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 Replies: 12 / Views: 1,745 |
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Pillar of the Community
United States
1285 Posts |
Silver could be near a wash out. Could is the operative word and some think the wash out took place yesterday (5/5/11). All these margin increases in long run are a good thing for the buy and hold crowd -- Conspiracy theories are just silliness at it is best. It's a prudent business decision that comex did to reduce volatility. Margin requirements work both ways and no one was complaining on the way up. They are also raising margin on other commodities and oil started getting whacked yesterday. Main Reasons for the sell off - Carlos slim hedged out his mine production (close to 100 Mil OZ's at $45 or higher) and George Soros sold out part of his holdings in the 40's as well. Those trades are still unwinding . FWIW -- It's going to be volatile for a while like a bouncy ball.  |
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Bedrock of the Community
United States
10982 Posts |
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It's a prudent business decision that comex did to reduce volatility. Especially when JPMorgan can make billions on their shorts and lose billions if the price continues to rise. That's the smart move. I do agree that raising margin requirements is good in the long run, why it was done this month is another matter. |
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Pillar of the Community
United States
4008 Posts |
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Conspiracy theories are just silliness at it is best. Well, as they say, "It's not paranoia if they really ARE out to get you".  |
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Pillar of the Community
United States
4008 Posts |
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I do agree that raising margin requirements is good in the long run, why it was done this month is another matter. Indeed... and multiple times at that. Fact is, we probably have not seen the last of the increases in silver reserve requirements. Quote:
Especially when JPMorgan can make billions on their shorts and lose billions if the price continues to rise. That's the smart move. To assume that there is no one attempting to manipulate the market to their advantage if they possibly can would seem pretty silly too. Do we not see instances of insider trading and other skulduggery in the stock and bond markets? What could possibly make other hot markets immune to this? Nothing that I can see. |
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Valued Member
United States
364 Posts |
Can someone post or send me a link that explains exactly what happened in English? I understand shorts and such, but not margin requirements.
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Bedrock of the Community
United States
10982 Posts |
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Do we not see instances of insider trading and other skulduggery in the stock and bond markets? What could possibly make other hot markets immune to this? Nothing that I can see.
Yes, of course we do and there is no way to stop it with the big banks, governments, and private billionaires running the show. We have to play by their rules or not play at all. Not playing at all is no fun!  Quote:
I understand shorts and such, but not margin requirements. Say your name is John Morgan and your company buys and sells shares of a paper asset called SLV and the value of SLV is directly tied to the spot price of silver. If silver spot price is $30, one share of SLV costs $30 plus a small commission/fees. People can buy and sell your SLV electronically on a moments notice. Being allowed to trade SLV requires that you actually possess XX% of total volume of shares outstanding as collateral (real silver or other hard asset). That XX% you are required to own is your "margin". 10% margin has been a typical value. Say you raise that (or are forced to raise that) to 20%. That increases your margin requirement. That 20% can be in the form of silver or cash. |
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Pillar of the Community
United States
3670 Posts |
Looks like about 75 cent gain for silver on the day, and it is pushing 36 again. I think if you are waiting for 30 or sub 30, you will be disappointed, and now is the time to buy as much as possible before it starts back up. Gold is 5 bucks within 1500 again as well....
Of course you could get out your shiniest silver coin and call it heads or tails in mid air, and have just a good of a chance of calling which way it will go next, but that debt that is not going anywhere and a dollar still in big trouble, so I think it has bottomed out....
Would not mind to be wrong one bit, as a dip into the mid twenties would open up some serious buying opportunities for many of us....
Edited by Silverhawk74
05/06/2011 6:09 pm
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Pillar of the Community
United States
4008 Posts |
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Would not mind to be wrong one bit, as a dip into the mid twenties would open up some serious buying opportunities for many of us....- Silverhawk Amen to that, Bro. Also agree that silver is finding good support in the $35 area. Only question now is, "Will it hold at that level come Monday?". If the bulk of the speculators have been shaken out, then it should hold. If not, then another $5 price drop is certainly possible. |
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Pillar of the Community
 United States
1285 Posts |
BH -- The daily price swings ($3 to $4) did it in. Each one dollar move is equal to $5,000. Some online trading firms are requiring 50% more than what the comex requires. There is another increase coming on Mon or Tuesday of next week.
Fwiw -- JPM is no longer active in silver, yes they are the custodians of SLV and those SLV trades should just wash each other out meaning it should be net neutral on JPM's books at settlement.
One of the main issues right now is all the newbie's that got into silver recently. All you have to do is look at the amount of new posters on this forum that are just on the PM board. Nothing wrong with it.. but it does give you an idea of the hot money that's in silver. It's WAS a mo mo trade which is now broken.
It's going to be volatile for a while until a lot of these trades are unwound and there is money to be made on both sides of this trade.
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Ed B -- Who is this THEY you speak of?
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Valued Member
United States
364 Posts |
Thanks for the explanation, BH1964.
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Rest in Peace
United States
9104 Posts |
To expand on margin:
Let's say you have $125,000 to speculate with.
A "contract" of silver is 5000 ounces. If the margin requirement is 5%, you must make a deposit of the value of 250 ounces (at $50 = $12,500) for each contract you trade.
This is "earnest money", similar to a deposit, that guarantees you'll fulfill your obligation (buying or selling) when the contract becomes due. If you buy 10 contracts, you need to put up $125,000.
Now let's say they raise the % to 6%. You would need $150,000 to control those same 10 contracts. If you don't have the extra $25,000, you'll have to sell two contracts, and you'll now have $120,000 margin on 8 contracts, plus $5000 cash in your account.
If they raise the % to 7%, each contract will require $17,500 margin, so you can control 7 contracts, with $1250 cash remaining.
They've raised the reserve five times in a week or so. As you can see, each time they raise the reserve, the fewer contracts an investor can control with the same amount of money.
In the simplified example above, three out of ten contracts will be sold to raise funds. Having those "extra" contracts put back into the market will cause the price to go down, exactly what has happened in the last week or so.
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Pillar of the Community
United States
1285 Posts |
Last weeks sell off on Wednesday and Thursday (5/11 and 5/12/2011) was driven by an increase on the margin requirements in OIL. There was also a lot of algorithmic trading that was totally out of control. Quite a few folks are looking into various price discrepancies that took place. NO conspiracy theories just call it computers gone wild. Computers gone wild = Computers were trading against one another trying to front run one another in either direction (up and down) with "millisecond trades". Definition from wiki below A millisecond (from milli- and second; abbreviation: ms) is a thousandth (1/1,000) of a second.[1]  |
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Pillar of the Community
United States
4008 Posts |
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Ed B -- Who is this THEY you speak of? Well, that depends on who YOU are. Once you know that, then you will know who is or is not after you... if anyone. Generally, "they" is a term reserved for those who can affect our lives but whom we cannot affect. City Hall? The cops? The IRS? The government? The press? Take your pick or insert your own "they" as fits into your scenario... again, if any. |
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Replies: 12 / Views: 1,745 |
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Posted 05/06/2011 2:22 pm
