waldipup

How Will CFTC Commodity Price Investigations Affect Trading in Silver?

"If the major shorts are forced to reduce the size of their positions, I asked myself who was going to take the other side of the longs when a contract is bought. Open interest goes up as the silver price increases, so it seems to me that if you limit the shorts then you are limiting the longs as well. The outcome of such a CFTC measure on silver may dampen the crashes we have seen in silver since 2004, but it may also dampen the run ups as well."

Open interest goes up as new longs enter , not short covering , and that would remain the same.

It would not rise as much as banks open new shorts (not long covering) if they enter with less positions ,

but the banks opening fewer new shorts would cause longs to hold their positions rather than cover thinking " here go the shorters again" , so the upside would benefit ?

Also , if fewer shorts occur due to lower position limits , the ability to crash the market will be mitigated , which may cause the shorters to reconsider their overall strategy to short the market ,

As their attempts to drop it will be riskier with less "big guns" (positions) in their arsenal.