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Drop In Silver Attributed To $1 Million 37% Downside Bet On SLV
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."
More:
“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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I am keeping my physical......too bad for you paper mongers.
Hap....that was great! And I agree with you 100%.LOL
Bet that SLV's lack of physical silver will be exposed?
This may actually be a LONG bet on physical silver. May COMEX default--SLV proven to not have physical backing it up.
What will the price of physical be when SLV is shown to be fraudulent? It won't be 25.
The massive naked shorting in PMs is about to be exposed--too much money to be made in exposing it. Only a question of when.
Just thinking out loud here - but is it possible that the buyer of the puts MAY not think that silver is actually going to go down - but rather the ETF is going to go down because they do not have the physical metal to back up the open interest in the fund. I know of at least two people who got calls last week from typically sell side houses MONEX for one - who wanted to Buy Silver Back from people who held physical.
I said earlier in the thread that long physical, short SLV is an easy trade (though perhaps a bit capital intensive). ZERO DOWNSIDE and a real nice option on the conspiracy theory panning out.
This may be what I warned about twice in the past few days. The predators-that-be know stock and commodity prices will crash when everyone (including the dumb money) realizes QE2 will not be immediately followed by QE3. The owners of the fed, including JPM and GoldmanShafts know exactly what the fed plans to do, so they position themselves accordingly.
If I'm right, expect far more of these kind of positions in commodities and commodity producers, perhaps reaching many billions of dollars (massively leveraged of course).
For the reason they're doing this, go back and read my posts the past few days. This is all being done to make the fed praised as a "hero" rather than a "villain"... all because they waited a few days or weeks between QE2 and QE3.
I was just reading through these comments and I have to say, Burnbright, you really nailed it in your prediction about silver. Methman....lay off the Meth.
I was just reading through these comments and I have to say, Burnbright, you really nailed it in your prediction about silver. Methman....lay off the Meth.
Actually one VERY interesting fact popped out. Fox news had a spot on this morning regarding how Silver was going to hit $50 an ounce.
Two hours later the raid started hardcore and all of a sudden we are seeing a pullback to Friday's price.
Another though is that this could have also been a million dollar infomercial to the sheep that are starting to wake up especially if they do run stories tonight contradicting the original story this morning and citing a 'huge' drop from intraday trading highs.
The more I think about it the more this and the rumors of QE ending are a GIANT headfake to shear a little more off the sheep.
So today wiped out the weekend's gains ... big fucking deal. $44 by 4/29 is still a good set of gains for physical holders.
I CALL "BULL SHIT"..On this reason for the big drop in silver. Anyone believes this is on the manipulators side.
A reasonable bet. If he can sell his entire position for a 10-15% profit before June 30th that's a winner. I think SLV/Silver is overdue for a correction but over the long term, the trend still points to $60+ by year end. The Fed will F'up again, you can count on it and that will trigger the correction.
Whoever sold the puts to this entity just banked $1mm.
A one million dollar lottery ticket.
IMHO there are better ways to hedge than to buy puts against a bull market in real money. For example, the semiconductors (SOX) failed to break its 50DMA Thurs/Fri, -2X etf SOXS.
Confirmed: it was charlie Sheen to hedge against bitchPrizes(because he has an flatrate against infla)....not more, not less. Its an mirrion $ bet in an Trillion $ world . Who cares beside ZH, really. The counterpart phones JPM and all have an good meal @ the hamptons. Come down guyz.
the question is: We will see a fair bid and price till the expiration ends? especially when slv tanks? thats more interesting.
gl for this guy
looks to me like the "markets" may be discounting a .25% FED upsky, like the bank of england put thru last week. "bets" are being made that this might take the wind out of PMs. the shorts are awash in blood. they need to recoup. the CBanksters know this and are trying to do what little they can. unfortunately, this will not balance anyone's budget nor allow QE to end.
gavid galland published what i consider to be a seminal interview w/ dr. andrew bogan last week, about ETFs. goldSeek and kitco both put it up last friday: Are ETFs Really Safe?
this is not an EZ read, yet it is step-by-step and methodical, as are most "Casey Reports".
some slewie hi-points:
over 50% of AMEX vol. is ETFs. The Flash Crash on May 6 of last year showed some structural issues with ETFs and perhaps with our whole market system for equities as well. Another incident occurred in September 2008, when the Lehman and AIG mess was upon us. The commodity ETFs run by ETF Securities, Ltd., in London halted trading when AIG's solvency came into question. The funds were investing in derivative contracts, including swap agreements, some of which were with AIG. It was only the Federal Reserve pumping in tens of billions of dollars that prevented those products from going. Bailing out AIG averted a disaster for the funds, and they continued to trade the next day. I think it's a clear example where you have a counterparty risk wrapped inside the fund that could be very significant in bad circumstances.
