Drop In Silver Attributed To $1 Million 37% Downside Bet On SLV

Tyler Durden's picture

With everyone transfixed by the relentless move higher in silver, stories, myths and virtually anything is used a catalyst to explain any move lower in the precious metal. While earlier there already were two rumors that the COMEX would imminently hike gold and silver margins again (so for untrue) what is true, and what many are attributing the move in silver to, is what according to some is an outsized option bet that SLV will drop 37% by July. Bloomberg reports: "A trader’s almost $1 million bet that an exchange-traded fund tracking silver will plunge 37 percent by July was today’s biggest single options trade on U.S. exchanges as futures on the metal reached a 31-year high. The 100,000 options to buy 100 shares each of the iShares Silver Trust (SLV) at $25 by July changed hands at the ask price of about 10 cents and exceeded the open interest of 6,054 outstanding contracts before today, indicating that a buyer of a new bearish position initiated the transaction. The ETF rose to the highest intraday level since trading began five years ago, $40.33, before erasing gains. It fell 0.5 percent to $39.67 at 12:54 p.m. It hasn’t closed below $25 since November."


“It’s definitely a massive downside bet on silver,” said Henry Schwartz, president of Trade Alert LLC, a New York-based provider of options-market data and analytics. “It’s so far out of the money that the buyer is probably just looking for a moderate pullback because a $3 retracement to where it was in March could double the position to $2 million.”

Silver for May delivery in New York climbed as much as 3.4 percent to $41.975 an ounce, the highest level since January 1980, when futures reached a record $50.35. It last traded at $41.33. Silver, where half of global consumption is industrial, has been rising because it benefits from a rebounding global economy as well as demand for a haven, according to UBS AG.

Of course, such a simplistic analysis certainly ignores what are likely numerous other components to a trade that is almost certainly multi-handed. After all let's not forget that it was none other than Morgan Stanley on Friday explaining why there appears to be a sizable short-gamma position in the market, which is substantially higher than just a $1 mm notional exposure, and which if anything, is a far more potent driver in the price of silver. Furthermore, if a $1mm bet is sufficient bet to push the market in either direction, then it is safe to say that there is absolutely no liquidity in the PM market whatsoever.

We are confident much more will emerge in the story of who is betting what and how much on future silver moves before June 30 comes.

Lastly, anybody out there heard of... gasp... hedging?

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ZeroPower's picture

Im glad this bet was taken as we can proceed to BTFD. Currently, wouldnt touch a silver long above 39, but hopefully we can see lower px to get back into.

Ray1968's picture

NO QE3 = Higher rates = Silver collapse

That is conventional wisdom. Conventional wisdom is often wrong.

Besides, I've got plenty time to wait. There's no way we're going to stop printing money. Just a matter of time.

Math Man's picture

Just unloaded some of the puts I bought on Friday up 40%...


SheepDog-One's picture

LOL Methman, now only 400 more such trades in a row to get back what you lost buying puts ever since $20.

Math Man's picture

Contango, bitchez!

No more backwardation = the beginning of the end for silver.

spiral_eyes's picture

= the beginning of the end?


weren't you saying a few days ago that the reasons we all give for high silver are fundamentally sound, but just that the price is overshooting itself? silver is exceedingly useful (try eating an ipad without it), exceedingly rare, and increasingly hoarded. no amount of technical analysis will stop me from buying the fucking dip. silver: on the way to the moon for fundamental reasons. 

Math Man's picture

Oh yeah, such great fundamentals.  Only 50% of the silver we mine is used industrially and the rest is speculatively hoarded by ZH readers and ETFs.

On yeah, and the largest ETF owns a half years mine production.   Such great fundamentals.

And production costs are between $5 and $10 bucks an ounce.

Face it, the price got ahead of itself because of all the speculative buying and hoarding...  and it will soon be back below $20 where it belongs.


The REASONS to buy silver were correct (dollar devaluation, QE, etc), but the price was WRONG.   Just like in the dot.com boom...  the internet did change the world, but buying pets.com at $100/share was a big mistake.


