Credible Evidence & Explanation of Silver Manipulation for Skeptic Jeffrey Christian

The CPM Group’s Jeffrey Christian was trotted out by the cartel Tuesday in a BNN interview in order to keep up the proper cartel spin that the CFTC is dropping it’s 4 year investigation into silver manipulation due to lack of any evidence that silver is in fact manipulated.

Christian informs the BNN host that ‘the whole investigation was a distraction‘, and states that ‘sources within the CFTC staff investigating have found no evidence’ and that ‘it’s just a waste of time and money‘.

When then asked why CFTC Commissioner Bart Chilton stated in 2010 that there had been ‘fraudulent efforts to deviously control‘ the price of silver,  Christian responded, ‘He based his beliefs entirely on information he had gotten from people on the internet and newsletter writers who were Conspiracy Theorists.  He clarified that he had seen no evidence presented by anyone in the CFTC that suggested such a thing.  You should also go back and understand that in 2004 and in 2008 the CFTC did very thorough studies in the silver market.  Not only did they not find any evidence of market manipulation, they found evidence that market manipulation did not exist.‘

While any Jeffrey Christian interview can be expected to provide more excrement than a trip to the elephant trail at the local zoo, Christian has again made the SD Hall of Shame by stating that ‘those believing silver has been suppressed and manipulated are never explicit in their accusations‘, and that ‘they don’t offer any credible evidence that it has been happening, nor do they offer any idea of how it could actually have happened the way they allege‘.

If only to demonstrate how simple it is to discredit an intentionally ignorant cartel shill for the blatant liar that he is, we will provide in as simple language as possible (to increase the likelihood of Christian being able to follow) both credible evidence that silver has been manipulated, and explain precisely how it happened.

While Jefferey Christian may like to believe that there is no credible evidence that silver manipulation has been occurring, the fact of the matter is that there is an open and ongoing class-action civil litigation suit against JP Morgan for allegedly manipulating the price of silver.  The discovery phase of the suit has revealed blatant and damning info implicating JP Morgan.

We put together a summary of the litigation last fall, writing that JP Morgan Allegedly Telegraphed Silver Price Smashes Using Massive FAKE TRADES on Saxo Bank Platform, and will include the crucial allegations/summary below:

The suit alleges that JPM orchestrated monthly options-expiry smash downs with the express intent of blowing up the “delta” risk of holders of short, far-out-of-the money options, suddenly forcing them to cover their positions, thus handing JPM silver futures positions at prices far below market prices only minutes prior.

The suit also alleges that JPM made over 25 massive FAKE TRADES using Saxo Bank during sparse Globex evening hours prior to major silver raids for the express purpose of TELEGRAPHING AN IMPENDING SILVER SMASH TO THEIR BUDDIES!

8. Saxo combination
More than twenty five additional instances of this manipulative selling occurred appeared following the highly unusual appearance of a fake trade on the Saxo Bank Silver and FOREX trading platform. JP Morgan and Deutsche Bank assisted Saxo in providing this trade platform. However, this Saxo trade platform repeatedly published a fake trade through March 2010 that did not appear on the trade platform e-signal.

9. It was highly unusual for Saxo Bank to let a fake trade repeatedly appear on the Saxo Bank platform.

10. In fact, the fake trade consistently appeared at the same time of day.  This was between 5:45 pm and 6:00 pm when there was a lull in trading.

11. Moreover, the price of the fake trade was far removed from the immediate remainder of the other trades.
Third, every fake trade involved a violent down drop that appeared on the chart and immediately returned.

12. The individual and cumulative effect of the more than twenty five plus COMEX price drops that occurred after the Saxo signal, was to cause COMEX prices to be lower than they otherwise would have been.

44. The effect of price movements on options positions is accentuated by the use of the Black-Sholes type model to value options.  The Black-Sholes options pricing model is a formula that created a “delta”, which estimates the equivalent futures position for an options portfolio.  An option that is well in the money close to expiration will have a delta of approximately 1 for a call or negative 1 for a put, meaning that owning the option is the equivalent of being long 1 futures contract for the call or short 1 futures contract for the put.  Likewise, an option that is far out of the money close to expiration will have a delta of approximately 0, because it is unlikely that the option move to an in-the-money position.

