Interesting end of the week for PMs

[JohnQPublic]

Tomorrow and Friday ought to be interesting. "TPTB" seem to have worked hard all week to keep gold and silver prices low. tomorrow is end of the June contract, so I think all shorts have to be covered. Maybe they get Friday, also, I'm not sure. Fasten your seatbelts!

Since I said it will probably be straight line tomorrow :D.

[Plastic]

We shall see.... *fondles bag of popcorn*

[MNeagle]

Straight line in which direction: up, down, or sideways? :conf:

[JohnQPublic]

Straight line in which direction: up, down, or sideways? :conf:


I'm expecting up or down, but straight line would be no change. I think JPM has to cover some shorts tomorrow or possibly Friday, and that could mean up, up, up.

[JohnQPublic]

Here's what Harvey Organ (http://harveyorgan.blogspot.com/) is saying:

... tomorrow at 1:30 all comex gold and silver options expiry and the front month of July silver goes off the board...So Ladies and Gentlemen, hold onto your hats as tomorrow will be a very violent day. You will see gold and silver recover at 1:31 pm and then you will see gold rise in the access market accompanied by the gold shares.

I have told you on many occasions that all markets are manipulated from the opening gun to closing. You play with the crooks at your peril.

So it sounds like tomorrow is the day. JPM and cohorts will attack the price on the COMEX (I guess to cover their shorts), then after COMEX close prices will move up again. That means that Friday should see big rises.

[Glass]

Interesting, could be good timing although it's always a currency balance as well for me. It sat at around mid $1200 in aussie while it was up and down USD $100. The Forex rate cancelled out much of the price movement for me. Judging by the 1 year chart we have a way to go before we blow the top of this baby. I talk like I'm interested but I didn't get in for the market. I don't think it matters much now. I think it's, get in how you can and stay in. They are just razing everything in sight. Its going to get very ugly.

[Mouse]

Does anyone know how many call options were written and at what average price (e.g. 1200)? I would be curious to estimate how much covering had to occur today, as I was expecting the hammer to drop below 1200 and then the swoop to cover, instead we saw the swoop to cover kick in from New York open to about noon, leveling and then decline of prices at the 1:30 EST and beyond. Not what I was expecting. Perhaps the call average was at 1230 or so? Just trying to understand how to evaluate the charts on expiry day and see if there is a pattern to exploit.

[JohnQPublic]

Here Mouse, I saw this today. Share your calcs with us!

Guide To Gold Pin Risk (http://www.zerohedge.com/article/guide-gold-pin-risk)
Submitted by Tyler Durden on 06/24/2010 08:49 -0500

Courtesy of www. fmxconnect.com

All About Pin Risk

Today is July options expiration in silver and gold. We’d like to take this opportunity to go over some of the basics and correct some misconceptions on pin risk and what it entails.

#1 Pin risk is not about direction manipulation, it is about volatility management (or manipulation if you prefer).

#2 Pin risk is classic weak hands vs. strong hands trading or described differently, trading where the deeper your pockets, the more likely you are to be the winner.

#3 Pin risk starts with a simple premise, it’s about long options players versus short options players. Its not about bulls vs. bears.

#4 The more money you have the less likely you are to be long options. The less money you have the less likely you are to be naked short options. Subpoint: people with money don’t buy insurance, they sell it. People who cannot bear catastrophic risk or must manage their bankroll are net buyers of options.

#5 Options buyers almost always have less capital then option sellers. This is because they must limit their risk to participate in a market (can’t afford to have infinite risk) like an options seller can.

Starting with the fact that buyers of options almost always have less money than sellers of options, its easy to see how this is played out. But first it may be helpful to explain why direction doesn't matter.

Most professional traders, i.e. bank dealers, proprietary trading firms and principle market makers hedge their directional risk. Longs of options want the market to move away from the option they bought in either direction. Shorts want the market to move toward the strike that they sold.

Longs make money though gamma scalping. Gamma trading allows them to buy low and sell high in the underlying market without risk of adverse movement. Conversely, the disciplined short option player should sell high and buy low hoping that the market movements will cost him less money than the premium he collected from selling the options. But if the short option player is a single bank with a 1 billion dollar balance sheet and can leverage itself up to 40 times he may not be so disciplined. He may instead be encouraged to play the “bully” game, and attempt to pin the strike. He may do this by selling high (adding to his position) and buying low in an attempt to manage volatility for the brief period of time before expiration. Meanwhile the longs are almost always a fragmented community of smaller firms and independent traders using their visa cards to trade. They don’t have the capital or leverage and usually are a fragmented group. Their disciplined trading of selling high and buying low contributes to the gravitational pull of the strike. The shorts who should be counterbalancing those trades by buying high and selling low are actually buying high and selling low.

This goes on all the time but to be clear I do not feel that big market players can force a market close to a strike. They can however facilitate pinning if the market is already there. In a sense pushing the weak players over the cliff when they have already put themselves on the edge. It is manipulation.

