FMX Connect Afternoon Gold Fix: "Yesterday’s Sell Off From The 1415 Area Seemed Almost Orchestrated"

Submitted by FMX Connect

Summary

April Gold settled at $1409.30 per
troy ounce, a loss of $6.50 for the day.  Volatility was offered today
and risk reversals swung towards the puts.

Active Options

M 1500 C

J 1400 C

V 1100/1200 1 x 2 PS

Q 1600/1800 1x2 CS

ATM Volatility Curve:

Volatility Smile:

Analysis:

For
the second day in a row there was strong two-way business in the front
part of the term structure while the back part of the curve was
alternatively ignored and sold. Funds continued to sell May options.
Today they sold the 1500 C. Meanwhile the April 1400/1420 Strangle was
purchased in size Over-the-Counter. In June the skew bubble surrounding
the 1600 strike was squashed as speculators bought the 1500/1600 1x2
call spread. Bearish dealers bought the October 1100/12000 1x2 put
spread and in general, sold back month straddles.

Commentary:

Options
held up reasonably well in the fronts after yesterday’s post-close
washout. Dealers came back buying puts in December and selling calls.
Some speculators recommitted to the market by rolling their longs from
April to June. This market is definitely a call skew market now with
volatility firming in rallies and dropping in selloffs. What has changed
and we see this in other markets as well, is the increase in fat fails
(leptokurtosis); it seems that insurance must be bought at any price. In
markets where the 20 delta call or put used to be king now it’s the 5
delta call or put that matters most. In gold it’s both: dealers continue
to lean into the wings by buying 1x2 and 1x3 call spreads but the
appetite for tails is insatiable. We don’t think this is temporary, the
world is no longer pricing statistical probabilities, it is chasing
after black swans. All markets seem correlated but at some point the
risk-reward just isn’t there.  Just because a wing call trades at 30%
volatility does not increase the probability it will go into the money;
it’s just a reflection of unquantifiable fear.

Editorial comment:
It’s becoming increasingly annoying watching dealers buy call and sell
puts the day before we rally $20, and then the next day buy put and sell
call the day before we drop $20. Yesterday’s sell off from the 1415
area seemed almost orchestrated.  At the very least, the futures selling
came in during the thinnest trading hours. While exchanges herald the
benefits of electronic trading there is one thing wrong with it.
Electronic trading minimizes the information leakage associated with
using brokers, for sure, but it is also allows oligarchic organizations
to anonymously manage price movement while hiding behind digital
displays. We won’t use the word manipulate, in part because of our
libertarian bent, but it’s getting ridiculous. Where there used to be 50
5-lot thieves on the floor now there are 5 Too-Big-To-Fail banks with
infinite fed-sponsored balance sheets doing whatever they please. The
idiot locals on the floor, fragmented as they were, served to keep the
big banks in check because there was transparency of price and to a
large extent, the players were known. This doesn’t exist anymore and we
don’t see an end to it. Instead of thinning the forest for the trees,
technology, regulatory and economic factors have killed the saplings and
destroyed market diversity. This translates to a narrow and deep
liquidity pool in trading venues; god forbid if one of them fails.

Comments

[asdasmos]

Not to worry, Marc Faber is here to save the day.....

Marc Faber McAlvany Interview 23 February 2011.

 - http://www.youtube.com/watch?v=3uEbhPuoTx0

[Fred Hayek]

Thank you very much for providing that link.

Faber was interesting, as always, but the two hosts were also good.

[SilverRhino]

Ya think??

Silver 36 end of next week as reality and squeeze catches up.

[DoChenRollingBearing]

Friend of a friend of mine (FOAFOM?) reports from the north coast (Atlantic) of Florida that his local coin shop is ALL OUT of any bulk / coin silver (non-numismatic).

[pgarner]

Tell me this has happened at 500 coin shops, and I'll pay attention.

[Pool Shark]

It happened today at the US Mint:

http://catalog.usmint.gov/webapp/wcs/stores/servlet/ProductDisplay?catalogId=10001&storeId=10001&productId=15252&langId=-1&parent_category_rn=45005

Got my order in yesterday (thanks to Rocky Racoon).

Good luck getting any silver from the US Mint now...

