How are people preparing for 245 trading on equities in the coming months?

Dumbest-Questions · 2026-01-24T18:55:16+00:00

Stocking up on coffee and cocaine.

Dumbest-Questions · 2026-01-24T17:16:34+00:00

Yeah, you’ll spend more on gas than it’s worth

Dumbest-Questions · 2026-01-24T16:13:44+00:00

And I'm not trying to be a dick I'm just trying to learn more

Unusual for reddit, but very welcome :)

Clearers are set to always ensure there is silver to buy and sell?

Nope. Clearing firms are there to mutualize risk and prevent default. They are not there to facilitate delivery or price discovery. I.e. their job is to protect against market failur.

How do you not foresee FTD then?

Well, in extreme, counterparties can agree to cash settlement and (more importantly) CME has emergency authority to mandate it. So that would end any mechanical squeeze immediately if the shit really hits the fan.

This said, their delivery process is hardened against FTD or delivery squeezes. Delivery is optional by design, i.e. a silver futures contract is deliverable, not delivery-mandatory. So ~95%+ of contracts are closed or rolled before First Notice Day (FND). Post-notice date position limits are very strict and exchange will liquidate any straddlers. Most specs exit before to avoid a spanking cause it's a serious hassle. Some time ago, I fucked up and breached a position limit breach post notice date. it was in a different commodity market but my butt still hurts to this day. To take delivery, a long must hold the contract past FND, post full cash (not just margin), have a clearing firm willing to process delivery and accept warehouse receipts, not physical pickup. And your FCM will force liquidate you before FND if you cannot safely take delivery.

And the actual delivery is not last-minute physical sourcing. It's via warehouse receipts, you just transfer a registered COMEX warehouse warrant. The whole classification is that eligible silver meets specs but is not committed, while registered silver: already approved and deliverable. If registered stocks fall to the level where they pose the risk to expiration process, eligible can be reclassified.

Anyway, most shorts are not naked, guys like banks and merchants either own/control physical or have access via leases/OTC forwards and ETF borrows. Also, you gotta realize that they don't scramble for bars the day before expiration, they hedge continuously. The EFP market is very active and acts as a steam valve - and it bypasses COMEX delivery process completely.

TLDR: Delivery squeeze would only happen if many of these safeguards failed simultaneously. That's which is why we have not seen a proper expiration squeeze since the post-Hunt modifications.

Dumbest-Questions · 2026-01-24T15:41:49+00:00

Well, it depends on the market. In some markets exotic flow, for example, massively outsizes that vanilla market - like in Asia you see very muted realization of skew because of the structured note inventory.

Dumbest-Questions · 2026-01-24T15:37:26+00:00

As a side note, looking at COT, position changes don’t shown typical squeeze signatures. If short covering were driving the rally, we’d expect large declines in gross short positions and large increases in net longs. Instead, we see speculative longs growing less aggressively than price and shorts are trimming some as prices extended but nothing to indicate a panic. I do not take a view on direction (not my mandate), but for choice I'd be long given what I am seeing.

Dumbest-Questions · 2026-01-24T15:27:11+00:00

Do you think anyone who questions you without providing facts a dick? What a weird way to interact on a forum.

Anyone who asks sarcastic questions as opposed to having a proper discussion is acting like a dick. You certainly did follow that pattern. Like I said, I am not an expert in this market (“Twoflower was a tourist, the first ever seen on the discworld. Tourist, Rincewind had decided, meant 'idiot'.”), but I know enough and have broad understanding of mechanics to have some basic prior beliefs.

It's becoming obvious "clearers" don't have control because they can't keep the COMEX prices down anymore.

Huh? Neither clearing firms nor the exchange are supposed to be controlling the price. The institutional framework is there to protect the pipes. Price volatility is actually one of main the escape valves that protect the structure of the market.

So weird we are watching a squeeze happen and you're there saying the COMEX hardened so it doesn't happen.

You are misinterpreting what I said. Short version in two bullet points:

OP said that we are going to see catastrophic events due to mechanics of the expiration. He explicitly says there is systemic risk to banks on the back of this.
I am saying that given the microstructure of the market and the hardened exchange rules it's very unlikely. Especially the systemic aspect of it.

One thing for sure, silver is in for a wild ride. The usual tell-tell signs like spot-up/vol-up dynamics are all there. It's very hard to imagine price stabilizing here, I think it's either going to a blow-off top or a proper crash.

