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A person buys a contract from Comex for silver delivery.
The contract numbers are for 5,000 physical ounces of silver.

It is a “futures” contract, and silver contracts mature at Comex every 2 months.

Now the contract must either be exercised, sold, or rolled over to a later future month. This all has to happen on the day the contracts go “off the board” which is typically about a week before the first day of the month the contract matures.

Now, if on or before that day when they go off the board, a contract holder can come up with the total cost of his contract and plunk it down at Comex and demand delivery.
For 5000 ounces at around 30 an ounce, that amounts to about 150K

If the price of silver is rising rapidly, then it would seem to pay to actually take delivery. You know it and Comex knows it.

So they might try to talk you out of it in a way. They want you to roll over your contract to a later month, and will give you some goodies to do it.

Or they might just as well buy your contract outright, that way you are happy, and they don’t have to give you the physical metal.

That is what we are talking about here. People hold contracts, possibly at a much lower price than spot currently is, and Comex decided to pay them 80% over the spot price to satisfy the contract.

Alot of folks who watch things are expressing much doubt about this report.
I’m kinda on the fence...

Here’s the “Story.” A group of ex-employees of JPM, who HATE JPM and especially HATE Blythe Masters, head of the JPM commodity trading desk (who fired them) are aware of JPM’s large short position in silver and its inability to deliver real silver against those short sales. So this group, the spokesperson for which is “Wynter Benton” has decided to buy silver (i.e. go “long”) on the COMEX, meaning, they bought futures contracts. Specifically, March ‘11 futures contracts. Then, they “stood for delivery” meaning, when those contracts expired, they paid in full for them and stated their intention to receive silver for them, which is incidentally in the amount of 5,000 ounces per contract. But they have reason to believe that the COMEX doesn’t have enough actual silver to deliver on all the longs, so they expected - and received - a cash premium to settle in cash rather than take delivery. In other words, they are willing to be bought off in cash, rather than get 5,000 ounces of silver per contract. However, they weren’t willing to accept a “mere” 30% premium, they even refused 50%, and claim the premium they accepted was 80%, which means about $60/oz, which is incidentally some $120,000 in cash higher than the value of each contract, over and above their appreciating between when then got them in early Feb and expiry at the end of Feb. So the story goes. Wynter Benton posted on Yahoo in the JPM message boards.

“Yes, someone please explain to us peasants.”

I’m no expert, but I’ll try to explain as far as I understand: the fact that the price listed is in the 30 dollar range and that the price for silver that would actually be in hand (to have and to hold, as it were) is in the 50 dollar range means that there’s something a little shady going on. What that is, according to the article, is basically selling the one thing, silver, twice or more, and hoping that delivery isn’t asked for by everyone all at once.

In other words, if you want to be safe holding silver as an investment (and by extension, gold or any other deliverable commodity), make sure you actually have it in your hand or possession. Especially as the value of commodities go up, and our dollar because of printing five times more of them goes down, incentive for commodities dealers is to trade like this, but for you as the investor the incentive is to not completely trust them.

How was that?

I will take a stab at it.

The COMEX is where people can buy silver or other commodities. Usually, the players there don’t want the actual commodity, they are just making bets. Well, silver has become very tight. And the COMEX doesn’t have enough for all of those who do want physical this month. So, what COMEX has been doing, is offering to pay more money to make the physical buyer, say OK, pay me more money, I really didn’t want the physical.

It sounds like they were trying to pay 50% MORE MONEY than the contracts were worth, to make people who had contracts be satisfied. Now, this post is saying that they got 80% over the current price of silver. Silver is around $35, $36 tonight. So, 80% of that is over $50 an oz for silver. I am not sure what base price they are using.

It is very significant. It means that the COMEX is near breaking. There are rumors that there are massive shorts on silver by JPMorgue. The price could easily go parabolic.

Hope this helps. Any one who knows more, please, post away!