Fortunately, there isn’t any triple-levered silver ETF, or at the very least one with any buying and selling quantity. With silver down 33% as we speak, that may be an extinction-level occasion.
We noticed one thing related within the VIX ETF implosion just a few years in the past because it was liquidated. This time, there’s solely a twice-levered ETF to fret about. That is the AGQ product from ProShares.
Going into the day, it held about $5 billion in property tied to silver and — evidently — it should be a lot much less tomorrow. It is buying and selling down 66%, which ought to wipe out about $3 billion of that.
This chart is definitely telling in hindsight because it exhibits a diminishing AUM this week, at the same time as silver made new highs. That was a crimson flag that retail enthusiasm was waning and now right here we’re.’
In the mean time, it seems to be like this ETF is behaving because it’s presupposed to however when markets transfer 33%, unhealthy issues are inclined to occur so it is price keeping track of the headlines after the shut. Whether or not it is on this ETF or within the derivatives market, there are more likely to be some our bodies piled up someplace or some margin calls unmet.
When that occurs, there may be usually much more compelled liquidation and additional ache. We additionally have not seen how these strikes will have an effect on overseas markets the place margin traces had been actually be ringing over the weekend.
It is an unsightly image throughout and to date the indications are that the market is functioning, however at any time when a market has its worst day ever — significantly one as massive as silver — there are some actual dangers in market plumbing.
