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The War Over The $1,520 Gold Pin Tomorrow - Part 3 Of "Market Manipulation: A Recipe in Three Parts"
From FMX Connect, which continues its very educational and highly informative series about precious metals price manipulation and interference. Previously: Options Risk, Manipulation, And The May Silver $40 Calls: An FMX Connect Special - Parts 1 And 2
Summary: Right now there is a war in Gold options. It is between the May 1520 longs, who most likely are unhedged, and their short option counterparts, who most likely are hedged. One would think the longs intend to sell futures at some point, perhaps 1520, perhaps 1540 we do not know. It is also possible that they intend to take delivery, but that is unknowable for the moment. The shorts are probably delta hedgers and have no desire to see this market go above 1520, much less move at all.
Full report:
Overview
Price Manipulation and its cousin
“mismarked books” are as much a product of systemic dysfunction as they
are of unethical individual behavior. The 3 part series we have planned
is educational in nature and aims to outline those system-wide
imperfections at the highest level. For today we must focus on what is
shaping up to be a rare opportunity to watch a pitched battle between
major players in Gold. In short, we are interrupting your regularly
scheduled program.
Current Events: The Potential Pin in Gold Options Tommorow
Right
now there is a war in Gold options. It is between the May 1520 longs,
who most likely are unhedged, and their short option counterparts, who
most likely are hedged. One would think the longs intend to sell futures
at some point, perhaps 1520, perhaps 1540 we do not know. It is also
possible that they intend to take delivery, but that is unknowable for
the moment. The shorts are probably delta hedgers and have no desire to
see this market go above 1520, much less move at all.
The Players
- The Longs-
have accumulated over 5,000 lots in a two week period and we would
assume they are bullish. They are patient dip buyers and seem to have
little fear of the Bullion Banks that are often accused of manipulating
PM prices lower or keeping prices range bound at expiration.
- The Shorts-
are Bullion Banks, market-making firms, locals and possibly some hedge
funds. There is no collusion implied here. In fact, these firms are
usually at odds with each other in terms of option open interest. The
majority of the shorts trade options from a non-directional point of
view. That is, they are professionals who, when short an option do not
want the market to move either way. Conversely, when they are long an
option, they want the market to move quickly through or away from the
strike they own.
The Play
We
feel the Longs were betting that once the gravitational pull of the
$1500 strike was broken, that the market would move quite easily to the
strike with the next largest open interest, the $1520 strike. They may
be privy to large order flow in futures, they may have large futures
order flow, or they may simply be speculating with nothing other than
their wallets and the ability to read market behavior through price
action. They can spot a market that is lopsided in one direction when
they see it.
Snapshot: May Gold Open Interest
|
product
|
contract
|
type
|
strike
|
volume
|
open interest
|
|
OG |
May-11 |
C |
1480 |
598 |
2303 |
|
OG |
May-11 |
P |
1480 |
368 |
675 |
|
OG |
May-11 |
P |
1485 |
271 |
341 |
|
OG |
May-11 |
C |
1485 |
11 |
666 |
|
OG |
May-11 |
C |
1490 |
5 |
970 |
|
OG |
May-11 |
P |
1490 |
379 |
416 |
|
OG |
May-11 |
P |
1495 |
86 |
280 |
|
OG |
May-11 |
C |
1495 |
35 |
361 |
|
OG |
May-11 |
C |
1500 |
211 |
6762 |
|
OG |
May-11 |
P |
1500 |
445 |
522 |
|
OG |
May-11 |
P |
1505 |
17 |
333 |
|
OG |
May-11 |
C |
1505 |
76 |
306 |
|
OG |
May-11 |
C |
1510 |
507 |
1731 |
|
OG |
May-11 |
P |
1510 |
344 |
116 |
|
OG |
May-11 |
C |
1515 |
116 |
1374 |
|
OG |
May-11 |
C |
1520 |
580 |
5823 |
|
OG |
May-11 |
C |
1525 |
143 |
747 |
|
OG |
May-11 |
C |
1530 |
128 |
578 |
|
OG |
May-11 |
C |
1535 |
95 |
289 |
|
OG |
May-11 |
C |
1540 |
9 |
730 |
|
OG |
May-11 |
C |
1550 |
40 |
1570 |
|
OG |
May-11 |
C |
1600 |
26 |
1515 |
The Next 48 Hours
We have alerted the reader to this possibility for the past week. All that remains is this:
Today the LME is closed
This
deprives the market of a deep source of liquidity. While the LME
Players are surely watching and trading today, we suspect the “A’ teams
may not be, however, as holiday continues for many and trading at 9PM
London time is not very fun if you are an MD at a large Bank. Also
remember there was no LME fix today, which has an effect on balance
sheets for London firms. No London Fix, no Balance Sheet Axe, so to
speak.
