Understanding the Silver Derivatives Market

[unfortunatebeam]

Wouldn't hedge fund managers be participants in broker related derivatives too?

[SGTbull07]

Thanks for the level-headed look at the bigger picture John.

[tcorourke2007]

Very useful, thanks much!

[timbosquad]

Contracts for Differences... never heard of it, but it sounds intriguing. Where can I learn more about them?

[hughescon]

good man stella

[theMAXILOPEZpsycho]

another great video - this is premium subscriber content, for free...very interesting too, surely the spec longs will get hammered again in the future and more of them will pile out of options trading into the physical market. I only own physical, but I plan on buying on margin should we dip under $29 over the summer

[davematherly]

Keep in mind that Bix believes in a fantasy that Greenspan and Bernanke are actually good guys trying to bring about the end of fiat dollars and the beginning of a new gold standard.

The man has one too many screws loose.

Definitely not the brightest bulb in the lamp.

[chroNick546]

nice vid

[cpswyl2]

So the derivative tail is wagging the physical dog, since price discovery is still determined by composite paper? So one day there will be a disconnect, 2 prices, 1 paper and one physical?

[bicyclethief2nd]

what would you rather have paper or secondary physical at ebay prices?

[Romulan112]

HI John, U forgot under the secondary physical markets for the participants, U forgot to put 'survivalist'. thats me. LOL

[DiggingNorway]

great video, informative and down to earth. no drama and no "save yourself from the end of the world" approach. Thank you very very much.

[NicosMind]

Best youtube silver channel period!

[thefink68]

Thanks for debunking the bs coming out of bix weir

[ChrisPCrunchy]

MANIPULATION

Date: 28 June 2011

Source:The Australian Financial Review --- Page: 29

Goldman Sachs analysts believe Newcrest Mining's share price declined from2005 onwards due to the advent of exchange traded funds (ETFs). ETFs offeredinvestors a cheaper alternative to invest in gold without a pure exposure.Investors have been less willing to invest in Newcrest since then but GoldmanSachs thinks the mining company has an "excellent growth pipeline"and, unlike ETFs, can lift its earnings

[stellaconcepts]

@ChrisPCrunchy goldman sachs complaining about manipulation?! now ive seen it all

[ChrisPCrunchy]

@stellaconcepts Yes, commical isnt it,the point is that ANY investment that purports to track a market but in doing so takes demand away from what it tracks has to be kept under control. Volumes have to be limited, derivative investments have to be kept within limits to prevent them over-riding true price descovery. Gold & Silver & their miners are well past that point, Goldman Sachs agrees. Mainly people with a legitimate reason to hedge or de-risk an existing position should be investing.

[tabcan]

Excellent presentation!!

[priapus512]

At 1:10 I think you are trying to think of ETNs, exchange traded notes.

[nanabijou62]

Anything with an X beside it is basically trading in unicorn piss. You will never get to have it physically, but you have a piece of paper stating that you own it. If you decide to sell your unicorn piss, you can trade it for other pieces of paper such as the USD, UK Pound, AUD, CAD or whatever other fiat currency there exists in the workd. These currencies are backed by.... you guessed it UNICORN PISS.

[atsag83]

love your old skool metals leasing vids from bvack in the hairy john days

[kricke243]

Thanks for the vid! But how can a CFD affect the price of the underlying? You say leverage brought price up and leverage brought it back down again. Now, if I bet with you (CFD) that the price of silver's going up, and you bet against, how will that in any way affect the price of silver? Even if we bet 1 trillion dollars, all that will happen is that I or you win 1 trillion dollar from the other, no one else would even have to know about it.

[stellaconcepts]

@kricke243 the leverage at the extreme end wouldnt affect the underlying physical price.

[kricke243]

@stellaconcepts Thanks. If anything, it might perhaps "pull out" some investment capital from physical into these bets, and thus lowering the "pressure" (price) on the underlying?

[Vince3868]

Well done, John. Good synopsis. I have one question: if the exchange contract is a contract to deliver with low leverage, are you sure the participants you've listed (traders and hedgers) are really intending to take delivery? Wouldn't it be more accurate to list the industrial users (jewelers, electronics & medical equipment manufacturers, etc). as the participants in exchange contracts who have full intentions to take delivery?

