re: SLV

Options are pretty simple. Start by just buying calls and puts. You are buying the right (but not the obligation) to either buy, or sell, at a set price, on a set date. Consequently, your only risk is the price you pay for the option. That's it.

So if you bought a 1/2016 call on SLV at a $20 strike price, it would cost you $325 per contract. Each contract controls 100 shares. You'd need silver to get above $23.25, by 1/15/2016. A good way to go long, without laying out the funds needed to buy the shares.

Keep in mind, the break even of $23.23 is in theory. SLV could be trading at $22.00, and your call could be worth $4.50, or $450.00. Time premium. It works both ways.

Or if you own the shares, you can sell the right to buy to someone (covered call) as insurance, or buy the right to sell (covered call) as in each case you own the actual shares.

I sell a lot of covered calls.

As an example I bought 3500 shares of PAL, and immediate sold 35 $1 strike price covered calls. Someone paid me $200.00 to buy these from me. It reduces my cost basis in the security. The only danger is that PAL goes to $7, and I have to sell at $1. Selling at $1 is still profitable for me, and I need to feel the pain of not being able to sell at a higher price.