Tomorrow Comex Options Expire
If
the Option Longs are right, then the market will be propelled through
the 1520 strike. Futures should receive additional support at some point
from the negative gamma hedging of those non-directional players who
MUST adjust their delta hedges. The longs are playing for a longer time
line than the shorts in this instance.
If
the Option Shorts win this battle then we will pin the strike.
Remember, a violent sell-off is not good for the shorts either. A pin
means the options go out worthless theoretically, and the future hedges
that longs carried against those shorts can be liquidated for a profit.
Let’s
assume next that the Options Shorts “win” this battle and through hope,
prayer, or their own attempts to keep the market in a range, the $1520
strike is Pinned or near-Pinned on the closing bell at 1:30 PM ET
tomorrow.
The Pin
If
a Pin occurs, the longs have another two and a half hours to decide if
they wish to abandon or exercise their calls. They own the optionality
at the strike. The option shorts can still lose a lot of money, even if
the option longs make none. A sell-off is very possible, wherein the
option longs abandon their calls, but the option shorts still have
hedges to unwind. The Shorts would be forced to use statistical methods
to determine if they will get exercised or not. More than likely this is
a digital event, and statistics do not matter when most of the
contracts are in the hands of a single player or a group of like minded
players, as may be the case here. We are likely looking at an
all-or-none exercise if we pin the strike. The shorts would be in the
dark.
Manipulation in the Commodities Market
A
multitude of individuals and firms have been accused of market
manipulation, over the years. Many individual traders have been brought
to task for their actions. The Hunt Brothers attempt to corner Silver,
Yasuo Hamanaka of Sumitomo for his copper manipulation in 1995, by,
various “rogue’ traders and brokers and most recently, the CFTCs
successfully prosecuted of a case involving Brian Hunter of Amaranth for
his actions in the natural gas market. Nonetheless, very few firms have
suffered commensurately.
Business as Usual
Firms
that have been successfully prosecuted continue to operate in the
markets they have manipulated, usually with monetary wrist slaps. To be
fair, major firms settle disputes all the time, but the fines are not
proportional to their balance sheets when compared to the individual
fines; nor are the firms’ abilities to go back to business-as-usual in
the market place affected.
It’s Baked in the System
We
believe manipulation is a product of many things, and attempt here to
boil them down to three broad categories. First, the U.S. Government’s
accounting and regulatory policies unintentionally enable these events
to occur. Second, the rights accorded corporations give them the ability
to mandate profits above all else, all the while getting the same
privileges an individual person does. Companies have no social contract
and their goal is to continue to exist, a combination easily misused.
Finally, market structure, especially in commodities lends itself to a
tail wags the dog situation wherein the transparent pricing mechanism
for settling contracts is not where most of those contracts actually
trade. This results in a disconnect between liquidity and price that can
lead towards “managed market” abuses.
We
intend over the next week or so to outline at the highest levels how
government policies, corporate mandates, and market structure contribute
to the moral hazards in derivative markets.
For today and tomorrow, we will just be watching the Precious Metals markets like we suspect many of you will. Good Luck.
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The old man weighs in....
http://www.marketwatch.com/story/russell-endorses-gold-manipulation-thes...
JPM and HSBC are naked shorting silver contracts because today is options expiration. They are trying to get as many longs to roll over into next months contracts and not stand for delivery because there is little to no silver to deliver.
