Technically, silver ultimately acts like a leveraged play on gold. The resulting excessive shorts have left silver with excellent near-term potential for a short squeeze, which would catapult it rapidly higher. But that plunge was largely driven by extreme silver-futures selling by speculators, including a blistering spike in short selling. Sentiment is still reeling following silver’s crushing selloff from mid-April to mid-May. Silver has suffered a lackluster year so far, really lagging gold’s upleg. The latest Commitment of Traders report data has given more support for this development.Īdam Hamilton digs into the increased likelihood of a short squeeze developing due to what has transpired in the silver market over the past few months… Silver Short-Squeeze Potential Jim cautions that Futures and Commodity markets carry risks due to leverage, and they may not be suitable for all traders.Last week we discussed t he short covering going on in the silver futures market and the possibility for a short squeeze developing in silver. If you have any questions, he would be happy to answer them at his e-mail or Twitter above. Jim specializes in covered calls and assists clients in the futures markets. He has over 35 years of experience in the futures and commodities space. James Hunter is a Registered Commodity Broker with The National Futures Association and a Branch Manager with Allendale. Clearing Misconceptions in Futures Markets.Futures manipulation and evidence of unfair practices.Understanding and defining the futures markets.Silver is an excellent savings account, and you can make money if you hold it. In addition, several countries are buying gold. Silver does have a lot higher to move as he considers it undervalued based on the amount of global money printing. Higher prices tend to bring more supply to the market. Short squeezes are the wrong term for these, as it would take a lot more demand to deplete the available supply. The movement was able to get prices to rise back in February for a brief period. The Wall Street Reddit Movement attempted to cause a short squeeze on the silver futures market. He argues the number of contracts has no bearing on the delivery process. Total open interest has nothing to do with the commodities in the warehouse or vault. Jim doesn’t find the idea of extra paper claims to have any basis. There have been other times when rules have changed at unusual times, resulting in unfair fluctuations in the markets in which various parties could benefit. He gives an example with the Hunt Brothers and why changes in the rules unfairly cost them their positions. Jim explains instances where manipulation has occurred in these futures markets. Margins are a function of recent volatility in the market and are necessary to ensure that a contracts counterparty gets paid. As prices for a commodity rise, the margin risks increase, and thus these requirements must increase. Margin requirements are important and they change based on market volatility and risk. Lastly, are the speculators of various from large hedge funds to small investors who may take either position long or short. Again, these might need metal and might regularly take possession by going long for manufacturing. Another large long trader might be a car company or a green energy company. They tend to be short because they are delivering and hedging metal for profit. These banks have supply and contracts with mines or suppliers that they need to sell. There are three different types of traders, with the largest being bullion banks. Many in North American are operated by the CME Group or the Chicago Board of Trade. There used to be numerous exchanges, but today with modern technology, many have been consolidated into a few exchanges. Then, Jim describes how longs and shorts operate in futures, along with options, hedging, and how the delivery process. Jim begins by explaining how futures markets function and defines many of the terms involved in these markets. Jim has 35 years of experience in the industry. Tom welcomes an experienced commodity broker and veteran of the futures business Jim Hunter.
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