Some clarity is starting to emerge from work done by the SEC and others. But from our perspective, those statistics are quite alarming. There's no good reason 70% of canceled trades would be in ETFs while only 11% of listed securities are ETFs. And even though ETFs trade more actively, they don't represent 70% of all trading volume. So any way you look at it, they were badly overrepresented among the canceled trades, i.e., overrepresented among the most extremely off-priced trades. From the perspective of financial theory, that makes absolutely no sense. People haven’t really looked closely enough at what the unintended consequences of ETF issuance and redemption mechanics are, and what the realities are in stressful market conditions.
People have been short-selling ETFs up to shocking levels, like 100% short, 500% short, sometimes over 1,000% short.
One concern is that the huge short interest building up essentially leaves the ETF as a fractionally reserved stock ownership system. If you have a fund, for example, that is 500% net short, then for every one holder of an actual share there are five other investors who own IOUs for the shares. Their real shares have been lent out and short-sold to someone else – usually without the original owner's knowledge, unless they read and still remember the margin agreement they signed when they opened the account 10 years ago.
DG: Was that a really lousy fund, and somebody just said, "Enough, I'm going to punish you guys and get out of it,” or –
AB: Oh, no, no, IWM is one of the largest and most liquid ETFs in the entire market. It's the Russell 2000 iShares ETF. It is the poster child of why ETFs are great. AB: No. In fact, in one ETF, IWM again, short positions recently amounted to 14 billion dollars. That's not an enormous amount for the capital markets, but it's a pretty significant amount with respect to 2,000 small stocks.
You take that across the entire ETF industry and you're looking at about 100 billion dollars in short interest – money that did not go into the underlying shares or gold or whatever the ETF represents. It was instead lent to hedge funds. It has been deposited in a shadow banking system where ETFs allow short-sellers to borrow money from institutional and retail investors.
DG: And what are they doing with that money?AB: Well, no one knows.
DG: Knowing what you do, I mean, obviously you deal on an institutional level with your money-management firm, do you own ETFs personally? AB: We do not. We do not own any ETFs either personally or on behalf of the funds we manage.
ok. enuf of that. tyler generated many "ideas" obout this "bet", clealy a put transaction from the screen shown.
robo is pointing to the volatility of the mining shares ETFs, down abt 2% today, and living up to their volatility reputation. the toronto exchange got nicked for over 1.6% today.
Elsewhere, short interest on the fund has been surging. Short interest on SLV rose by 31.5% during the most recent reporting period, and now represents a healthy 6.9% of the ETF's float. In light of this data, it's possible that traders have been purchasing calls on SLV only to hedge their shorted shares -- a theory supported by the fact that Wednesday's most popular strike was the out-of-the-money October 41 call. Pasted fr. schaeffer's investment reasearch.
as you know, if i could only tell the future a tiny bit better, i wld spend a heluva lot more time @ the racetrack and baccarat tables, and fuk zH!
hopefully as many diff Z's who goto the link and read this stuff and research the slv will each find something unique.
what did slewie think of his trip, here? first, dr. b is pretty freakin smart, as is d. galland. dr b. avoids ETFs and thinks there is embedded counterpart risk which is pretty elusive, during orderly times, and can jump up & bite ya during stampedes for the exit.
next, robo & others have posted on this site abt hedge funds' ballooning assets. this piece makes me wonder how much of this phenom is due to shorting ETFs to try for higher returns elsewhere. i would call this the ETF carry trade. to the best of my knowledge, slewie just made history w/ that puppy! tyvm! i'll be here all week! dr. b sez this is administered thru the "shadow banking system".
finally, i am reminded, once again that many banks are insolvent and "liquidity does not cure insolvency". in other words, the FED & BoE have many and sundry looking at inflation, oil prices, cost of borrowing for bloated goobermints, but the insolvencies are always there and maybe should be seen as some of the counterparty risk embed as these playas throw this ETF shit around like confetti. tyler has pointed to the controlled upward drift of the R 2000 so often, we are almost deaf to the words. here we see two men of stature dicuss the IWM ETF as if they were speaking of leprosy, in polite company, of course.
enjoy!