[Turd Ferguson]

"We won’t use the word manipulate"

WELL I WILL. THE EVIL EMPIRE MANIPULATES PRICE EVERY SINGLE DAY!!!

[SilverIsKing]

Anyone who thinks that the silver drop beginning at approximately 2:15pm on Thursday, February 24, 2011 is not manipulation is a stupid fucking asshole.  EE fingerprints all over that move.  Textbook.  Alright, maybe they aren't an asshole but they sure are stupid.

[RockyRacoon]

Got my order in yesterday (thanks to Rocky Racoon).

Glad you were able to snag a few.  There are 2 possibilities:  1. They are sold out, or 2. They are seeking a price increase which takes a while.   The "temporary" nature of the unavailability leads me to believe that they are seeking a price increase.   I'd expect to see them again at $42 or so per set.   There are some dealers selling the sets at a markup over spot but that changes with the spot price (duh).   Paul Sims has an ad in Coin World offering 40 silver Statehood Quarter sets at $1,085.  That's $50 face in quarters.   Not bad if you can get 'em.   Silver in bullion rounds or perhaps ASEs are cheaper but nobody is going to confiscate your "numismatic" coins!

[topcallingtroll]

Coin shops charge outrageous prices.

Golddealer.com  best buy and sell spreads I have found.

I have been dealing with them since 1997 even though I am now mostly out of precious metals and looking for the next big thing (probably slumlord management).

If you ever want to sell your precious metals it is fast and easy with golddealer.com and you get the best prices.  They will even tell you the rules on when they have to report transactions.  Just ask!

Now that the new 1099 $600 limit has been overturned you can buy and sell online without any problems.

[dumpster]

I have been dealing with them since 1997 even though I am now mostly out of precious metals and looking for the next big thing (probably slumlord management).

top calling troll

look no further than precious metals

you really are really clueless.. about the monetary shape of the world ,

and have no clue about the up of gold or silver

in my opinion

a slum lord ,,

do your just fly with head in sand

[Lord Koos]

Silver bulls might want to listen to this:  http://www.netcastdaily.com/broadcast/fsn2011-0225-1.mp3

[Drachma]

Unfortunately another vague and ambiguous analysis. Could skyrocket or could tank. That's genius.

[Gene Parmesan]

God forbid indeed.

[Misean]

TBTF can't fail. The Feral can never run out of money!

[SwingForce]

Connect the dots, you don't think swings in stocks are timed to options expirations?

You don't know, what you don't know. H.m.m.m.m. 

[Waterfallsparkles]

What I find interesting is that stocks trade a lot around option prices during the day.

It appears to me that the exchanged have become option sellers.  The more they trade just above and below an option price the more options they sell.

It also seems like it has become like a Bribery scheme.  The more options you place, the more the stock will move in the direction you want.  Option makers are saying pay me enough money and I will move the stock in the direction you want.

[ZeroPower]

The truth. Options move the underlying (ironic isn't it).

Its a lot easier to move the options due to less capital employed.

[A_MacLaren]

You write this as if you thought these were honest markets...

[Gene Parmesan]

The most troubling part of this manipulation, not to mention the rest of the bullshit being pulled by the banks and the .gov, is the fact that it's all so blatant. Nobody cares about the repercussions, or of getting prosecuted or having their name dragged through the mud at some later date. It's a frenzy of lawlessness. What we should be asking ourselves is "why don't they care?" The easy answer is that they realize that, soon enough, none of it will matter. We'll all be pre-occupied with frying bigger fish before this rat's nest of bullshit can be untangled.

[Threeggg]

Looks like Gasparino from fuax news will have to eat his own shit !

All his Merideth Whitney bashing is going to come back to bite him!!

From AIG just out

http://www.bloomberg.com/news/2011-02-25/aig-says-risk-of-losses-has-increased-on-46-6-billion-muni-bond-portfolio.html

Just a heads up, Silver going ballistic into the close.

http://www.usagold.com/gold-price-live.html

$33.39 up 96.5 cents

[johnQpublic]

them thar theys seem to be playin a little red, a little black, and even a little bit of green 0 00

so get your bets down and lets spin that wheel

meanwhile i'm buyin 1000 face of pre '64 in the morning for 22,500....below spot again woohoo

[topcallingtroll]

ugh.  I remember paying $5800 for it and worrying I was making a mistake.  Are you sure you aren't a mo mo invester?

