May 5, 2011 7:17 am

1. The mysterious buy of the July $25.00 put in SLV when Silver was at its high.

This buy, which was a $1,000,000 bet that SLV would go down (it didn't necessarily have to go down to $25.00 or below, as options can easily double in worth as the price on SLV starts to trend downward) was placed in one of the biggest bull markets, which really started in late August 2010, was well underway. No "Joe Trader" would buy such OTM (Out of The Money) put options in this amount without some advance knowledge they would be worth more in the future.

Furthermore, it was discovered that this buy of puts was part of an apparent "butterfly spread" where, in this case, if SLV closed at 36 - 37 anytime before the May 2011 options expire, this trade would return a guaranteed 7%. Well, look where the price of SLV is likely to be today, remember that SLV is usually 98% of the price of spot Silver.... which is the price of the real metal, and not some paper "IOU".

2. The CME announcing several margin hikes to reduce "volatility"in Silver, when they have only increased it as a result of their margin hikes. Now while that seems counterintuitive, that's what has happened. The real 'kicker' to this is that they have announced another margin hike (announced last night) for not ONE hike but TWO hikes, one after close today, then one after the close on Monday. Now wait a minute. When was the last time the CME ever announced TWO margin hikes in the same announcement, for the same commodity, for back to back hikes? Think about this for a minute. If they have, I think it has been extremely rare, feel free to correct me if I am wrong. However, if this is right, WHY would they do such a thing? If you analyze this , especially in light of the timing of the effectiveness of the margin hikes, they are doing this so that they can let the big money cover their shorts at the low, for a commodity they do not have enough to meet their delivery obligations for May.

Here's what I mean:

If you knew that another margin hike is coming on Monday after the close, WHY would you want to buy any Silver or SLV, buy any calls or go long TODAY or FRIDAY (Or Monday as well?) You have been told (it's there in the news release) that another margin hike is coming after Monday close, so you think, "I can wait to go long until Monday when the spot will be lower due to more margin traders selling." In addition, you may think "Maybe I should also SHORT Silver (and its associated trading vehicles) to take advantage of the drop that will occur over the next few trading days."

Now you think you have gamed the system and have figured it out... simple trade, right? Just wait until Monday. Well, remember, the price of SLV reached its 36-37 target (see #1) and that trader made its money. Now Sunday night (could be Monday for best effect), before the NY market opens, Australia and Asia markets decide that it's time to start buying.... and they do so in a BIG way, now that retail investors have decided to sell short (guess who bought those shorts at the bottom) get caught in the squeeze.

Margin increases mean that the short squeeze will be even more magnified, as it will then take ADDITIONAL funds to buy contracts to cover the shorts that were just sold a few days earlier (example, two weeks ago you could cover your short contract for let's say $7,000 now, after many margin increases, to buy back your short contract it now takes a minimum of $12,000 per contract. Have the margin requirements for shorts been increased in the past (unprecedented) 5 announced margin hikes (including the one coming on Monday) ?

This is timed perfectly... the smart money (in the know) put trade made its money, they can not (in my opinion) drop Silver to $25.00 as they don't even have enough physical metal Silver to deliver this month and it appears the COMEX sellers are in default. The COMEX price is NOT a true "Price Discovery Mechanism" anymore when over a year's worth of Silver trades in one day at prices much higher than today. Sunday night, or perhaps Monday, after retail investors have sat out buying the next few days expecting Silver to go lower (and perhaps decided to "join them" in selling, since higher margin = more selling = lower price) then buyers of size will decide to show up, and the price will have bottomed.... and reverse upward. When they have roped in as many retail (dumb money) to sell short into the last of the drop of spot price and Silver then Tuesday, when margin increases hit again, it will take more money to buy back those contracts sold short, which will, again, lead to a more amplified short squeeze.

Now I have NO idea if this is the plan, just do your own DD. But think about it. WHY did the CME "pre-announce" Monday's margin increase? Have they done this at ANYTIME during this bull market in Silver that really took off August 23, 2010?

In my opinion, again, it was to keep Joe Investor out and possibly encourage Joe to sell short expecting a drop all the way until Monday close, which is why I think we will see the bottom on Monday when volume will be high and smart money covers at the low with Joe's short selling today, tomorrow and Monday.