To Bloomberg:
Bull shit, and fuck you.
I'll happily double my 3,000 ounce physical position on the dip but I seriously doubt this is anything but bull shit. Bring the Fucking Dip On.
hi! are you married?
BYAAAAAAAAAAHAHAHAHA!!! Get a load of this BS, zerohedgers!!!
http://online.barrons.com/article/SB500014240529702042619045762428842546...
i can't tell you how much i laughed as i read that. i wonder how much money JPM paid them to post that. lol! what a load of crock.
and also, i am shocked that a measely $1m bet alone did this today. if that's true, that blows me away. anyone armed with a standard, leveraged forex account can log in and pop silver back up if that's the case, ...it doesn't take much equity to buy $1m worth of XAGUSD. is this market really that small?
exactly...when I read an article anymore I ask myself "What is it they are trying to convince me to do?" Sell my silver. Why....why do they want me to sell my silver...because they need it to cover their short positions. Propaganda. It's going to get more intense as this year rolls on, i can sense it. Do the opposite of what the devil wants you to do.
Just BTFD, There just trying to cool the action. I don't believe it for a minuite that PM's are going anywhere FWIW. I'm well apraised of the rumors, I wired 10K over to Apmex at 2:30 est, 120 oz silver, 3 oz gold physical delivery to add to my hedge biznatches! That's how scared I am of a 30% pluse dive of PM's. Don't believe the hype it's a sequel.
The Bad Guy.
Big put options in place? Oh boy - one false flag coming up. Remember the airline stocks before 9-11? They were lined up to buy puts. They can make a lot of money this way to cover their large short position. Problem is a big dip can cause heavy buying in the physical and then you could have a force majeure (horse manure) to bail the boyz out of a delivery failure or even have the markets closed for months so they can buy directly from the mines to cover when the markets open again, if they open again. Yep, looks like a false flag coming up.
Look, I don't wanna sound like a dick.. But who would make that "Put" public? I mean.. come on! Fuc the false flag BS and roll the dice. Let it rip, JPM is up against the wall from last month still, National debt limit raised or not will force PM's up either way not to mention printing another 600b. So don't be herded. What commodity is comming down? gas? oil? wheat? corn... you see? it's theater.
The Bad Guy.
"JPM is up against the wall" which is why all "options" are on the table.
this trade wasn't a bet that slv would go to 25. it was simply getting paid 1 million to provide isurance to people who might think it could go to 25. to write this put option the seller would probably think it was impossible to go to 25 and why not take the million now and be willing to buy 10,000,000 shares of slv at 25
would anyone here be willing to buy slv at 25? i sure would, especially since it's almost 40 now ... but i wouldn't bet it would go to 25 and i don't this this put trade was actually making that bet either
to imply the trader made a million dollar bet that slv would go to 25 by june would also mean to imply the trade would lose a million if it didn't reach that target. but in this case the trade generated a million on a probable outcome of nill .. nearly risk free if you ask me. risk-free trades can rarely be called bets.
but as the article points out, almost any reason is givin' for why precious metals move this way or that, but instead of this being a reason why the metal moved i'd say the movement in the metal probably created the reason why this trade is already a success.
that's my humble opinion anyway
Agreed dehdhed, I don't go for head fakes, and that article reeks of it IMHO. Keep on truckin and F- da rumor mill. I trust only to myself.
They always use backwards talk all the time anyway.. Like "Health Care" = death assurance. Tarp = no banker left behind and so fourth.
The Bad Guy.
jpm probably snatched the cool mill knowing there's no way in hell slv will ever hit 25 again and then spoon fed the spin to the media and tried to scared the bajesus out of everyone
or maybe pimco found a new way to generate 24% annualized risk-free return with all that cash
I bought $1 million notional in silver OTM calls in one shot in 2002 and it didn't make the news...
anyway from a fundamentals perspective 75$ silver makes more sense as SP500 1500$
BTFD, and assess why you are buying physical instead of fiat silver......
http://www.youtube.com/watch?v=GmAgdx6_GHg&feature=feedu
American scrap gold bound for China.
