Watch That Trap SNAP CLOSED -- ZioDenniger

[CrackSmokeRepublican]

Like I said in the interview with Ognir back in October.  A lot of Jew HedgeFunds are playing in the commodities-PM markets.... keep your eyes open and your guns loaded...they are looking for relatively "cheap" snags after getting pumped from the QE Jew Banks...  --CSR

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Watch That Trap SNAP CLOSED
 

There are times you must just smiley

Anyone who follows my writing knows that I've commented many times on the risks of commodity trading.  One of the more-serious ones is lock risk - a risk that rarely arises in the cash markets.

Well, it happens all the time in the commodities market.  You get a lock-limit trade and you can't go into the direction of the move - only the opposite.  This can continue in extreme cases for days, and while it doesn't happen all that often, when it does happen it will wipe out months or years of gains, and can wipe you out entirely if you're too-heavily into your margin.


Today we got it in Corn.

Bought that gap up did 'ya?  Oops.


Silver got hammered as well, but the real slaughter was in sugar:



This was foretold a couple of days ago when the margin on silver was raised.  I chuckled at the time, because the resulting "flash crash" in the metal, much of which was recovered, said one thing (that I noted in the nightly video) quite loudly: There were far too many people in there speculating with full margin leverage - and they got forced out.

Then Sugar got the same treatment.

Expect this to continue.  The CME has access to the margin positions of everyone - how much is posted, and how many contracts are open on which side and who's holding them.  They also have unilateral authority to raise margin requirements as they see fit.

Well, if you're buying without leverage and margin goes up, so what?  You were socking back the full value of the contract, so the margin change means nothing to you.

But if you were long using only minimum margin, you're in big trouble - and can be forced to liquidate into a hideous loss.  If you're in too far you can have your trading account entirely wiped out or even be bankrupted.

Remember that when the Hunt Brothers tried to play this game with silver many years ago Comex pulled margin (that is, dramatically increased margin requirements) on them.  They weren't long with their own money - they were using leverage, effectively borrowed money - to buy the contracts.  Oops.  This caused them to be hit with an instant margin call even though the price hadn't moved!

They had to sell to reduce holdings to get under margin limits.  This of course drove other people (who were late to the trade) underwater and they started to take heavy losses - and they sold as well.

smiley

If CME is waking up to this generally and is pulling in margin this is a positive development for the economy even though it will roil markets.  Unbridled speculation in commodities is part of what caused the horrific impact on people in 2007/08.  Stopping that this time around is a good thing.

But don't be fooled - there's a difference between leverage being forced out (gee, where have seen that happen before in the financial markets?) and eliminating the bad effects of QE2.  The most-important is that contrary to Bernanke's claims long end bond rates are going up, not down.

This is exactly as it was with QE1, and is not surprising to me one bit.  In fact, it's exactly what I said would happen.  It's not like I had some sort of crystal ball either - I only had the last QE attempt to go on, and the inescapable logic - when you debase currency you drive long rates higher as the debasement premium increases and this means that bond holders expect more of it, not less.

In any event trading leveraged positions without stops and in particular holding them overnight is dangerous.  Very dangerous - especially when the folks in control of the amount of margin you have to put up are free to change that amount any time they'd like, and they're in possession of exactly how many contracts are out, on which side, and who is holding them.

As I've said repeatedly: If you intend to trade commodity futures in particular, always have a stop active, do so on a daytrade basis and be out and flat by the close of business.

Your trading account's balance will thank you.

http://market-ticker.org/akcs-www?post=172082