[dumpster]

topcallingtroll

so you have been in precious metals since 98  and bought 716 oz of silver for 5800..

when 2900 would have bought the sack at 4.00

your blowing wind

[Amish Hacker]

"The world is no longer pricing statistical probabilities, it is chasing after black swans."

Great line. And one reason why trying to predict what the market will do based on technical analysis, fundamentals, and past market behavior no longer seems to work. 

[Quintus]

"Almost orchestrated".  

Ya don't say.

Does nothing else about the way the PM sector trades strike you as slightly unusual?  Maybe the astonishing concentration of short positions, unlike any other market, hints at there being something 'Different' about the objectives of the big players in Gold and Silver?  No?

[RockyRacoon]

From Patrick Heller, his latest:

http://news.coinupdate.com/huge-comex-silver-supply-squeeze-developing-0...

As the December 2010 COMEX silver contracts approached maturity, a higher than normal number of contracts were not closed out before the first day of notice for delivery.  In theory, potentially all of these open contracts could have ended up being called for delivery.  While a number of short sellers absorbed their losses by purchasing an offsetting long contract, the amount of silver that was needed for physical delivery did stress available COMEX inventories.

As a result, in November and December 2010 the price of silver jumped more than 30%.

This same pattern looks like it will repeat for the maturing March 2011 COMEX silver contracts.  This time, however, the potential supply squeeze is much larger.

February 28 is the first day of notice for delivery of the March contracts.  Normally, parties not wanting delivery would have closed out their contract long before then.  At the COMEX close on February 22, there were still 50,848 open March 2011 silver contracts, representing a potential liability to deliver 254.24 million ounces of silver by the end of March.  The COMEX registered silver inventories available to cover deliveries totaled only 41.91 million ounces.  Even including customer inventories that are stored at the COMEX, which are only eligible to deliver against COMEX contracts if the owners so choose (and most do not), the total is only 102.35 million ounces.

During COMEX trading hours on February 22, there were 124,000 March 2011 silver contracts traded—almost 2-1/2 times the number of open contracts!  This is almost unprecedented volatility!

Here’s what I suspect happened to cause such a huge trading volume that day.  The price of silver had been rising significantly for the past several trading days, reaching successive 31-year high price records (ignoring inflation).  The US markets were closed on February 21 for Presidents’ Day.  In trading in Asian and European markets early on February 22, the price of silver passed $34.00.  If this price were maintained, then a large number of short sellers would get margin calls when the COMEX market opened on February 22.  That could have forced leveraged short sellers to put up additional cash, physical silver, or to buy long contracts to close out their short positions.  Any of these actions would likely have the effect of pushing silver prices up even higher.

It appears that a massive effort was mounted to drive drown COMEX silver prices on February 22 in order to avoid or reduce the margin calls to leveraged short sellers.  This strategy was successful to a degree in that the price of silver dropped to just below $33.00 at one point on the COMEX.  The temporary drop encouraged some owners of long positions to liquidate and take profits, further helping to push the price down.

However, the price suppression effort was not successful at pushing down the silver price below the February 18 COMEX close.  Once it became clear that the manipulation was losing steam, buyers jumped back into the market on February 23.  During COMEX trading hours, the price of silver reached as high as $33.75.  Trading was extremely volatile, with 1% swings up and down occurring within a matter of minutes.

Several hedge funds, seeing how easy it was to make a short-term profit in silver squeezing COMEX short sellers last November and December, are likely to repeat the tactic with the maturing March contracts—but on a greater scale.

If the price of silver from now through the end of March were to rise by 30% again, that would put the price around $43.  But, if there is a larger supply squeeze underway, the price could go much higher.

Already we are seeing several physical silver wholesalers using a two-tier silver spot price system.  If you want to sell to them, they are using spot prices derived from COMEX and other markets.  On the other side, if you wish to purchase physical metals from them, they are quoting a selling spot price that is 5-10 cents higher than their buying spot price.

