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Silver Wheaton Corp. Message Board

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  • ltvalue ltvalue Nov 17, 2010 1:20 PM Flag

    CME's Criminally-Timed Silver Margin Increase-They Pulled Out Every Dirty Trick

    To answer your question more directly here is how it worked:

    1) Suddenly raise margin requirements by 30% after normal trading

    2) Traders get at start of next days trading margin calls demanding they put up more money

    3) Many traders can't/wont put up more money so they start selling off their positions to raise cash to meet margin calls.

    4) Prices start dropping quickly in the face of #3 selling, causing more traders to get margin calls or hit their sell stops and these new traders start selling.

    5) The member/commercial firms who have large short positions at the start of this bear raid begin selling short more futures contracts into the already declining market.

    6) Prices start dropping even more after #5, causing yet more traders to get margin calls or hit their sell stops and these new traders start selling.

    7) Traders who were not crushed during #1-6 realize the party has started and start selling short into the already declining market.

    8) Payday! The member/commercial firms who were originally short big time start slowly covering their net short position, such that over time it is significantly lower than when #1 started

    9) Prices continue falling for awhile until a new equilibrium is reached in which the weaker traders were wiped out or had to get out.

    Classic bear raid. As old as time. Still going strong in the 21st century......

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