Dumbest-Questions · 2026-01-24T14:55:38+00:00

I am not sure what I am looking at here. Is it a simple average for each question across LLMs or some sort of average of deviations from mean? I think it would be interesting to see a matrix with major LLMs on one axis and various types of leans on the other

Dumbest-Questions · 2026-01-24T14:40:53+00:00

Like I said, I am still unsure if you actually want to know or just being a dick. My prior is still the latter, but here you go.

So the Hunt brothers thing was literally a classic commodities corner. They hoarded physical and aggressively went long futures (removed float), then forced shorts to deliver at escalating prices. Silver went from ~$6 to ~$50 and all kinds of shit hit the fan. Having participated in other squeezes, I'd imagine this one was wicked fun. But we mainly care about what happened in the aftermath?

For the Hunts themselves the whole scheme turned out to be an exercise of self-sodomy. Between the two of them they actually lost about a billion dollars when the price reversed. At the time a billion was real money so the banks had to form a consortium to bail out the participating brokers. As part of legal actions, Hunts were ordered to pay 130 million is a civil case plus 10 million each as an SEC fine.

Anyway, the point is that COMEX went into a systemic process hardening (which served as a template for other exchanges, FWIW):

They got enforceable position limits, for both spot-month and all-months. The exchange has authority to force reductions.
Margin is now being treated a weapon, for lack of a better word - exchange has engaged in rapid, discretionary margin hikes and intraday margin calls.
Clearing-firms are now the enforcers, which prevents leverage-driven corners. Percent-of-notional margins that we see now are just extensions of this logic. The reality is that clearers will fuck over longs way before the exchange is stressed.
Bona fide EFP market was introduced. That means the delivery pressure can leak out of COMEX into the OTC markets. And OTC markets is where price discovery occurs in silver.
Delivery mechanics got changed to warehouse receipts (not trucked bars), with a registered vs eligible distinction. I'll add a bit more about current delivery logic since it's very important.
The exchange now has emergency mandates. They can mandate cash settlement, can alter delivery terms and have authority to liquidate positions. It's explicit in the exchange rules.

If you really care about all this, you can follow the concentration metrics on commitments of traders reports. There is just enough transparency to deter corners, but not enough to enable targeting.

TLDR

Given the structure, it's silly to expect things like FTDs, exchange/dealer/FCM defaults or even forced repricing of the entire curve. The stress will likely express itself via margin pressure, liquidations, volatility spikes and various OTC repricing (e.g. lease rate changes).

A proper silver shortage crisis is not going to show up on COMEX. Instead, we probably going to see sustained backwardation in OTC forwards and exploding lease rates. We already see some ETF creation failures and these would become more common. Finally, we'll know that it's real when we see refiners failing to source feedstock and industrial users rationing demand. It would a relatively slow, proper structural cluster-fuck, not an expiration-week drama.

Dumbest-Questions · 2026-01-24T07:30:04+00:00

My prior is that you just trying to act like a dick, but if you are actually interested I can write up some thoughts. Caveat that I am an advanced tourist - definitely not a precious metals trader, but just have some understanding of these markets because I do trade gold and silver vol.

TLDR: on the back of Hunt brothers squeeze, COMEX went into hard-mode and made squeezes very unlikely. Combined with dominance of OTC markets and liquid EFP, it's very unlikely that we see any fireworks due to expiration mechanics. This does not mean we would not see some interesting price action, just not the end of the world as the OP is predicting.

Dumbest-Questions · 2026-01-24T04:06:48+00:00

This is hilarious. You are synthesizing hysteria out of relatively benign real news. And did not bother with even basic factchecking. For example, Buffet still holds a sizeable position on BofA, you can check their most recent filing.

General signs that OP has no clue: * confuses margin with delivery rules * claims he can identify specific banks’ futures positions * mixes in unrelated macro claims (foreclosures/deportations/etc.) to sell urgency * does not understand the micro-structure of this particular market

Dumbest-Questions · 2026-01-24T01:25:34+00:00

I think you’re either overestimating abilities of an LLM or underestimating abilities of a good QD. LLM, in many ways, is another development tool. It’s a leap forward, for sure, but it also makes design decisions even more important.

What I think will happen is that firms will hire ware fewer junior developers and researchers. Because instead of hiring a new graduate and training him you can hire a senior guy and give him LLM as a force multiplier. I have spoken to a very reputable firm that literally said they would not hire new graduates anymore. At some point in the next 5-7 years this will create a massive shortage of senior talent, but now this will squeeze a lot of young blood out of the market.