The mainstream media is reporting that stock market prices and most commodities (with the exception of gold) fell on February 22 as a result of concerns about unrest in countries in the Middle East and North Africa that could lead to reduced supplies of petroleum.  The unrest is sparked in part by soaring food prices (which the US government pretends is not occurring) in addition to political factors.  But this news does not give you a clear picture of what is really going on in the silver (and gold) markets.

Expect both gold and silver prices to become much more volatile in the coming weeks.  Don’t be surprised if silver prices move across a $2-3 range within a 24-hour period.  In the past week, our company has enjoyed a significant increase in demand for physical silver.  Thus far we have been able to make immediate or short-term delivery of most forms of silver.  That could change quickly.  At last report, the Perth Mint was telling buyers that they would have to wait until at least April to receive delivery of newly manufactured silver ingots.

Even though silver prices are now near 31-year highs and gold is near its highest prices ever, I still consider both of them to be at bargain levels compared to what I expect to see by the end of March.  Silver will outperform gold, but both will do well versus the US dollar and all currencies.

[John Law Lives]

Look at those commodity prices soar today (mostly aside from Gold):

http://www.bloomberg.com/markets/commodities/futures/

I wonder if Chairsatan-Psychopath will keep shoveling out $$$ until nothing is affordable.

[trav7777]

his bank's product is built on a foundation of sand...wtf does everyone expect him to do, let the compound interest consume the entire money supply?

The erosion in confidence WRT the dollar is due to achievement of collective point of recognition that, as a debt instrument, its NPV must be discounted to reflect the reality of a future of contraction.

[John Law Lives]

The Fed is supposed to fight inflation.  It is not supposed to monetize debt and fan the fires of inflation and drive more people into abject poverty in the process.

Chairsatan-Psychopath = The enemy

[MrBoompi]

If you pay with silver instead of $$$ maybe you'll be able to afford it.

[John Law Lives]

Take an ounce of silver to your nearest grocery store and see if they accept it in exchange for food.

[gwar5]

At least look now for retailers of the future.

Show them a silver Eagle and establish barter buddies now.

.

[Richard Head]

Done!  If you're in front of me in line, I'll swap my green paper for your ounce of silver so you can get your food.

[John Law Lives]

If things become that dire, the most valuable possession of mine would probably be my gun.

[CrockettAlmanac.com]

Fiat currencies fail all the time. Folks get upset but I don't think you'll necessarily want to be shooting people. Such behavior would likely create far more problems for you than it might solve.

[John Law Lives]

I never suggested I intended to shoot anyone, brainiac.  People use guns to hunt for food.  I don't hunt people.

[RockyRacoon]

I can trade a silver quarter or a Franklin half for nice veggies at my local farmer's market.

You might want to get out in the real world and see how things get done.

[John Law Lives]

I did not say that merchants would not take silver coins, brainiac.  I told the other poster to take an ounce of silver and try to buy food at a grocery store with it.

You might pay attention next time instead of trying to throw a verbal dart.

[RockyRacoon]

I say again:  Real World.   Long supply chains and pre-packaged TV dinners and fake mac-and-cheese are not the real world.   If things get bad the habit of shopping where the common folk shop will pay off.

[dumpster]

just stop by the coin shop on the way to the store ,

your out of metals now,, and blowing smoke all over the place

retail investers  like you .. lol

you mean day traders like you .. a dime a dozen

[Kobe Beef]

Exactly. We the readers of the Zedge can establish silver as a circulating, competing currency.  Can't End the Fed until we've replaced their debt/tax ponzi with something better.

If you own a business, quote your prices in Silver, Gold, or dollars. Give the people an option to debt & taxes.

[Long-John-Silver]

I always stop by a Pawn shop on Fridays and look for Silver he's pulled from the back room and displayed for sale. I usually pick up a Silver coin or two. Imagine my shock when he told me he will no longer sell any Silver and Gold he takes in. I called him a Hoarder and we both laughed.

[camoes]

Market manipulation bitchez!

[John McCloy]

It is all orchestrated and right out in the open. The market was heading toward a major correction and then "The Rumors" and then the margin hikes.

