Today's drop in silver attributed to.......

derryb

.....$1 Million 37% Downside Bet On SLV

To those that say SLV is not a major player in the spot price I say "wanna bet?"
An eventual crash in silver price will be led by SLV. Might wanna keep one eye on it.

Justacommeman

Not a bad bet..........MJ

cohodk

<< <i>.....$1 Million 37% Downside Bet On SLV

To those that say SLV is not a major player in the spot price I say "wanna bet?"
An eventual crash in silver price will be led by SLV. Might wanna keep one eye on it. >>




I would say, and have, that SLV is responsible for the vast majority of silvers run. SLV made it easy for J6P to buy silver. The copper ETFs have done the same for copper. And many sector specific ETFs have had major influence on stocks.

I would disagree that silver reversed "due" to this bet. It was grossly overbought as someone mentioned in another thread.

Also, just because the trade was with the $25 options, doesnt necessarily mean the trader thinks it will go there. Those options will rise substantially even if SLV drops to 30 or even 35. Then again, it might drop to 20 and the trader could profit in excess of $50 million.

derryb

<< <i>Not a bad bet..........MJ >>


I'd say somebody (i mean somebank) has some inside info on the Fed's next QE move! I take this move as a very serious indicator for July. If we see this same bet reappear a few more times we had better pay attention.

cohodk

<< <i>

<< <i>Not a bad bet..........MJ >>


I'd say somebody (i mean somebank) has some inside info on the Fed's next QE move! I take this move as a very serious indicator for July. If we see this same bet reappear a few more times we had better pay attention. >>



I would say with near 100% certainty that a bank did not make this trade. $1 million is actually a very small sum of money. There are thousand and thousands of individuals, not to mention hedge funds, who could pony up $1 mil.

derryb

<< <i>

<< <i>

<< <i>Not a bad bet..........MJ >>


I'd say somebody (i mean somebank) has some inside info on the Fed's next QE move! I take this move as a very serious indicator for July. If we see this same bet reappear a few more times we had better pay attention. >>



I would say with near 100% certainty that a bank did not make this trade. $1 million is actually a very small sum of money. There are thousand and thousands of individuals, not to mention hedge funds, who could pony up $1 mil. >>


And if they wanted to not crash the price too quickly with a killer trade would they not attempt it in multiple small trades?

Justacommeman

And a lot of money could rush back into the other side as well. This bet abeit small, is only going to be in play for a short while anyways if it's going to work. A quick move to $36-$37 should double his money and get some takers to sell his position into in theory. That's what he is looking for. A slow move to $36-$37 and poof that bet is in big trouble and he may hold these to expiration worthless.MJ

derryb

would not another quick $1MIL bet or two get him there quickly?

Justacommeman

In a static environment maybe. However, what if as he is placing another $1 million dollar bet a JPM comes in five minutes later and starts buying July 55 calls by the boatload? Also, what if this million dollar short bet is nothing more then a ruse to knock silver down a little to get premiums down in order to place an even bigger bet LONG by the same entity.............Just talking outloud. Lot's of possibilities. MJ

streeter

A lot of people thought that the run to 33-35 about a month ago would be followed by a correction.

I know I did.

Well, it didn't correct save for a buck or two. A lot of weak buyers either entered the market or enlarged their position because they were emboldened by the absence of a correction. Most of these late entering speculators have no connection to the mining or use of metals. Pure speculation and one never knows what they rely on for information.

That's going to make the next correction even more punishing.

This metal market has the same speculative fever as real estate in 2005-6.

I'm sure many of you will disagree.

pitboss

I just don't understand how this whole thing works. Won't it just gradually work it's way back up no matter what the do to try to hold it down .

derryb

<< <i>I just don't understand how this whole thing works. Won't it just gradually work it's way back up no matter what the do to try to hold it down . >>


Yes as long as there are enough buyers/speculators throwing demand at it.

Theoritically price is set by buyers and sellers. If more buyers show up price goes up. If more sellers show up price goes down. Simple explaination, but basically how it "should" work.

roadrunner

90% of the basic materials sector plunged today. Oil seemed to be the leader...and probably a major reason why gold and silver continued to move upwards. Other than a few rare earths I see that the entire sector from oil, ng, ags, coal, copper and gold got hit. Equities in general did poorly for a big POMO day. Options expiration looming on Friday and it appears lots of people didn't want to be last out the door. The materials sector actually peaked mid-last week or even earlier. Some big oil stocks had been falling for 1-2 weeks. The final whifs of vapor occured Friday, but I sort of expected one last push on Monday or even Tuesday. Seems to me everything came down together. The S&P today was probably saved by lots of POMO. A new schedule is released tomorrow and I wouldn't expect any more POMO until Wed. TBond auctions Tu-Thurs also offers some headwinds.

It seems like it was just time heading into an expiration week. Fwiw gold and silver advanced since mid-March. The 2nd half of that run was at 9 days and 5 distinct waves.
But it doesn't mean that it's over until the fall. Let's see what the rest of this week brings.

While SLV has allowed J6P to come in and play with silver much more easily. It has also allowed the banks to "manage" silver much better as well. There are 2 sides to that sword.

roadrunner

TWQG

Phew... I thought it was because I bought then sold ZSL today.
(That was the easiest $500 I made all day)

MrBear

I bought AGQ on the first. Stop-loss sold it for me this afternoon. Still made about 15%

Now what to do with the cash...

derryb

<< <i>I bought AGQ on the first. Stop-loss sold it for me this afternoon. Still made about 15%

Now what to do with the cash... >>



wait for the dip to dip, get a beer and go back for more!

RedTiger

I believe that the headline and the story are deceptive. Options traders prefer complexity and hedging, not plunging and betting it all on double-zero at roulette or buying $1 million dollar lottery tickets. My first guess is that the $1 million in SLV puts is part of a collar. A collar is a conservative bullish position with limited upside and crash protection. It is not a bearish bet. A collar consists of being long the underlying, short out of the money calls, and long out of the money puts. The cost of the puts is financed by selling calls.

There are any number of other options strategies that might involve a large purchase of puts, and only some of them are bearish bets. For those that believe in conspiracies, the firm might have purposely planted the story and made the trade that way so that little fish will leap to false conclusions. Don't believe the headlines, especially about options. Most writers and newsletter folks know so little about options, that they might only convey the small ridges on the trunk of an elephant, not the whole elephant, not even the whole trunk.

percyb

<< <i>Not a bad bet..........MJ >>



Bet it doesn't pan out. Options are meant to be sold, not purchased.
The smart money, in my estimation, sold the 100k lot. Time will tell and it will erode the option price, too.

Wingsrule

Paid a dime, now at 0.17/0.19. 80% in one day is not a bad gig if you can get it.

The key will be whether (s)he can hold on to it.

jmski52

I've never written an options contract but I understood your explanation pretty well, Red Tiger. The only hedging I ever remember doing is at the roulette table, and complexity is kinda fun, as long as it's not serious money.