I realize this is a lot to say in a short article but we will be writing an in-depth report on pin risk and how expirations and how expirations affects price movement in the coming week. For now, know that in my experience as a market options market for 20 years, that when a single bank is short a straddle and 450 guys like me are long it we’re probably going to pin the strike. The times that strikes do not get pinned are when the longs are in the hands of a strong small pool of speculators who are actually directionally biased. This is rare. Examples of longs who have run in the banks are when Fibro in silver in 1995 or when JPM pushed the silver market in 2008. There are many other instances but it really comes down to this. How much money do you have and how concentrated is the open interest?

http://www.fmxconnect.com/fmxmetalsconnect/image.axd?picture=WindowsLiveWriter/GoldOGPINRISKALERTJune242010/78CD235A/image.png

For today, the strikes that matter are the July 1200 and 1250 strikes. The 1200 strike has more open interest but we are closer to 1250. Your guess is as good as mine if the graviton pull of either strike will attract the futures today. For those who care, options officially expire at 4PM on the comex which means if you have open interest you have the time between when the market closes and options expire to decide whether to exercise or not. On the flip side, you don’t need the market to pin the strike when comex closes. You need the market to be pinning the strike in the afterhours when the underlying is more thinly traded.

-Elizabeth Thawne

http://www.zerohedge.com/sites/default/files/images/user5/imageroot/trichet/Gold%206.24.png

[JohnQPublic]

here is Harvey Organ's wrap-up (http://harveyorgan.blogspot.com/2010/06/commentaryjune-242010.html) for the day:

"...Today gold rebuffed a blatant manipulation attempt in order to prevent option holders of gold and silver from winning on their bets on this last day of trading.

Gold finished the trading day and the last day of options trading at $1245.50 up by $11.20 . Silver finished the day in fine fashion up by 25 cents to 18.73.

The gold comex OI fell by 9000 contracts to 593,232. The silver comex OI fell by 1874 contracts to 137146. Gold and silver fell yesterday on the raid so this is quite normal. However I have my suspicion that the figure is too low. We will see if OI rises well above 600,000 tomorrow (tonights official reading).
If it did, the bankers will burn the midnight oil as they try and figure out how to combat the massive physical demand for silver and gold..."

<silver>

"...We are witnessing massive withdrawals at both ends of the silver inventory namely the dealer inventory and the customer. Today it was a big drainage from the dealer inventory."

<gold>

"...Again paltry movements out of gold. This is extremely surprising as this is the second largest delivery month of the year for gold and we are not seeing any movement into the dealer inventory.

...Since gold traded above 1200.00 all gold contracts above 1200 dollars is in the money and this will be very interesting to see how many option holders stand
for delivery."

<silver again>

"In silver, any silver option holder is in the money with contracts above a strike price of 18.70."

[Skirnir]

$18.5 is the level to watch for silver; expect them to whack it should it get close. I recall quadruple witching is soon...

[JohnQPublic]

$18.5 is the level to watch for silver; expect them to whack it should it get close. I recall quadruple witching is soon...


I think it was today? We're currently at $18.68 .

[Mouse]

JQP,

Thanks for a good post. I am just looking at these things in the monthly cycles and trying to see the patterns. Very subjective, no fancy calc's at this time. We know there is the expiry hustle going on, so the question is what is the delta where they have to crush the call options they have written in order not to go underwater. And we can sort of see the smackdown happen a few days before expiry, they get to some controllable point and then they "fix" it on expiry day. I am no chart analyst. If you look, you can see where a few days before expiry, the metals tank "enough" and then expiry happens and everything goes up a bit, then back down. Then trend up on the fundamentals once again. What I am trying to find is the relationship between written calls/puts that would allow a prudent investor to determine where they will kick the price to before they cover. With this in mind one could make some bucks around the area of expiry by properly guessing the price it will be manipulated to.

I hope that made sense. I don't trade this stuff, but if I thought I had a winning bet I would play with it, and I see this obvious manipulation, so there is probably a simple way to guess what their target price is and go make a buck or two on that.

It could be as simple as buy on expiry day at market open, sell by noon and be gone. That could probably make some bucks. These types of strategies are what I am looking at.

[JohnQPublic]

JQP,

Thanks for a good post. I am just looking at these things in the monthly cycles and trying to see the patterns. Very subjective, no fancy calc's at this time. We know there is the expiry hustle going on, so the question is what is the delta where they have to crush the call options they have written in order not to go underwater. And we can sort of see the smackdown happen a few days before expiry, they get to some controllable point and then they "fix" it on expiry day. I am no chart analyst. If you look, you can see where a few days before expiry, the metals tank "enough" and then expiry happens and everything goes up a bit, then back down. Then trend up on the fundamentals once again. What I am trying to find is the relationship between written calls/puts that would allow a prudent investor to determine where they will kick the price to before they cover. With this in mind one could make some bucks around the area of expiry by properly guessing the price it will be manipulated to.

I hope that made sense. I don't trade this stuff, but if I thought I had a winning bet I would play with it, and I see this obvious manipulation, so there is probably a simple way to guess what their target price is and go make a buck or two on that.




You need to talk to Jerry Maguire ;) .

[Mouse]

yep....