Burnbright's picture

How is this for a prediction


by Burnbright 
on Tue, 04/05/2011 - 11:31


Just wait for the next dip, they will be calling a top. It is actually kind of funny cause they are a good indication of when to buy. 

by Dr. Porkchop 
on Tue, 04/05/2011 - 11:49


If we could have their comments quantified on the level of trollishness and chart it, we could have the PM Troll Buy Indicator Index.

by Burnbright 
on Sun, 04/10/2011 - 23:55


I bet we get a dip here soon at either right below 42 or 43 followed by a margin hike announcement an hour later. So more than likely by tuesday. 

I was off by the margin hike announcement but the day still isnt over yet.

yipcarl's picture

Look peeps most of you know this.  If in fact the Mass Media is telling us someone is taking a huge silver short that means to buy the F out of it.  THe reason....If the big dogs were really sellling silver, you wouldn't know they sold a single share, in fact there would be some news about them buying it.  


Burnbright it right on it.  Silver 10 bucks higher here we come. 

Henry Chinaski's picture

I was buying SLV for some time, but have been selling into this latest run-up for a couple of months and feeling stupid as it keeps running up beyond reason.  Meanwhile DXY keeps diving...  I don't see any good options for my paper assets.  I am diversified with plenty of phys and other tangibles, and even farmland, etc.  Still, I don't like the outlook for my children in any asset class.   This is a great forum, but how do you get ahead in a decline of an empire?

yipcarl's picture

You think you have a viable answer, hit me up. 



TwoShortPlanks's picture

"how do you get ahead in a decline of an empire?"...by selling guns, ammo and rope, lots of rope!

JoeSexPack's picture

$5/ounce production cost means those producers are a great buy.

If you're honest, for once, then a link would help your case.

If you're lying, again, talk is cheap & compulsive liars are still losers.

Math Man's picture

Just pull up the financial statments of any silver producer...  problem is that it is hard to find one that has gone fully hedged at these levels. 

Temporis's picture

So when does it stop Mathman? Silver at $40? Silver at $50? $60?

Call it... right here right now.

tmosley's picture

He already did.  He claimed $34 was the top.

Also, it's funny how he brags about his 40% gain on his last trade, but says nothing about all of the 100% losses that preceded it.

GoinFawr's picture

Oh yeah me too! I totally went all in ZSL on Friday at its very lowest low of ever lower and lower lows. And, depending on which way the market moves tomorrow, I will let you know what I did today the day after. (Hint: I've already won!)

Ghod how I love the interwebs: You just cannot lose.

All kidding aside, we all knew MethMom would be back spewing his asshat rote the moment there was any sort of naturally occuring retracement. What a predictable putz.

TwoShortPlanks's picture

Wank-Wank, I'm a Tank!

Heard all this shite before...allow me to let everyone on ZH in on a little secret...come closer to the screen...come-on, closer...***whispering***...here's a little #1 secret about Silver and many other commodities you actually already know very well, but seem to forget...***whispering very quietly in your ear***...since the modern world has never been in this situation before, ever, why do the so-called experts claim to still know which way is up and which way is down, how trends will go this way "for sure", then that way "for sure"...ask yourself, what is all that based upon since we've never been here before...***Ultra quiet now***...so...at all those who claim to know what will happen in this environment, especially when we don't even know if any Silver mines will still be alive after a massive post QE credit crunch, or worse, a collapse, how about you tell them to SHUT THE FUCK UP!!!

The only rule that counts in this environment is dead fuckin simple, and you damn-well know its' true...when going long on PMs etc, price is dictated by fear only...the dips and peaks along the way are the Weekend Warriors trying to gleen a buck out along the way. Fear will drive a PM bubble, no different than the fear-based housing bubble fiasco. This is common dog-fuck!

So, go ahead an believe the weekend warrior try-hard market manipulators on ZH if you like...who for some reason don't seem to be getting million dollar bunuses on Wall Street, perhaps because of some obscure reason like, they haven't been discovered as yet (LOL), personally, this shit is simple; buy long, stay long, the 'Fear' is still to come! Once the dust settles (Nuclear Fall-out), buy farms.

Missing_Link's picture


I'm long silver, but that was good.

TwoShortPlanks's picture

Might as well stick a Parrot on my shoulder and call me John; that's how long on Silver I am...well I thought that was funny at any rate.