What exactly does "naked short" mean in the context of a futures market?
You do realize that the longs don't have the cash to stand for delivery - they're trading on something called "margin."
+1 for the long term bulls
I would love to stay and play with you bagholders, but I have a date with a Porsche.
Remember, the low won't be hit for six weeks, so it's still not too late to get out.
See you in a few hours.
It is not nice to gloat, nor is it nice to be a troll.
There will be day when you get bent over, the folks you just dissed will laugh at your screams.
Or better yet, maybe you your Porsche will have a date with destiny.
Only the universe knows for sure
We are not trolls. We are sensible, rational traders. You really expected silver to rocket through $50 on option expiry and the predictable period when the manipulative Bullion Banks plunge PMs to get the rollover to the next delivery?
Ill have to agree. Let em have there fun today and on Tuesday but then another month of hell.
Agree! They hardly deliver in March, now lets see what they got in May?
"sensible, rational trader"? LOL...
Bullshit. Dangertime is a troll.
maybe dangertime can't play online poker anymore and he's brought all that table "chat" attitude to zH. i hope he's enjoying himself, but once mogul rider goes cosmic and calls him out, he's finished! adios, dangertime! you are now officially a troll. hahahahahahahahahahahahahahahahahahahahahahhahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahhahahahahahahahahahahahahahahahahahahahahah
Okay. Enjoy your happy meal. Make sure you let mommy know when you'll be home
If he can scare anyone out of silver he gets an extra hour on the xbox tonight.
Dangertime... if you own a Porsche then I FUCKING DARE YOU to take a picture of it with a big fucking piece of paper next to it that says "Dangertime's Porsche"... clear enough so every one can read... and then post it up here. (or post the link)
I say your 100% full of shit and your still living in your mama's basement, but please... prove me wrong if you can.
and he should be sitting in it cos it would piss me off no end if I saw my car in his photo...
Id much rather him take a screen shoot of his puts on silver, aint no way he is up 10%.
not now, silver's going back up...
and expiration is when, tomorrow? Good luck with that one...
"I would love to stay and play with you bagholders, but I have a date with a Porsche."
If this is your advice I suggest that your Porsche is actually a Proton...
and that you most probably drive a moped...
lol your comedy routine is fucking fail.
'but I have a date with a Porsche.'
Try dating a woman and not jacking off in your dodge dart.
+ 49.87 the top!
Must say this was expected. Fight a long way from over on both sides.
Paper covers rock unless you cut out the middleman
Bank stocks are still strong today. Until these crack, I wouldn't trust this selloff.
It's a beaks, it's a helo, it's a bubble! Get out now, sell Mortimer.
On a serious note, those that bought @$600 do not give a fuck about any daily % move. Bashers don't realize the culmination of all negative factors in play now. I won't sell my PM and wish I bought more.
For those willing to buy silver, At 30 in the end of May it would look even better.
Here is the chart for next months:
http://saposjoint.net/Forum/viewtopic.php?f=14&t=2626&st=0&sk=t&sd=a&sta...
People will get out of gold and silver to buy oil? Good, I'll buy their precious metals then. I also remember prophets like this saying gold would dip to $8 back when it was $35.
Some people still can't free themselves from believing gold and silver are simple commodities. Their minds will be changed when they realize gold and silver will be used to buy oil someday.
'Oh, I want my mommy!'
'Go back to your hole, silver bug.'
You are weak. We are strong. This volatility was predicted, and will get worse, but the bias will remain UPWARDS.
Enjoy your poverty, troll boy.
+1
Nice #Oracle from TFMetals two days ago. http://www.youtube.com/user/TFMetals#p/u/0/WhcFI-vzNXk
Didn't they mess with the margin requirements again? They always pull out that little trick when the price jumps "too much" over a weekend.
And with all the pounding, they can only get the price down to $46? Looks like a good time to BUY if you ask me.....
says the guy with all 'his' physical sitting in GoldMoney's vaults. ROFL!