    They have unlimited money and political,media protection and evidently judicial immunity to rig the game.This is the most disgraceful I ever could have imagined..legalized mafia like Wall Street cosa nostra cartels. 

   Push down the commodities, push down metals, push down oil, ramp up rumors, move all shorts out over and over and over again and then push the markets up with the sole belief they can never go down again. Shameful excuse for a free market. I wish everyone could come together on this for the orchestrated flash crash in May meant as a financial terrorist attack to our legislative system. We have had far more plausible catalysts than the Greek riots and in the end you have to come to the conclusion that the market fell 1000 points only because it was intended to as a message.

[huggy_in_london]

Totally agree.  It was laughable how the BS rumour came and the margin hike came.  And exactly as you say, just as the market was getting into gear for a meaningful correction.  When S&Ps trade down 15 handles its a battle all day, a genuine ebb and flow.  When it rallies 15 or so, like today, it's one way trading, gets to the highs and sits there.  At the end of the day though, you can't hold markets forever.  

[John McCloy]

"At the end of the day though, you can't hold markets forever"

   And that is the exact belief and mentality of logical folks that they are trying to challenge now incredibly. How can they not realize that by lulling everyone into a state of complacency we are compounding the problems of the past busted bubbles into a scenario where even more wealth is lost than before? The scenario they are cooking up is one none of us would have believed 2 years ago..

As the market crashes into oblivion and the positions are liquidated the citizenry will hold their stocks providing a temporary level of support of which there will be no return. All of this has been done as a psyop to once again theive money and wealth for the insiders. And the chumps will buy into the collapsing ponzi ALL THE WAY DOWN to Dow 2,000. That is what makes the Fed so criminal.

[huggy_in_london]

Yep, you're right.  And I gotta tell you, i got short this week as technicals (amongst plenty of other things) stink and after seeing what happened in the last 24 hours (rumours, margin and todays rampathon) even I am asking myself "why bother - this thing isn't allowed to go down?".  We went up 29.3% in pretty much a straight line, and when we pull back 2.5% its made out to be a disaster.  It's rigged.  I am better off spending my time finding a hole in the ground to hide in!!

[topcallingtroll]

Yeah I sold my spxu for a lousy one percent gain. This market is tough to short, but everything says buy bonds and short stocks. It has to bounce the other way eventually.

[Bastiat]

It screams at you -- it's epic to watch them fail in spite of all the extra-legal machinations.  Physical trumps and NOTHING can stop it.

[Johnny Lawrence]

What are the 5 TBTF banks?

Citi

Goldman

Morgan Stanley

Bank of America

JP Morgan

???

[MrBoompi]

Here's your basic list of TBTFs, the Fed's Primary Dealers:

Bank of America Securities LLC
Cantor Fitzgerald & Co.
Citigroup Global Markets Inc.
Goldman, Sachs & Co.
Jefferies & Company, Inc.
J. P. Morgan Securities Inc.
Morgan Stanley & Co. Inc.
Barclays Capital Inc.
HSBC Securities (USA) Inc.
Credit Suisse Securities (USA) LLC
UBS Securities LLC.
Daiwa Capital Markets America Inc.
Mizuho Securities USA Inc.
Nomura Securities International, Inc.
Deutsche Bank Securities Inc.
BNP Paribas Securities Corp.
RBC Capital Markets Corp.
RBS Securities Inc.

[Richard Head]

MF Global and SocGen too?

[asdasmos]

And for those who have not seen this.....

.....exchange on CNBC today. (Feb 25th 2011)

 - http://www.youtube.com/watch?v=5WC9CpdeHF8

or if you prefer the cnbc link.....

 - http://www.cnbc.com/id/15840232/?video=1817702861&play=1

Damon Vickers, Nine Points Capital Management founder talks about QE2 and why he thinks bernanke is buying up the US debt

[gwar5]

CNBC babe and sidekick barely knew Fed is monetizing.

Vickers: ends with new currency and debt realignment and a "New Authority" = NWO (TPTB hate the term)

They're all behind the curve, phase II is already underway.

[topcallingtroll]

Technically it is not monetization unless it is permanent. Right now it is still possible to say it is interest rate and liquidity management as bernanke so noted in his testimony. They might not have been clueless, just confused about someone's definition of monetization and applying it in the current circumstance.