[aybesee123]

Well made and informitive. They do not trade CFD's in America..

[solojam]

who doesnt know that derivatives are not physical silver and cannot be delivered.

options ARE derivatives. they are just a game to be played, like gambling.

invest in silver for the long term, don't worry about the rest...

[AirelonTrading]

Labeling "Paper" on the 'less real' side, seems to reveal a bit of emotional bias. All manipulation that does occur ... occurs in the spot market. That is the genesis and starting place of all manipulation

As well the leverage on the commodity futures being labeled (20 to 40) ?? 20 to 40 leverage? Huh? WAYYYY off. Im looking at the numbers right now. Its only c 7 to 1 at the moment

(Proof on "ETF Fraud" that I've seen simply revolves around amateurs not understanding basket rebalancing)

[AirelonTrading]

@AirelonTrading Your leverage chart is way, way off

[stellaconcepts]

@AirelonTrading Lol.. less real in terms of physical silver... more paper than physical. It was to illustrate the deviation from the original stuff bought out of the ground. As for the 20-40 to one... here I bracketed that for the reference of what I was talking about in my previous vid where I am discussing how much paper vs metal there is.

[siggyboss]

Where are your sources? In particular, what is your source in regards to futures being promises to deliver? I'm not being argumentative, but no one references an actual article or webpage.

[TheTmp2010]

Great video John. I have a simple question that will lead to a not so simple answer. Can you explain how each of those paper markets affect the price of physical silver? I really don't understand the paper markets well (your videos have been helping me with that) My entire silver position is physical. I am really curious to know how the parts I don't understand affect the part I hold in my hand. Thanks again for the great videos.

[stellaconcepts]

There are times when the more paper markets drive the price more - and times when the physical drives the price... its basically a balance between the two - when the paper starts to distort price to an extreme - the physical tightness or surplus plays catchup and corrects the price up or down. If you're investing in silver for the long haul - physical is the only way to go in my opinion... either that or a fully allocated (and audited) account, but really - why take the risk. get physical

[TheTmp2010]

@stellaconcepts All I have is physical, I have no interest in taking risks in markets I don't understand. I am definately in for the long haul so day to day price really isn't even that important to me. I am just trying to understand the factors that drive that price purely from an educational standpoint.

[Raycheetah]

Well done, John! Makes me glad I'm not into Pork Bellies, instead of Silver; I wouldn't want to hold physical, then, which means I'd only be trading paper, in the end. =^[.]^=

[stellaconcepts]

@Raycheetah hehehe - yeap. imagine trying to stuff them into the safe :)

[TheClarky545]

@stellaconcepts really appreciate another informative video. This really does help put the different silver market in lamens terms for us who aren't as experience in the market. Also I was wondering where you purchased those new pamp Suisse bars from would really appreciate a response cheers

[stellaconcepts]

@TheClarky545 bullionbourse. thx for the comment.

[MalibuLimo]

I have a question regarding volume, is volume a representation of how many Paper oz were traded(bought or sold)?

Or how many customers buying ? Oz?

How does volume relate exactly?

[stellaconcepts]

@MalibuLimo it depends of what you're talking about. volume of what market. volume of options market for example means no physical was traded (implied or actual)... each market has their own volume.

[PhysicalPrice]

@stellaconcepts let's say ETF

[stellaconcepts]

@PhysicalPrice well again - there are many types of etfs... physical etfs or 1:1 etfs like slv - yes, volume relates to number of oz... but for these double short, long etfs and others... volume means nothing in the physical world.

[PhysicalPrice]

@stellaconcepts Ok, but if we were living in a perfect world tomorrow and we had to be 100% honest, every trade was backed by an Audit, how would this impact Physical? If all the Volume was Honest?

[stellaconcepts]

@PhysicalPrice im not saying its not an honest system - to answer your question - it depends if you include manipulation into the equation... but everything I am discussing in this vid is non-manipulative (i.e bonafide trading) every market operates like this... there are elements in the silver market that is manipulation - but the markets outlined here - and the way they should operate - it legitimate.