Hephasteus's picture

Uh funny. We have 100 years of fed economic activity under our belt. That's 4 generations. In 4 generations if you can't learn anything you're not paying attention.

The trolls are easy to figure out.

1999 fed mint sells 5 million ounces of silver eagles.

2011 fed mint sells 40 million ounces of silver eagles.

Of course they are screaming it's going to crash.

Guess what? Religious nuts are trying to start this big wave of judgement day is may 21, 2011 or some shit. Welcome to the mushroom. The guy running the theory had an old theory that it was september 1994.


GoinFawr's picture

Haha! 'Sif Wall St. would hire anyone who has been daily kicking them in the ballz for the last decade with Au-toed, silver-shanked boots... oh, and I know a farm is (shudder) work and all that, but man, you city types will never know just how shitty Monstrous Santa produce really is until you've tried the veggies from my family's garden.

Though, speaking of other things that Wall St. coke headz spend their days endeavouring not to 'discover', I suppose if anyone reading this really is a 'million dollah' bonus blood sucker squeezing the life out of your country you may have inadvertently given us and ours some gold for that criminally overpriced meal you ate at 'Chauve à Col Roulé'; I sincerely hope the waiters threw in the expectorate gratis, 'cuz I'm sure they charged a hero like you extra for the urine content of your coffee.


NidStyles's picture

So you claim to have the secret info that the miner's let only you know?


You can't be serious to think that the cost to pull the stuff out of the ground would stay that regular even with fuel prices staying the same, which anyone that actually own's their own vehicle can look around and tell you that fuel prices are up quite a bit as well.

Lets_Eat_Ben's picture

Hey Math Man I gotta say you have some balls and you stick to your guns. I mean for someone to stay bearish on an asset that's performed the way silver has, takes an impressive amount of self-assurance.

Math Man's picture

Shorting the NASDAQ at 4000 would have looked like a stupid trade at first too...

It's hard to call the exact top of a parabolic bubble like silver.  But we are pretty damn close now.

Thank god for puts... limited downside and huge upside means you can just keep reloading.

Why would you buy silver here?  You have a couple of bucks of upside and more than $20 of downside...


spiral_eyes's picture

the hunt blowout top, inflation adjusted is in the mid 200s. that was artificial scarcity. we keep dropping tomahawk missiles with 7kg of silver solder on libya. china and india are developing a ravenous appetite for consumer goods (mmm delicious ipad). we're about to see a huge solar rollout, in addition to silver's traditional uses (medical, mirrors, water purification and oh as an inflation hedge against the rampant debasement we're seeing on every continent). all of which (other than as bullion) is non-recoverable. peak silver is real.


so you keep believing there's a $2 upside, dude. i think silver: gold is going 5:1 by the end of the decade and 1:5 by the end of the century. fuck the olympics.

SilverRhino's picture

Silver: Rhodium of the 22nd century.

ZeroPower's picture

Lol @ SGR at 1:5.

I mean i know its nice to reassure yourself with random digits, but come on. Youre absolutely right, the olympics would never be the same.

spiral_eyes's picture

competitors now get a medal made from stuck-together federal reserve notes.

Pool Shark's picture


"You have a couple of bucks of upside and more than $20 of downside"

Works for me; bought mostly in the $13 to $15 range.

Also, if you were so certain you were correct, you wouldn't be wasting your time arguing on Zero Hedge. You'd be quietly putting your life savings into ZSL.

Anyway, once silver takes out it's 1980 highs, you'll disappear just like all the other anti-PM trolls...



Harmonious_Dissonance's picture

Yes! Why is it the trolls exhibit such altruism? "I just want to assist you all"

Smiddywesson's picture


Stop trying to be right.  Mathman may have a lower percentage chance to be right, but the average size of his wins from taking such trades is tremendous.


Math Man's picture

Bingo.  I can afford to keep reloading my puts until I'm right...  and when I'm right I make multiples of my initial invesment.

But I'll be right soon enough.  Silver below $20 by the summer.

Even if you're a die hard long, you should still be buying puts as protection.  SO CHEAP....



Hephasteus's picture

You'll keep you're perfect record.