[RockyRacoon]

OK.  That does it.  You are an apologist.  There was no mistaking Carl's total ignorance to the question of who was buying the debt.   He, along with the majority of the high-rollers in this market, haven't the slightest notion of what is actually happening.   Ms Quick had a clue but wasn't about to tip her hand and make a fool of her compatriot.  Don't forget, she is Warren's honey.

[DosZap]

"New Authority" = NWO (TPTB hate the term)

As well you should, as it is more EVIL than anyone here can imagine.

The NWO, is going to End the World as we have known it.

Imagine one form of fiat used by everyone, and the control factor that will have on everything you do, not ,most, everything.

The NWO will usher in the Antichrist, times a burnin boyeeez.

[HedgeFundLIVE]

I do not think I would be buying this market today. I have been shorting futures all day. Thoughts leading into next week:

http://www.hedgefundlive.com/blog/stock-market-commentary-2252011-my-advice

[Lord Koos]

http://www.netcastdaily.com/broadcast/fsn2011-0225-1.mp3

[Thomas]

Physical market will win (eventually).

[Amish Hacker]

I hope you're right, Thomas, not just for the obvious reasons, but because we'll go nuts if we don't believe that truth will have the last word.

[topcallingtroll]

Retail specs including me are notorious for buying puts when we should be buying put spreads and buying calls when we should be buying call spreads. No manipulation theory is necessary to explain herd behavior. Of course the majority will be buying puts and calls at the most useless of times.

[Yen Cross]

Hi TCT. Sounds like you're doing well. The retail fx market usually trades ETF spreads/rates. It's just longs and shorts, (or hedgeing if you have an offshore trust) We also have increased margins, not puts and calls. Limit and stop orders would be the proper technical term. Cheers.

[GoinFawr]

"I want to orbit your globe . Lets dance!"

<dances>

[jmcadg]

Did anyone else see the CNBC interview with Hoening earlier. And how they blatantly cut him off mid sentence. Director was obviously getting a beat down for allowing him on primetime to say the truth about the TBTF banks. 

I thought he was actually incredibly subdued in the way he stated the truth.

Best add his name next to Ron Paul on the people's side.

[fasTTcar]

I am a PM dealer and had a run on all my low premium gold and silver this week. I actually gave my GM a wad of hundreds tonight to try and buy any gold or silver he can at spot tomorrow at a large show. I am out for all intents and purposes.

[RockyRacoon]

I like your road sign.   I am a coin dealer and can say without equivocation that if I were to lay out all the non-numis stock I have on a bourse table tomorrow -- it would be gone at my price.   This is gonna get nasty.

[ArkOmen1]

A long time ago any talk of the new world order globalist agenda would have you dubbed a kook. A world currency? Nah. Not in this lifetime. World government? No way, you're crazy. It all doesn't seem so crazy now, does it? Good to see that at least 3 states have banned mandatory human microchipping. Resist the mark!

[wintermute]

That sell-off from 1415 is just normal market price swings. It sold off hard because WTI sold off hard from a level of 99.60 (April future).

That sell-off was always on the cards when it exploded from 98 to 103 some20 hours earlier, and had been trending lower since.

Brent crude spiked around 120 on Libya, and because this is a yard-stick for 2/3rds of world oil sales - WTI followed.

There is enough government and big bank duplicity (as revealed in places like ZH and Wikileaks) without having to invent conspiracy.

[AmCockerSpaniel]

$20 $20   That's 1.5% of $1415.  We buy and hold the physical, and it's on the dips over 5%. Been doing it for years. It sure beats what we use to get from our bank CD's.  Now; If I can just get a good dip on silver, to start doing the same thing with it.   I can't trust ebay, so I pay up at KITCO & APMEX.  We know you day traders are making a killing, but we just don't have the stomach for that.

[billwilson]

What we are getting is what happens in a true "free market". Everyone is free to try to screw everyone else in what ever way they can get away with.

So thanks but no thanks. Free markets don't make sense.

[Bansters-in-my-...]

Fucking pig-dog manipulators.

Off with their heads.

[themosmitsos]

Q CS FTMFW