Raptor Update

[webmaster]

Subject:Raptor Update
By: Theodore Butler

Overview: In last week’s article, The Raptors, I described how that term applied to the smaller commercials that seemed to be outmaneuvering the largest commercial traders which I dubbed the T. Rexs. I speculated that the T. Rex commercials looked increasingly trapped in their massive concentrated net short position, and how this might portend profoundly bullish implications for the silver market. My reasoning centered on this increased dealer competition as an indicator that the long-term manipulation in silver might be on its last legs.

Link: http://news.silverseek.com/TedButler/1180471306.php

[valerb@bellsouth.net]

Mr. Butler’s explanation as to how he arrives at his findings for the Raptors position leaves me wondering how I ever passed accounting. To me, it just seems like simple addition and subtraction without all the rest of these calculations. The only problem I find with Mr. Butler’s formula is, he seems to be leaving out the other half of the T-Rex numbers and takes a long way around getting to the bottom line.

If the top 8 Commercial investors are accountable for 58,325 “short”, that leaves the 9+ investors holding the remaining 10,482 “short”.

These same top 8 Commercial investors are accountable for 24,111 “long”, that leaves the 9+ investors holding the remaining 225 “long”.

Now I can’t come to any other conclusion than, the 9+ commercial investors are net 10,257 short.

However, if you neglect to credit the top 8 Commercial investors with there 24,111 “long” position and credit these to the 9+, then the 9+ Commercial investors would show a net long position of 13,854. That just doesn’t seem to be the case.

I for one was salivating all over my keyboard when I read his May 22nd report, but I really wanted to see the actual numbers for the top 8 Commercial investors, so I could follow his logic and track the T-Rex vs. Raptors battle.

I really “want” someone to prove I’m all wet. Please show me the error in my simplistic accounting.

[valerb@bellsouth.net]

I sent an E-mail to a fellow Silver investor along with a copy of my posting above.
He had a hard time following it as he didn’t try and figure out what Mr. Butler had posted.

So here are the actual numbers:

Commercial Shorts………….....…68,807…............commercial longs………..…24,336….NET POSITION
1 –8 commercial investors….….58,325…........1-8 commercial investors….24,111 = 34,214 net short
9+ commercial investors…..……10,482….........9+ commercial investors…..…..225 = 10,257 net short

As you can see the T-Rex (1-8) group are only 34,214 net short and not 58,325 as reported by Mr. Butler

The Raptors (9+) are 10,257 net short and not the 13,854 net long as reported by Mr. Butler.

All the errors were made by adding “24,336” commercial longs to the 9+ group when in fact 24,111 actually belonged in the 1-8 group. This error gave the 9+ group 13,854 net long while keeping the 1-8 group incorrectly high with 58,325 net short.

I am ending up with the same numbers as Mr. Butler, if I make the same mistake.

I hope this makes things clear for those of you who have not tried to follow Mr. Butler’s formula.

Again, I hope I am wrong.

[Silverbach]

Valerb:

I guess you are wrong. No entity holds both long positions and short positions. You are either short or long. It doesn't make sense to hold both. So the 8 largest short position holders and the 8 largest long position holders are two DIFFERENT GROUP. And the 8 largest long position holders may not even be the commercial so it doesn't make sense to subtract from the commercial long positions.

[valerb@bellsouth.net]

Silverbach

Admittedly I know very little about the futures market, as I’m a buy and hold investor. However, I find it hard to believe that you are not allowed to hold both long and short positions in this market. I know you said that someone wouldn’t do such an investment. It is done all the time in other areas; even bookies do this when their bets get too lopsided. If it is allowed, I can see someone playing both ends. If it is not allowed, then you are correct about my being wrong.

I didn’t consider the possibility that the top eight investors in the long and short positions could be different, that was an oversight on my part.

If it is a market policy that you cannot, hold both long and short positions, then Mr. Butler’s assumptions are right on. On the other hand, if you can, no one knows who is holding these long positions and it is just a guess.

I sincerely hope you are correct about not owning both sides of the market, as my buy and hold status is always depending on good news and an ever shrinking supply of Silver.
:D

[Silverbach]

Valerb:

You ARE allowed to have both short and long positions. But since long and short are exactly the opposite, it really makes no sense to have both.If you want to add short position, you might as well just reduce your long position and the effect is the same and you carry less margin. For example you have 1000 shares long position to start with. The broker made your 1000 shares available for short seller to borrow. Now you borrow 1000 shares to short sell. And the shares you borrow happen to be the same 1000 shares you originally own. You end up with nothing and still carry the margin for both your long and short position. Why do so. You could have just straight sell your 1000 long positions. So it never make sense to have both long and short.

So the 8 largest shorts and the 8 largest longs. They are not the same people.

[valerb@bellsouth.net]

Silverbach

Correct me if I’m wrong. Your telling me a large dealer who is heavy on the short side and is waiting for another chance to pounce on the tech traders along with anyone else caught in that process, could not gamble and also go long, knowing when and where that next pouncing might take place. That is, selling his long at a profit before the tech slaughter is about to begin and then cashing in on his shorts.

What it sounds like your saying, is that a dealer trying to sell 1,000 long contracts would be obligated to use his own short contracts to cover that trade? If that is the case, then you are right, it would not make any sense at all.

Without having experience in this market, I assume that the trade would somehow be spread over all the short sellers. In that case, the dealer selling his long could expect to give up some of his shorts in the trade but only a small percentage.
If this were to occur, then it would make sense to go long and short, assuming you knew what to expect in the market. That’s why I’m a buy and hold investor, I don’t have a clue.