Silver or Blubber?
Welcome to The Rundown! Each week we’ll feature a couple talented guest writers to give their thoughts on whatever is happening in the markets right now.
One of our guest writers this week is the Unusual Whale! He’ll be sharing his thoughts and deep underwater knowledge of the Silver Flow and whether it’s real or blubber.
THIS BLOG IS NOT FINANCIAL ADVICE. I am a cartoon whale 🙂
There has been a lot of talk on silver recently.
Many people are saying it is the next short squeeze, the big one, even larger than Gamestop. Others are saying this silver squeeze is a respective distraction play to bother GME, AMC shorts.
The truth is, as always, it is complicated.
What do we know that is true:
Large institutions manipulate commodities, specifically silver, and have for a long time
Large institutions are short silver as well.
Large groups are also long silver, including the infamous Citadel group of GME fame.
That all being understood, I am only interested in what the flow and inflows tell us on silver, and whether people are trying to make money via this setup.
And as I show in this tweet, whales believe silver will go up significantly.
A lot of the whale plays are up massively already given the recent jumps on the 28th-29th, but new inflows are rapidly coming, with a huge skew on OTM plays (check the whales OTM skew for example).
What does this mean for retail? Well generally, you can likely see short term fluctuations in price, and IV will likely rise in response to this. Long term no one knows (shorts can always get out in a heavily manipulated market or take a loss), but the whales are really clear on direction.
As I write, futures are heavily down (%0.6) but commodities are all up. Gold is up 0.44% but silver is up a womping 6.43%.
Did the whale predict this? Looks like it. To see all the whales in tabular form, check this tweet. You can see that the whales went long quite early.
In greater detail though, the whales were pretty clear about forcing a whale direction here. Let’s match this with price action and see how options + whale moves drove pricing here.
You can see a detailed breakdown on SLV and AG here.
The silver squeeze appears to be a thing, at least when looking at the price of iShares Silver Trust ($SLV) over the last couple weeks. Luckily, the whale picked up on some long calls earlier in the month that have already returned huge. UW alerts are marked on the timeline with labeled alerts having over 100% max returns. While the size of data points corresponding to the daily $ volume at the time of the alert.
We see the silver squeeze also playing out with First Majestic Silver Corp. ($AG) but with much less daily $ volume than $SLV. The single UW call (01/29 15C) generated on Monday, January 25 has a max return of up to 2243%.
Notice the timing of each whale play, at a local bottom. The whales shorted accurately on price action, and then went long at the right time. It seems a large portion of this was driven by media, as I tried to match dates of discussions around whale plays.
In short, should you go out and buy a lot of silver? Who knows. And plus, Mr. Whale never recommends positions. But it is clear that the whales planned for price action to increase on silver. This ofc can be coincidental in terms of social interaction, low interest rate, renewed stimulus discussions, and now, the ever omnipotent short squeeze.
My only recommendation is to follow the flow, as it clearly worked out here.
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