Being right exactly 0 times in a row.

duncecap rack's picture

I like calls better. Then tend to pay off more often these days.

hamstercheese's picture

So meth man....you are suggesting to sell silver and buy Federal Reserve Notes..?? Sell something tangible for paper??  You think the FRN's are going up in value? Not buying it....people aren't buying silver to make money, they are doing it to preserve purchasing power...if you believe silver is going to $20/oz then food and energy prices will also be cut in half...when denominated in FRN's...not gonna happen, all this government spending has to come from something....more money printing...more until it is no longer accepted..then you enter a world of barter I guess.

Lets_Eat_Ben's picture

Hey Math Man I gotta say you have some balls and you stick to your guns. I mean for someone to stay bearish on an asset that's performed the way silver has, takes an impressive amount of self-assurance.

Lets_Eat_Ben's picture

Hey Math Man I gotta say you have some balls and you stick to your guns. I mean for someone to stay bearish on an asset that's performed the way silver has, takes an impressive amount of self-assurance.

Lets_Eat_Ben's picture

Hey Math Man I gotta say you have some balls and you stick to your guns. I mean for someone to stay bearish on an asset that's performed the way silver has, takes an impressive amount of self-assurance.

SilverIsKing's picture

I get it.  I get it.  You are totally impressed with his gun and balls.

Temporis's picture

I got the same impression

emsolý's picture

How many balls could he have?

66Sexy's picture

i think the real question is how many alt troll handles "math man" has.

Sabibaby's picture

May as well just change his name to Lets_Eat_Balls and shove the barrel of a gun up his butt!

thecoloredsky's picture

Math Man

When did pets.com sell for $100/share? Best I can tell it sold at $14/share at its high. The IPO was $11.


Stop posting bullshit.


IQ 145's picture

 But, if he stops posting bullshit; he'll have to remain silent; he doesn't know anything but bullshit; and if he stops typing altogether, he'll get in trouble cause he told his mother he was doing his homework in the basement.

r101958's picture

Nice try......but no cigar.

Absinthe Minded's picture

Yeah, your right. Your always right. All hail Math Man!!!! I don't know why you even hang around this site with all the pathetic and nonsensical drivel about silver going to the moon. I think we are all indebted to you and should sell all our PM holdings right now. Seriously though, if you don't agree with 90% of the comments why do you stay? Seems rather pigheaded to me, either that or your just a contrarian that likes to ruffle feathers. Either way good luck, if TSHTF you'll need it.

SRSrocco's picture

Math Man has a point, unforunately it is a dull one.  Many what I label ANAL-ISTS probably agree with what MathMan stated above.  Sure it is true that CASH COSTS for many silver producers are between $5-$10 an ounce but these are the companies who have high ORE GRADES as well as large tonnage per day.

US Silver Corp had unaudited cash cost per silver ounce produced after by-product credits was $13.50 for the year ended December 31, 2010.  If you take out the by-product credits, I imagine the cash costs were probably over $15 an ounce.  Cash costs do not account for capital expenditures, drilling budgets etc and etc.

There are a good bunch of lousy SILVER ANAL-ISTS out there.  I am not going to mention their names but they also think silver is OVERVALUED.  Some have stated that silver is in a bubble and needs to correct down to $20-$25....same with Math Man.

What I would like to know....WHERE THE HELL HAVE THE IQ's GONE?  Don't these so called anal-ists realize the FED is buying $100 billion in US Treasuries a month?  Do they not realize when you go to foreign countries a good portion of retail businesses no longer take DOLLARS??? 

Silver is not in a bubble.....and it is not OVERBOUGHT.  When the US Dollar finally dies taking down the US Treasury market with it.....and price of Gold and Silver flies towards the heavens, we won't hear a PEEP out of the ANAL-IST CLOWNS who thought it was overbought.

MrSilverAG's picture

"The REASONS to buy silver were correct (dollar devaluation, QE, etc), but the price was WRONG.   Just like in the dot.com boom...  the internet did change the world, but buying pets.com at $100/share was a big mistake."


You sure sound a lot like Fed Shill Stewart Baxter - http://mrsilverag.com/2011/03/28/fed-shill-on-facebook-bashing-silver/

He says nearly the exact same words.   That is twice now you two are basically reading from the exact same script.  Shill much?