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Many were quick to pooh-pooh the famously anonymous Apr. 11 $1M bet on silver puts - which is...

Many were quick to pooh-pooh the famously anonymous Apr. 11 $1M bet on silver puts - which is now worth a cool $7M thanks to the subsequent spike in implied volatility. "The investor didn't get this trade right," Andrew Wilkinson writes, "He or she got it spectacularly right." For others, "it could be a long day in hell before investors feel they can afford to trade silver again."
Comments (12)
  • Shouldn't that be a cold day in hell, rather than a "long day in hell"? It seems any day in hell would be long.
    6 May 2011, 09:21 AM Reply Like
  • ya beat me to it
    6 May 2011, 10:03 AM Reply Like
  • I spent a long year in Hell in Midland, Texas back in the early 80's.
    6 May 2011, 10:21 AM Reply Like
  • If the powers that be didn't spike margins 5 times in two weeks we wouldn't be seeing this selloff. They need to find a better way - maybe some sort of trailing percentage that rises with the rise in the price (or vice versa). The seemingly subjective hikes have done a lot of damage. (Of course this doesn't mention the impact of HFT's in this area either)
    6 May 2011, 09:25 AM Reply Like
  • And....the sell off was totally engineered by a 2000 contract sale on last weekend when all the rest of the world was asleep or off on holiday. Boy would I like to know who those guys were....my bet is Soros or JPM.
    6 May 2011, 10:23 AM Reply Like
  • "He or she got it..."

     

    Are we stuck with this until the Muslims take over?
    6 May 2011, 09:36 AM Reply Like
  • He's probably one of the insiders who control the price of metals and was just showing off..
    6 May 2011, 09:53 AM Reply Like
  • The point of the article is about how volatility affects the price of options. SLV is pretty much where it was when the buyer took up the position, but volatility doubled and the options price increased 7 fold.

     

    Traders taking up out of the money positions on situations where volatility is low compared to the potential for a gap don't need the price of the underlying to hit their strike. This is particularly true if the options have enough time to expiration.

     

    Rather than waiting for expiration, the investor/speculator sells as soon as the gap occurs and volatility spikes.
    6 May 2011, 09:53 AM Reply Like
  • thanks for that succinct explanation
    6 May 2011, 10:04 AM Reply Like
  • And I wonder what Andrew will be saying when Silver busts the $50 price and vaults to $55 or $60...

     

    No one ever gets pinned with their prior goof ball forecasts when things turn. In this case, all precious metals will climb as currency debasement inexorably occurs.
    6 May 2011, 10:26 AM Reply Like
  • So at 10:27 Eastern time this morning, I sit wondering if this will be one of those days counter to the last week where Silver rises $3 or $4 in a single day and Gold is going to go up $50 in a single day. Then again, what will Andrew say.
    6 May 2011, 10:29 AM Reply Like
  • So at 10:52 Eastern time this morning gold's up $25.
    6 May 2011, 10:53 AM Reply Like
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