"With all due respect, All4one suggested that the orders were created out of thin air. He is correct. The article stated the following: "Mr Plunkett created fake orders with the intent of pushing the price of gold below $1,585.96, which he succeeded in doing." Mr Daniel Plunkett was fined 96,500 pounds for creating fake orders."
This is one of those case where the journalist doesn't know what he is talking about and All4One has been taken along for the ride.
The article says that the trades were "fake" which suggests that they didn't exist. However, the article tells us that he lost $2.15mill "managing" the position, which suggests that the trade were very real.
The journalist should have said that Daniel Plunkett executed actual trades with the intention of creating an artificial market, which is against the law
Why am I making a fuss about this.
What we have here is a documented case of actual market manipulation from which we can learn somethings:
1. To control the price of gold (create an artificial market) requires actual trades 2. The trader creating the artificial market usually has to pay a price. 3. Because of the expense, markets can only be controlled for relatively short periods of time.
Many member of the gold forum (and elsewhere) think that the price of gold is manipulated all the time. I find this claim astonishing because
For a brilliant demonstration of this, I refers readers to the activities of the Bunker Hunt brothers in the Silver market in the 1970's.
mtl
"big players RARELY buy options....they tend to sell them..."
It is often assumed that selling options is more dangerous than buying them. I thought so too, until a few years ago when I found myself managing risk on an FX book with a Theta of $1 million. ("Theta" is the dollar amount bought options loses when the date stamp moves forward one day. It increases exponentially as the option approaches expiry.)