[PhysicalPrice]

@stellaconcepts What I'm trying to say is we are all hearing a few people say "ETF" when what they mean is "Dishonest Trade" Your points on this video is helping many people understand there is many Markets. So, if we remove All the Dishonest trade, what no. all together would that be?

[colinjockgraham]

i think this 100:1 or 500:1 argument is irrelevant. Here is why. If we can use paper to short silver 100:1 or what ever, we take one silver oz and we sell it 100x, yes there is still only one silver. But that action of selling it 100x in a quick and seamless method is manlipulation in it purest form, and will drive the price lower.  Same can be said for house buying, if a house is brougth and sold for 10x in a year, will house go up in value? of course it will

[stellaconcepts]

@colinjockgraham well, not really, cause if you're selling 100x - someone is buying 100x. Remove all leverage from the market and the price will be where it is now... dont get leverage confused with manipulation... its not... its dangerous - sure - but dangerous on both ends (bubbles and busts).

[colinjockgraham]

@stellaconcepts so if i understand correctly, when the banks sold 15billion oz of silver in may. there were 15billion oz also brought? so the question is , who had the money to buy them? sure they used leverage to move volumn. wicked results acheived. For my brain , it is strange.

[stellaconcepts]

@colinjockgraham yes, absolutely someone bought them. you can't sell something if there isn't a buyer :) there is a lot of money out there.... a LOT of money... and a lot of leveraged money.

[0urGaia]

@colinjockgraham, there is more than one bank working the books. High speed selling, buying overwhelms the system, so they can make the silver price, dance the hoops. The climb from $38 to $49 and subsequent collapse was all backed by uncle sam to force the herd of wealth back into the USD. Now that USD is collapsing again, will they replay another pump and dump!

[colinjockgraham]

@0urGaia more than one bank, true, they tag each other in true WWF style.

[0urGaia]

@colinjockgraham. yes, thats why looking at slv volume under historical price section is just as important as looking at the price of silver. When volume jumped above 40k at 39.86 on Apr 8 the game was on. Fool me once, shame on you, fool me twice, shame on me :)

[aybesee123]

@colinjockgraham You realize for everything sold there must be a buyer correct?To sell an oz of silver 100x someone will have to buy it 100x.

[colinjockgraham]

@aybesee123 naked shorting. it how they malipute markets, by selling silver that does not exsists. Or unless i have been tricked .

[stellaconcepts]

@colinjockgraham by selling silver they dont own... not that doesnt exist (well it may not even exist)

[143DREWID]

@stellaconcepts

Fractional Reserve. What pray tell is not as such, in the digital world. Apprehension partners indecision.

Our great grandparents laugh at the digital currency belief. The epitome of a ponzi scheme, partnered with the epitome of idiocy.

Gains to be had, losses guaranteed.

[143DREWID]

@colinjockgraham

Precisely; Demand Reduction.

That however does not matter, if trained fiat addiction, spawns personal and irrational derivatives.

[K1RKH4MM3T]

Great vid, helped me understand the silver market more! The thing that pisses me off about the "silver community" is all the bullshit some people put out, I just want the simple facts, not to be indoctrinated with cult-like propaganda.

So, while it may be a little disappointing that its not mega-manipulation like 100:1, I'd rather know the reality of the situation than believe something wrong. Thanks

[BiggerThinking1]

and where can you buy a derivative in australia? My online brokerage only lets me buy long (and sell) - and thats IT!

[stellaconcepts]

@BiggerThinking1 i trade with ig markets.

[geniusmarketing08]

@stellaconcepts Yeah IG is a pretty good trading platform, nice layout and faily tight spreads (at least on fx majors, not sure about silver though) Nice explanation of paper markets on this vid :)

[TheSchaefReport]

@stellaconcepts Hey John. I have often wondered which types of trading actually affects the price of silver on the market. For instance, if a ton of people rushed in and bought the ETF SLV would that cause the price of silver to go up? If not, why? Also, which types of trading just reflect what goes on in the physical market but don't actually affect the market themselves? I hope my question makes sense. Thanks

[BiggerThinking1]

whats the "double short" derivative some of the yank traders (like bullorbearreport) talk about?

