A quick summary of the Hunt Brothers and Silver Thursday:
In 1980, after the Hunt brothers cornered the silver market, having accumulated approx 1/3 of supply via heavy leverage, COMEX created Silver Rule 7 which placed aggressive limits on said leverage. Prices began to fall.
Silver fell 50%+ in just four days (after increasing over 700%), leading to a $100M margin call for the Hunts. They were facing a $1.7B loss. The fear was that this inability to cover the margin debt would lead to brokerage and bank failures, and that spread through all markets.
Silver Thursday was on March 27, 1980. The brothers ended up being bailed out by a group of bankers extending a $1.1B credit line to bail them out. They were eventually convicted on civil charges, filing bankruptcy 8 years later.
These explanations about the plumbing and real underpinnings of what makes a market work (especially w Dodd Frank) are thankfully all over twitter now, however most will skip right past and prefer to stay outraged at the “system” despite experiencing the best bull run ever.
Congress will drag the execs to a hearing, which nobody will watch except for a short clip of Elizabeth Warren (or whoever) asking a rhetorical question with the sole intent of making their victim look speechless, and all people will remember is that “Wall St fkd the little guy.”
This is correct. There is no way to hedge the options they’ve sold when the market moves like this. Yes they may be at fault for taking on too much short gamma exposure, but this is self preservation rather than collusion IMO.
The range of outcomes into the 1/29 option expiration when the open interest is so high and price moves hundreds of % a day is impossible to forecast or manage. It’s not just hedge funds it’s the entire system at risk.
Everyone is caught up on little guy vs Wall Street and missing the potential of what happens if the bookies run out of money
If they rescue the 20d again (currently 3784 on $ES) then we might be able to consider this a stick save. Continue to keep hedges on IMO. I closed my $VXX calls, but still have $VIX call spreads and I added $XRT puts today. Still got some OTM $IWM and $TSLA puts running too.
That said I also bought quite a few dips pretty aggressively.