Follow the Money In Silver

If smart money was turning bearish as suggested below, money flows would be accelerating towards the red rather green line. That is, unless commercial traders are no longer considered ‘smart money’. Don’t count on that. Silver remains a market in transition from order to disorder. Markets in transition tend to do unexpected things.

Silver (SLV) and the Commercial (C) Less Nonreportable (NR) Traders COT Futures And Options Stochastic Weighted Average of Net Long As A % of Open Interest:


Headline: Silver: The Smart Money Gets Bearish

"It's actually a very well-timed, very inexpensive wager on the price of silver falling," says Wilkinson. "Plenty of smart money [read: the cool kids] is betting on the commodity rally ending." How is a million buck bet inexpensive? For one thing, a million bucks isn't what it used to be. For another, as Wilkinson notes, it was a "low Delta trade." In English, that means you can buy a whole stack of option paper for a relatively low price. The unknown silver bear only paid 10 cents a contract at a relatively low volatility. As a result, the trader doesn't actually need to fall 37% by July to make money. Instead the put buyer just needs other traders to think silver might drop that steeply. Wilkinson observes that the put buyer's contracts were trading for 20 cents the day after the million-dollar trade, giving the bear a double on paper.

Source: finance.yahoo.com