Now on to the silver post This is a very long post, so I apologize to the WSB apes who can barely read and will have to scroll a long way to get to the TLDR. Its also been impossible to post about silver lately on WSB (no posts approved, thanks to the mod who assisted this one), so I crammed about 3-4 posts worth into this one. Not sure when I'll be allowed to post again. I've organized this post into 4 sections so feel free to skip around to the parts you are interested in. The silver short squeeze evidence Why the 'hedge funds are pushing silver' narrative is BS The fundamental case for silver, and why the shorts deserve to be squeezed TLDR, what to buy if you want to go long silverSince myinitial poston the potential for a silver short squeeze, I have been researching the topic to prepare a more detailed and substantiated update post. This is my latest attempt to post, and hopefully this one gets to stay up (silver censorship has been a thing here lately) 1. The potential for a short squeeze (573% of the 'float' is currently sold short) The big thing to remember here is that if enough market participants who are long silver contracts in the futures market begin to demand delivery of their silver, there will absolutely be a meltup in the price because there simply isn't enough supply available. The next 3 trading days are critical, and there is war being waged. The shorts and COMEX are in a fight for their lives, and barely hanging on by a thread Many big name precious metals veterans have bemoaned for years about how the size of the 'paper' silver market absolutely dwarfs the amount of silver that could be delivered, and thus themarket is manipulated. The vast majority of futures and options contracts in the silver market have historically been settled via cash. Meaning no physical silver is actually delivered when these contracts are set to expire. This is where the talk of the 100-1 and 250-1 paper silver to physical silver ratios comes from, but short interest is actually more like 6-1 on the COMEX using open interest data through the next two big delivery months. Technically every month is eligible for deliveries, but only months with options interest tend to have any real volume, and that's why they are known as delivery months. March and May are options expiration months, while April is not. If you want to think about it like a stock,the short interest is 573% of the 'float'. This is based on the fact that over the next 3 months there are futures contracts and options which have the right to take delivery of 847 million ounces of silver. This is compared to only 147 million ounces registered on the COMEX that could fulfil these deliveries. For perspective, GME short interest peaked at around 140% of its float, and that was considered crazy high. It is widely known that if a small, but significant share of long silver contract holders took delivery, that there would not be enough silver, as the demand would cascade higher and higher as the prices rise. (sources:silver stocks report,futures open interest,options open interest, data as of 2-18 was used in this post) This would be similar to a bank run scenario. The COMEX is the silver bank, and they have printed too many paper claims on a limited amount of silver. If there is no actual silver left to be delivered to the holders of the futures contracts, that means that means that the COMEX would default and settle their contracts in cash. No one wants to get settled in cash if the COMEX had to default. This would mean that right as you want to be able to stay long silver, as the price is surging higher, that you will get forced out and paid cash instead of silver and wouldn't benefit from future increases in the price. The traders who want to stay long silver and who see the run occurring would try to takedelivery because if you actually have physical silver in your vault then it doesn't matter if the COMEX goes down, you still have your actual silver you can sell on the spot market. Most importantly to them, they get to keep participating in the upside. Now the shorts are very much trying to keep the price down at the moment, because their problems get worse as the price rises and more options become in the money. See the chart below, with a handy arrow to illustrate where we are currently in terms of March open interest. https://preview.redd.it/y6j90g954mi61.png?width=860&format=png&auto=webp&s=e2ad9f33ea4008e3380ce11eb4e9333669e1524e As the price rises more and more, the short interest grows as more options on futures contracts become 'in the money', compounding problems for the shorts. This is the silver version of a gamma squeeze. The chart below shows the number of ounces that would be eligible for delivery over the next 3 months, given the current open interest data. Most of the open interest comes from futures contracts that aren't dependent on price, but I've made this chart to illustrate how the problems get worse for the shorts due to the options contracts as the price rises. The latest silver price as I'm writing this is $27.37. https://preview.redd.it/t91qm4t84mi61.png?width=664&format=png&auto=webp&s=0fee997ca32e24a60916e6829be375885263107c But why would contract holders all of a sudden start to demand delivery when cash settlement has historically been the norm? A couple of reasons. The first reason is arbitrage. Premiums on 1000oz bars have surged to somewhere between $1 and $2 an ounce (this is unheard of on the 1000oz commercial bars), meaning that traders can stand for delivery and then sell in the physical market for immediate profit. When supply had become constrained in previous silver bull markets these premiums were more like 30 cents an ounce. In addition, mints are also interested in arbitrage. They could begin to take delivery to break down....................................................
And on and on it goes.
SVL Price at posting:
24.0¢ Sentiment: Buy Disclosure: Held
(20min delay)