A 37% DROP?..THAT'S GREAT. BUY THE DIPS, take physical possession, dig a hole, hide your stash and don't tell anyone.
Nobody can be this stupid in calling a top here. they are paid assassains of JP morgan assigned to infiltrate these boards. Look how desperate the govenment is as they bought the phony put today for $1m of taxpayers money
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The market operators ie banksters are driving the USD index down and pumping up everything else. This process will continue till there are no long positions left in the USD index and no short positions in any of the commodities, stock or currencies other than the USD.
The operators are then likely to take the long position on the dollar and short position on everything else. They would then use their money power to move the markets in the direction which would get them the maximum profit while screwing all other traders / hedge funds / investors.
The stock, commodity and currency exchanges have been reduced to gambling dens whereby the more powerful traders with deep pockets move the markets to maximize their own profits at the expense of the remaining not so powerful players. The big boys have enormous money power to move the markets in the direction which results in maximum profits for themselves. They effectively use the media to lure the other players in the market to a position where they would incur maximum loss.
The markets will fall only when the banksters have eliminated all the short positions and only they themselves have positioned themselves to profit when the market falls
OR
When an unexpected world event catches the banksters with their pants down and the softwares they use to rig the markets go berserk beyond their control.
http://www.marketoracle.co.uk/Article24581.html
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The "big dogs" will sell on the way down. And it will be the BTFDs that they sell to.
And after they sell to the BTFDs the BTFDs the BTFDs can sell to each other?????
DOH!!
gh
Seems like there are a lot of people here who have NOT been thru a few Silver cycles. Cloaking themselves in Fundamental analysis L O L . .. Silver can easily sell off 30 or 40% from here. In fact the average Sell off since this bull began is 31% so be careful be VERY careful set your stops. Dollar is ready to rally, Euro ready to rollover as is oil Silver gold etc. You may get another week but the end is at hand for this leg of the commodity Bull.
Why is this trade so hard for people to believe or understand . . . Silver can drop $5 this week or this month and that guy can close out his position for 100%+ Gain. It's not a conspiracy there are dozens ways to play that position. So get over your conspiracy obssessed selves. There are so many real ones these days why make up more
Quasi--Silver could drop $5 this week. OR, it could go to $50. None of us knows. What are facts are these: $130T+ in debt/obligations, trillion dollar annual deficits, a 17% jobless rate, real estate in the sh*#ter, a government in Washington that thinks that raising taxes will help(!), a Fed that almost certainly will continue to weaken the dollar, instability in the MENA (what happens when the Muslim Brotherhood decides to hike fees for Suez Canal use by 1000%?), and a President hell-bent on guaranteeing that more than 50% of Americans are fully dependent upon the federal government for subsistence. Now, how does any of that, long term, negatively impact silver and gold prices? None of it does. Silver and gold, long term, are going to $100 and $5000, respectively, so $5 this week, one way or another, does not matter.
No need to buy, pick a spot on some land somewhere and stick a shovel into it until you find some silver. Maybe the old Comstock might have a few leftovers.
Math Man, I purchased some puts when silver was 37 and exited at 34 on most of them the remaining are pretty much to zero. However, now I see the value of reloading those puts...the prices are 1/3 cheaper and a 2 dollar drop in silver will double my investment.
I want to also let you know, I value your insight. Please continue posting you have been a breath of fresh air.
RogueFit
I was following some cycles and some analysts who were following cycles, and I reached the conclusion, in Feburary, that we would see $1225 gold and $23 silver by the end of March. I then held on for a few more weeks, sure that both gold and silver had to pull back from what seemed like grossly high levels. Of course, by doing so, I only watched both go higher. Finally, I bought in on Friday, at about $1465 gold and $40 silver. And yes, I knew, when I bought, that I would be at risk to have entered at a short-term peak. But the risk of both going higher was just as great as the risk of a dip. So, since I firmly believe that this is a long-term BULL, I figured I would go ahead and get in and ride it out to what I expect will be $5000 gold and $100 silver--by 2016. Sure, there will be pullbacks, and if I have cash to put into them on the pullbacks, I will do so. But I missed huge gains by waiting for a short-term pullback--never again.