The only margin requirement hike was in Asia, and it was insignificant. Wait until the COMEX raises margins. Next step downwards, $45.757. After that, you hit $44.953, and then the $44.547. It will be exciting for me to see how many of these support levels will be blown through.
"Sensible traders" told me low interest rates and tax credits didn't "entice" buyers who wouldn't ordinarily be there, they told me it was healthy and I should buy a home.
"Sensible traders" believe that rate hikes, increase in margin requirements, and tax penalties in the face of buying metals are negative... I should sell these real assets. Interesting to note how "enticing and creating" artificial buyers is no bubble, yet "enticing and creating" sellers is the sign of a bubble.
"Sensible traders" told me "fundamental recovery and good jobs reports" would bury the metal trade. They claimed China rate hikes would bury the metal trade. (oops) Now they claim Fed rate hikes and increased margin requirements (already played and will be played again) will bury the metal trade.
"Sensible traders" still think technicals dictate this market.
This is a liquidity / debt trade, just like the stock run-up. Nothing else. Shorting metals is like shorting the market the last 2 years... A loser.
I throw "we the sensible traders" input out with the trash... and get back to what "we the ignorant traders" do best... decipher FED and big banker bs.
It is exciting to see the "weak hands" all over ZH now... Because if its here, then its everywhere. No bubble, minor corrections at best... This metal trade is going higher... much higher.
++ Likin` it.
$47.59 at 12:19
on Mon, 04/25/2011 - 10:54
#1203478
"I would love to stay and play with you bagholders, but I have a date with a Porsche.
Remember, the low won't be hit for six weeks, so it's still not too late to get out"
Hey Dangerjackoff,
Silver is above its Thursday closing price, so you pretty much have your head up your anus...
For some reason he has stopped posting...
Somewhat off topic but I need a recommendation.
I'm a grad student and my income is somewhat limited. I do own a decent amount of gold and silver which i started purchasing in early 2010.
Right now I have little student debt - but I'm thinking about taking out a student loan to buy PMs with. My reasoning (1) Best time to be in debt- could potentially get wiped out with inflation. (2) Don't want to wait until I have a job to get my hands on more PMs (3) Student loans are cheap and I'd be sure to lock in a non-adjustable rate.
Sound prudent?
Thx
I don't mean to sound like an ass, so don't take this the wrong way, but you did realize that student loans are among the precious few types of debt that are NOT dischargeable in bankruptcy proceedings, and basically follow you for the rest of your life, right?
I do. Let's say the interest I have to pay is 5%. I could sell off some PMs or stocks that I own which would likely have increased by more than 5%.
don't be in a hurry to make a mistake, jfk.
you have some PMs. you can't afford any more right now.
be a bit more wary of debt, perhaps. you say you have very little student debt, but you don't say how much. what is your budget to finish yer education? do you have a job?
again, be careful of debt. many young people, including myself, grew up seeing people with decent incomes "manage debt" quite sucessfully. recently, we have seen similar "investors" fuk up their lives pretty severely by "mortgage debt" for assets that "would go UP!" actually, the entire financial infrastructure of the economy is playing with cooked books, and "We the People" have been enslaved with Fanny, Freddy, all bank accounts to $250K, and about $3 Tril. in debt for asswipes we'd like to murder.
work hard, play hard, study hard, stay out of debt, stay out of jail, &tc.
and, good luck!
advice to jfk...
what slew said.
Or max out credit cards, buying PM's and default like chumbadumbashitleechfuck. Then brag about it to all your friends.
Avoid debt except for a roof over your head that is affordable. Student loans are sucky shit. My kid paid his off and is in grad program and is talking more loans, to finish. I say finish when you have the money.
Thanks all- I appeciate the advice.
Debt isn't pretty looking and I don't want to support the banks in any way - so I guess I will forgo that plan.
but you better believe that im gonna sacrifice wasteful spending to maximize my PM position.
To the moon we go!
Thanks all- I appeciate the advice.