45. As an option nears a point of being in the money, the delta of the option approaches 0.5.  Many options traders use the measure of the delta expressed in Black-Sholes type models to hedge their delta exposure.  This means that if they hold many options, even if the delta is substantially less than 1 (and the option is out of the money), they may need to sell or buy futures to hedge their delta exposure.  So, for example, if a trader is short 100 out-of-the-money puts whose delta is 0.25, in order to be “delta neutral”, the trader must sell 25 futures contracts.

46.  For the periods alleged below, JP Morgan purchased put options with strike prices that, prior to expiration, were far below the price of the underlying silver contracts.  These “far out of the money” options were nearly always purchased from traders that used some variation of the Black-Sholes trading model.
JPM was fully aware that a trader using any Black-Sholes type trading model would hedge their short option positions based largely upon the options delta i.e the risk (represented on a scale of 0 to 1) that the option would be exercised. 
JPM also knew that options trading at prices far out of the money, particularly those that were set to expire shortly, would be assigned a delta near 0 and left largely unhedged by the traders who sold them. 
JPM was also aware that any sudden and unexpected decline in futures prices would cause option deltas to skyrocket, perhaps as high as 1, and send the sellers of the far-outside-of-the-money puts scrambling to sell futures in order to hedge their newfound option risk.

In such a selling frenzy, JPM would be able to purchase silver futures at prices far below what they had been trading hours, if not minutes, earlier.  In addition, the decline in future prices would allow JPM to profitably exercise options that shortly before seemed certain to expire worthless. 

47.  As discussed more fully below, on several occasions, including on June 26th 2007, and August 15th 2008, JPM intentionally manipulated the price of silver futures contracts at or near the time of expiration for the express purpose of forcing the holders of short, out of the money options to cover their positions.

So contrary to what CPM’s Jeffrey Christian might state falsely otherwise, those alleging manipulation of silver by JP Morgan have explicitly documented and explained precisely HOW AND WHY JP Morgan raided silver on options expirations in order to fleece specs and retail investors who had left their delta positions unhedged.

Back to Christian’s BNN interview Tuesday- the CPM’s Chairman caps off the interview with his prediction that silver will break down and head to $18, and will trade ‘at a very high range between $18 and $28 dollars over the next several years‘.

Only Jeffery Christian could call a prediction for a 40% additional crash in the price of a commodity (in addition to a 50% correction over the past 15 months) trading in a ‘very high range’ with a straight face.

As we feel like we have sufficiently dismantled Christian’s propaganda, we will leave our closing comments to our friend Pining of TFMetals who summed up the interview perfectly:

The FT piece was nothing but a bald-faced apology piece, trying to get the notion that JPM doesn’t manipulate silver into the public sphere.  As ZH noted, they used Blythe’s quotes from an old interview that was three months old, and in which several other things she said have proven to be untrue in the meantime.  This wasn’t journalism, it was directed propaganda.  Additionally:

Left to their own devices, the CFTC isn’t going to do jack- Gensler has been a “corrupt f***ing midget” (to use an old ZH quote) for too long to play any other game.
UNLESS…   unless they are about to be so publicly shamed for their perfidy and complicity that they have no choice but to actually ‘regulate’ fraud and corruption, for once.
Gee, what might this public shaming be? A CIVIL suit that is pending against JPM perhaps???

Now we have Christian wagging his tail obediently, licking his master’s hand (or is that Masters hand?) and trotting out the same story for the public…  

My 2 cents:  JPM is desperately calling on their minions in the press and gov to try and get the idea that “JPM doesn’t manipulate silver” into the public mind right now.  Looks to me like they are trying to front-run some really bad news, and are already in damage-control mode prior to this news even making it into the public sphere.
The FT piece and the Christian interview are nothing but smoke…  and THAT tells me that where there is smoke, there is also fire.

Indeed Pining, indeed.

Those interested can watch the snake-oil salesman’s full interview at BNN after the jump:

http://watch.bnn.ca/#clip735116