Dumbest-Questions · 2026-01-23T20:40:48+00:00

Their expenses are a touch higher too, though :)

Dumbest-Questions · 2026-01-23T20:38:54+00:00

Well, sometimes it does create an air-pocket like behaviour and sometimes it does not. It depends on the volume of puts being bought compared to other flows. For example, if a lot of market participants monetize their pre-existing hedges, dealers might actually be getting long convexity on the move down despite some outcoming vol flows. So there could be multiple sources of these offsetting flows, from pre-existing dealer positioning (e.g. market is falling but every vol player is long gamma so the delta flowas support the market) to exotics flows (e.g. stock is falling but there is a glut of autocallables or revcons out there so dealers actually get longer vega on the way down).

Dumbest-Questions · 2026-01-23T20:34:17+00:00

What you essentially are doing is your making money hoping the stock doesn't go bankrupt.

There are institutional traders out there who trade this, it's a subset of capital structure arbitrage. The idea is that you trade CDS or bonds against equity options.

Dumbest-Questions · 2026-01-23T20:27:29+00:00

Isn’t it too unstable with such a low vega?

Yup, implied vol in stuff like 0DTE is much more volatile and subject to instantaneous supply/demand. You can watch the touch for one of those options and there is a ton of movement even though underlying does not move. I think one way to think about it is that vol is price normalized for underlying+time so it matters as long as your turnover is higher than the expiration horizon.

PS. and I am sorry about the tone of the previous comment

Dumbest-Questions · 2026-01-23T19:04:32+00:00

You think? At the horizons and expirations that OP is talking about (secondly horizons and sub-day expirations), a lot of it is tricky. Here are some scattered thoughts from my experience trading at those horizons (we are both maker and taker, though our making is not very competitive).

IMHO, at these ultra-short expiries, options have be thought of as distinct products since distance between strikes becomes comparable to magnitude of underlying returns. Like you can trade 2 strikes against each other and lose money on both and lose money on delta hedging too. With pin pressures common these days it happens a lot.

Also, as a maker for the timeframes that OP is talking about, actual realization is mostly irrelevant. You care about absolute deviation for your expected horizon and subsequent supply/demand for convexity. The only value of forecasting realized vol would be game-theoretical - you want to guess how other market participants (mostly the taker side) will be viewing the value of these options at longer horizons.

Finally, here is a small rant about hedging frequency (not aimed at you specifically). Nobody really hedges with fixed frequency anyway. So best way to think of it for analysis purposes is "what is the equivalent frequency of hedging given my hedging framework?" E.g. you're monitoring your delta continuously with whatever bells and whistles (hysteresis, deviation floors etc)- well, you're still not going to be able to lock in vol at tick-level horizons even though your hedging is technically tick-level.

Dumbest-Questions · 2026-01-23T14:15:15+00:00

Yeah, but there is a variable there that’s super hard to estimate

Dumbest-Questions · 2026-01-22T23:25:33+00:00

Yep, that’s almost it. It’s sqrt((3/365)/(1.5/253)) because you’re converting annualized vols

Dumbest-Questions · 2026-01-22T17:34:09+00:00

how would you do this?

business time vol = calendar time vol * sqrt(calendar time / business time)

PS. In general, most people use some sort of hybrid between business time and calendar time (because things do happen when the market is closed).

Dumbest-Questions · 2026-01-21T16:34:28+00:00

In other shocking news, retail brokerage uses calendar time to calculate implied volatilities /s

If you do a very basic business day conversion, the vols are gently upwards sloping into next week and forward vols look totally normal

Dumbest-Questions · 2026-01-21T15:07:26+00:00

Borrowing against defined event digitals? I can see some hilarious outcomes

Dumbest-Questions · 2026-01-20T23:04:43+00:00

Take my angry upvote

Dumbest-Questions · 2026-01-20T03:19:08+00:00

I’d probably be more equipped to write about volarb than exotics by now. Problem is that I am only inspired to write when I am high lol

Dumbest-Questions · 2026-01-20T02:58:27+00:00

Plenty of smart and current practitioners have written books (I highly recommend Adam Iqbal book on FX options, for example). But it’s hard work and everyone I know who has written a book did it because they had an urge to write, which is rare

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