $3,000; no call.
4. Price falls to $28.40: loss $1,600; equity $2,400, below $2,450, so a margin call follows. To return to initial margin you would add $2,700 − $2,400 = $300.
5. A gap to $27.60 (−8%): loss $2,400, equity $1,600. A 13.3% fall wipes out the whole $4,000.
6. At $40.00, margin would be 9% × $40,000 = $3,600.

Fair value and roll: with S = $30.00, r = 4%, l = 1% and 90 days, F = $30.00 × (1 + 0.03 × 90 ÷ 360) = $30.225. If you roll from a contract at $30.00 to one at $30.25, the cost is $0.25 × 1,000 = $250, about 0.83% of notional.

Common mistake

Practice activity

Hypothetical: you buy two SIL contracts at $28.00 with a $6,000 account. Initial margin 9%; broker maintenance margin $4,580 for the position. (a) Calculate notional value, leverage and initial margin. (b) At what price does a margin call start? (c) Silver gaps to $26.90. What is your equity and how much must you add to return to initial margin? (d) Estimate a fair futures price for 180 days with r = 3.5% and lease rate 0.5%.

Key takeaways

• SI covers 5,000 ounces ($25 per tick), SIL 1,000 ounces ($5 per tick); always calculate notional value first.
• Since January 2026, CME sets silver margins as a percentage of notional, so margin rises with price and can be raised in volatile markets.
• Silver's curve reflects interest rates minus lease rates; scarcity can push it into backwardation.
• Forced closures tend to happen at the worst prices, and gaps can exceed stops.

Next step

Next, you will calculate the gold-to-silver ratio and see why it is context, not a timing signal.