[stellaconcepts]

@BiggerThinking1 yea thats those etfs i was talking about.

[lizadfuel]

@stellaconcepts ZSL was the one rawdog used to hedge his silver originally. Good informative video!

[852plm]

paper money is the problem that caused the confusion.

the one kilo metal can change hand 100 x, but there is still one kilo of metal.

but the dollar figure is 100x$, it the same kilo is passed around for 1000x for a year, that is still the kilo bar.

where else the dollar amount is huge for a year, can you imagine the amount of tax being collected on that kilo.

[rocky315w]

Many thanks, once we reach the point where there is nearly no mined silver available, wich of the the above will be eliminated, any, I know it sounds like a stupid question but is all silver is recycled or bullion how will that effect the market as you so nicely described abouve. Many thanks Love Rocky

[Pfsif]

Thanks for all you hard work making these videos!

[gottagetatubename]

good job well done.

[silverfuturist]

Thanks for doing videos and having the patience to answer the comments.

[GuildF40]

Job well done (stop fiddling with the kettle)

[65nom]

I think this is slightly misleading. leverage != volume. A private bet with little money down can have huge leverage, and insignificant effect on the real market. It's like putting a fiver on a horse, vs actually buying the horse or a share in it. Cost of horse $50,000 ? cost of bet $5. Insane leverage sure 10,000 to 1. But not manipulative. It's more a measure of "skin in the game". I'd be interested to know what the Real-Paper axis vs Volume ($ or oz) data looks like...

[stellaconcepts]

@65nom im not saying leverage = volume... whats the prob? if anything you actually summarised what i was saying in the vid :)

[stealinator]

Thanks for taking the time to go over all this John, I actually learned something.

[Hoepsakee]

Cheers on the vid John. What do you reckon is the balance between the physical market (with promise) and the paper market (no promise) worldwide? 10% to 90%?

Off topic a bit, but anyone know what is making silver rise 1,27% atm? Cheers.

[stellaconcepts]

@Hoepsakee who knows - the derivative market must be 100's of times bigger - at least... but its not that there is no promise with most derivatives - there is no expectation of promise in the first place.

[outforsushi]

John, have you researched the Australian ETF yet? Do etf gold, pmgold on the asx have real gold or are they like the american version

[stellaconcepts]

@outforsushi i believe asx:gold does have physical backing but to be honest ive never purchased or looked into them. their share price is 1/10th the value of gold valued in aud.

[TheScanova]

Zurich KantonalBank's ETF ISIN CH0029792717 Swiss Exchange symbol ZSIL The investor has the right to sell his shares at any time or to demand the payment in kind in physical silver.

[stellaconcepts]

@TheScanova yes, much like pslv... these are more like allocated bullion accounts rather than funds tho... even tho technically they are a fund, its more like you are making claim on bullion, with lower spreads and can demand delivery at your leisure... however you will find that with most of these physical backed etfs, there is a "baring" fee if you want your silver (i.e. the production cost of minting your bars).

[ChristopherWalkenPUA]

looking forward to the 'not included' video as well :)

[timmit59]

You are a bloody champion! This is what YouTube needs, some honest content amongst the sensationalism.

John would you be interested speaking at the gold symposium in November this year? Its in sydney. It's run by a company called symposium, youd be a very appreciated speaker and it's a very educated crowd. A talk on this very topic would be great. Eric Sprott is speaking so you'd be able to meet him. Let me know if you're interested and I can put you in contact with the organiser

[venttiarmas]

Great video, thanks. Waiting for "What´s not included" part.

[stellaconcepts]

@venttiarmas Well I have done videos on them all in the past... my first vid infact was about metals leasing... I would have covered them all a few times.

[venttiarmas]

@stellaconcepts Ok, i´ll check them out.

[mrkarlhey]

great video - loving these educational vids - keep them coming

[angie7dino]

I`m glad you know what your talking about !