Short-Free Price" For Silver is $101.35
Commodities / Gold and Silver 2012 Dec 15, 2012 - 01:41 PM GMTBy: Submissions
Afcarl submits:
"Short-Free Price" For Silver is $101.35 ( $33.11 + $68.24 ) Dollars Per Ounce:
The Silver Short-Free Price or SFP, is simply the Silver Spot price ($33.11/oz) plus the price increase ($68.24/oz) that would result from the purchase of all the current Silver Short contracts on the COMEX (117,651 Contracts of 5000 oz per contract). As the number of Silver Short contracts are reduced to zero, the Silver "Short-Free Price" becomes equal to the Silver Spot price.
The Short-Free Silver Price clearly demonstrates and quantifies the manipulative COMEX market impact of large short contract positions, and the importance of position limits on the COMEX enforced by the CFTC.
HOW TO DETERMINE THE SHORT-FREE SILVER (or GOLD) PRICE:
The "Short-Free" Price is equal to the last day close spot price plus the "Equivilent Short Delta Price Increment", or ESDPI, associated with purchasing the total number of ounces of gold or silver corresponding the the total short contracts for the same last day close, and computed as:
SFP = ( last day close Spot Price ) + ( last day close "ESDPI")
The "Equivilent Short Delta Price Increment", or ESDPI, may be calculated by looking at the total number of Short COMEX contracts and the "Historical Market Impact", or HMI, and the total number of Short COMEX contracts, and computed as:
ESDPI= ( Total number of COMEX Short contracts ) x ( Number of ounces per COMEX contract ) x ( "HMI" in dollars per ounce )
The "Historical Market Impact", or HMI, may be calculated by looking at various recent historical instances of large sell-offs or purchases, where the corresponding volume of ounces sold or purchased from a single historical transaction or tight batch executed together, and the observed change in spot price associated with the transaction volume can be matched together, and computed as:
HMI = ( change in spot price associated with the historical transaction / transaction volume in ounces associated with the historical transaction )
EXAMPLE:
Given:
a) Spot price immediately prior to historical transaction = $33.01 per oz.
b) Spot price immediately after historical transaction = $32.72 per oz.
c) Volume of historical transaction = 500 contracts
d) Number of ounces per contract = 5000 oz.
e) Last day close Spot price = $33.11 per oz
f) Current Total Number of Short COMEX Contracts = 117,651 contracts
HMI = ( $33.01 - $32.72 per oz. ) / ( ( 500 contracts ) x ( 5000 oz per contract ) ) = 0.000000116 $/oz
ESDPI = ( 117,651 Short contracts ) x ( 5000 oz/contract ) x ( 0.000000116 $/oz ) = $68.24 per oz
SFP = ( $33.11 per oz. ) + ( $68.24 per oz. ) = $101.35 per oz.
The SFP and the ESDPI may also be computed on an individual Short contract holder (read: JPM) basis to more readily demonstrate the impact of the individual entities all by themself to further substaniate and quantify market manipulation as a direct consequence of large short positions, and the importance of position limits.
NOTE: The pre- and post- transaction spot prices were taken from the Kitco 24 Hour Spot Silver (Bid) chart for December 7th, 2012 at approx. 8:15 a.m. NY Time price drop. For the purposes of the example, It was assumed that the price drop was due to the "non-profit" sale of 500 contracts. Access to volume information would provide a more accure number. The Last day close Spot price was obtained for the same date from the same chart published in the Ed Steer's Gold & Silver Daily Newsletter for Saturday, December 8th, 2012. The number of Current Total Short COMEX contracts was also obtained from the comentary in the same date Newsletter. Better data would obviously result in a more accurate answer.
SUMMARY:
The reoccurring theme, is that the CTFC Commissioners refusal to enforce the law has signaled to all parties in the physical silver COMEX futures market, the NYSE and all the various other exchanges in which the trading of silver-related stocks and options are conducted, is that it is open season for manipulation of the silver and silver related markets, regardless of how illegal and blatant it has become, and regardless of how damaging it has been and will continue to be to the multitude of small private investors.
By AfCarl
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