Debt isn't pretty looking and I don't want to support the banks in any way - so I guess I will forgo that plan.
but you better believe that im gonna sacrifice wasteful spending to maximize my PM position.
To the moon we go!
deleted repeat post
wtf
deleted repeat post
It's risky. Although I believe silver will outperform whatever interest rate they're charging you for a student loan, I might advise never to risk money you can't afford to lose. And this goes double for risking money you don't even have in the first place.
I've done the same, I live in the UK tho. Put bits of my student loan into gold miners + silver over a year or so, still buying when I can.Interest rate on student debt is 1.5% annualy atm. I made a killing so far.
Go ahead, but don't bet it all! Have an amount x you are willing to loose and don't go beyond it.
Defcon 1 silva bitchez the herd leveraging themselves to buy silver. I repeat all silva bitchez report to your stations Defcon 1.
Who here besides IQ 145 is leveraged on silver? No-one.
And IQ 145 is WAY up.
Is not leveraging to borrow money in a student loan and use it buy silver. That's just as fucked up as what the banks do. It's a signal that people want to get in at any cost and it's a signal that an intermediate top is in.
He lives in the UK, where student debt repayment is tied to income. They don't have the right to seize assets if he fails to pay, but rather they only garnish his wages. If anything, it is more like buying silver with future wages, where you get to keep the silver whether you actually make the wages or not. Damn good deal, if you ask me.
Defcon 1 silva bitchez the herd leveraging themselves to buy silver. I repeat all silva bitchez report to your stations Defcon 1.
Defcon 1 = silver at $47.55 (1:55 pm)
OMG WE'RE ALL GONNA DIE!!!!!!111!1!11ONEONE1!
It's gonna be huge BTFD party in the next week
Wow....nice silver chart today....
FUCK YOU PPT
FUCK YOU Giethner,Bernanke,JPM,and the fucking snakes that lay in your pit of vipers...!
..................FUCK YOU...!!!
Hey hey! Hey Hey!
FUCK THE FED!
http://www.youtube.com/user/NealF#p/u/18/-6Fpoebz2LE
"what do the idiots got to say now"
They gots to say Fuck Off and die you piece of shit Dangertime.
BTFD Now! Just broke back above $47. Happy days. I'm backing up the truck for more silver futures.
This is very healthy price action. Some weaker hands are being shaken out. I would like to see silver correct to $40, but it doesn't look like that is going to happen - gold is far too strong here. The Hunt brothers' high has been taken out (albeit in thin trade), but that is still significant.
When full trading resumes and options expiry is behind us, I am confident we are going higher in both metals.
I'm not fussed by this action. The (physical) metals are mostly in strong hands now. I sense that quite strongly.
the high price varies from different sources - all in the range from 49 to 52.
what is your source?
I've read intraday $52.50 on the CBOT...
Kind of meaningless with inflation and the protagonists...Bunker Hunt was unusual and unusually wealthy and the Comex mandated liquidation trades (sell) only on Jan 21 1980...that will generally stop a bull market.
As gold spot and future prices pulled to new highs this week, topping the huge psychological price level of $1500 per ounce, it is interesting that gold miners and silver miners have not been following the huge run up.
http://www.hedgefundlive.com/blog/gold-at-new-high-but-miners-lagging-behind
With SLV now bouncing back and the silver miners getting slammed once again...
Dan Norcini's hated "Ratio Spread Traders" are enjoying profits of a lifetime.
this is a fabulous chart, RT! if i ever want to end it all by doing a cannonball off the roof of a 4-storey parking garage into a diaper pail, i will visualize this chart...
andrew mickey is calling the bottom, RT!
from today's goldSeek:The Coming Junior Stock Eruption
the
Back even for the day net of my physical and miner positions. But I bet they loaded up all weekend for that. Fun week ahead.
netdania has silver at 47.771 @ 17:34 GMT.
Up 2% on open.
Why are the bears so jubilant?
Am I missing something?
http://www.netdania.com/Products/live-streaming-currency-rates-foreign-exchange/real-time-quotes/QuoteList.aspx
That's pretty sad. When the manipulations are corrected so quickly you don't even notice.
