We all know what caused price of silver to go down on Nov 9th 2010 and Nov 16th 2010 – it was increase in margin for silver futures.
But what many of traders and investors in silver don’t know, is how price of SLV (biggest silver ETF), behaved around this dates.
Changes in SLV volumes are even more intriguing.
Let’s look at the following image that shows correlation of XSLV (World silver index) and SLV (blue line).
Looking at Nov 8th 2010, both XSLV and SLV traded in a same way but on Nov 9th 2010 when CME announced 30% increase in margins for silver futures trading, then price of SLV went the opposite way of price of XSLV.
Next day on Nov 10th 2010 also price of XSLV went down and from then on both prices of XSLV and SLV were trading the same way BUT only until Nov 15th 2010.
On Nov 15th 2010 again price of SLV went down while price of XSLV went up.
This would be somehow again explained if another margin increase for trading with silver futures would actually occur on Nov 15th 2010 BUT it happened next day on Nov 16th 2010.
On Nov 16th 2010 price of XSLV went also down and from then on price of XSLV and SLV again are moving in the same way.
Was it a coincidence that price of SLV went down 1 day before 2nd margin increase in just 1 week?
For this to have more weight, we have to check the volume of SLV on this days since price can swing easily on small volume but if huge volume is involved then this can smell on insider trading.
So let me present you next image with volume numbers for SLV trading from Nov 12th 2010 to Nov 17th 2010.
By looking at volume, you see that biggest jump in action was with Puts volume at $24 which jumped on Nov 15th 2010 by 17,167 contracts (from 8,143 on Nov 12th 2010 to 25,310).
Buying puts is a way to make money if price of silver goes down and now 1 day before new margin increase was announced, we see such jump in volume for “out of the money” puts.
Increase in volume of 17,167 contracts equals 85.835 million ounces of silver – which at Nov 15th 2010′s price of silver at around $26, represented gambling with around $2.2 billion.
To gamble with such amount, you need to be very sure that your connections gave you right info and that you’ll end up on a winning side.
Looking at puts volume for next 2 days, we see that on Nov 16th 2010 when margin increase was announced, there was further increase in puts volume at $24 strike price which was also expected.
And on Nov 17th 2010 we see huge drop in puts volume at $24 by 34,146 contracts which is almost double volume versus increase on Nov 15th 2010.
By the looks of it, everybody that entered in buying SLV puts at $24 on Nov 15th 2010 (1 day before new margin increase was announced), exited this trades on Nov 17th 2010 (1 day after announcement).
Price of silver on Nov 15th 2010 before drop started was around $26.4 and it went down all the way to around $25.1 on Nov 17th 2010 before it started to climb back up.
SLV in this same period also dropped by around $1.3
Looks like a few billion USD gamble with SLV, 1 day before new margin increase was announced, lasted less than 48 hours and was a winning bet.
Did we witnessed on Nov 15th 2010 insider trading with SLV?
Who knows, I certainly am not in charge of running investigations about silver manipulation with price of silver or paper silver derivatives.
But such things let you think twice before deciding to trade paper silver derivatives!
No such fuzz or loss of your purchasing power with buying and owning PHYSICAL silver.
Disclosure: Long the physical.