Don't follow.
Is netdania unreliable?
Yes the high was 49.786.
But still up 1.21% on the day. @18:04 GMT.
Maybe I'm missreading your response.
There was a very short lived drop in the price down to 46 something for a couple hours. Then the trolls all came charging in talking shit. Now they are in their offices puking. You see they don't mind making enemies that they can control or intimidate. But making enemies that you can't control or intimidate scares the crap out of them.
Ah. I see.
I would have written your previous comment as ...
"When the manipulations are corrected so quickly they don't even notice"
So there's a battle at $50. Then options expire.
Then another leg up?
No. It's pretty much over. Clearing houses will stop functioning because they don't have the gold and silver to work with. The swap spread that kept inflating and driving the dollar up as it went out and become the global reserve currency won't add up coming back in. So they pretty much killed all those koreans and started making kias for nothing. Then they killed all those vietnamese and started making more drugs and online crappy video games for nothing. Then killing all those 3 million people in iraq bought them just a few more years. The dollar won't repatriate. It's fluffed up and it won't go back from liquid to solid form.
Silver will probably just launch up to some really high number like 90 95 bucks and that will keep enough retards selling to shift focus over to gold which will go through the same bullshit rodeo.
So silver fucked in april/may
Gold screwed in may/june/maybe july but doubt it. It'll probably be a ballistic basket case end of june.
They're jubilant because they see this morning's volatility as confirming their theses that Silver is over-valued. Of course, volatility is necessary to confirm any trading theses because prices need to be tested before they are to be fully believed. Silver certainly seems to be passing every test. That said, just shifted heavily into cash as I think these raids will persist this week and some trading channels are forming.
The PM bears been down so long it looks like up to them?
Where'd the trolls go?
Problem bro?
http://www.google.com/imgres?imgurl=http://www.razvancoloja.com/wp-conte...
Volatility a comin'. Parabolic takeoff delayed (not derailed). Takes cash to buy Dips.
Bye-Bye Miss American Blythe!
http://silverdoctors.blogspot.com/2011/04/bye-bye-miss-american-blythe.h...
Spreading the word is simplier with a song: Fuck The Fed! (unbleeped version)
F**k The Fed
Words and Music by Neal Fox
1.
Sit back, little children
As I tell the tale
Of how democracy and freedom bit the dust
They were sold while we were sleeping
Something evil came a-creeping
Now it's hard to know exactly who to trust
2.
It was 1913 on a Christmas day
Congress gave away its right to create cash
Now your money's only worth
Just what the Bankers say
And you can lose your only shirt
In just a flash
3.
You see the Federal Reserve
Is not a government thing
It's a bunch of private bankers we obey
And they don't answer to the people
'Cause they pull the strings
And that's precisely why we have to say...
Chorus:
Hey, hey
Hey, hey
Fuck The Fed!
4.
Now, not too long ago
There was a President who tried
He was about to stick it to
The lousy Fed
He made some legal tender
Silver-backed in all its spender
It's unfortunate he ended up dead
5.
Clinton, Bush, Barak Obama,
Carter, Reagen and McCain
We can argue who's the best until we drop
But whoever is elected
It all comes out the same
Till we see that it's the Fed we need to stop
Chorus
6.
We need a President with balls
No matter white or black or female
Someone more than
Just another talking head
They have to stand up for our rights
They better read the constitution
When they hear the people cry:
Fuck the Fed!
7.
So tell your children's children
If we're still around to tell
How depressions were created
By a few
How the people lived and suffered
While the candidates debated
Till the people knew exactly what to do
http://www.youtube.com/watch?v=-6Fpoebz2LE&feature=channel_video_title
Buy gold and oil...they can only go up....
Is there a point to this article??
There's no conclusion; is silver going higher or lower, and by when and how much?
When is ZH going to stop posting these guests posts that don't say much of anything?
"remember there was no LME fix today"
They lose a bit of credibility when they can't distinguish between the LME (which doesn't trade gold) and the LBMA - there is no such thing as a LME fix for precious metals.