Read on Twitter
So much shiny metal chicanery going on it's tough to wade through it. Hate to rain on the parade for some people but it's highly unlikely this Citadel long position in $SLV is what you think it is. /1
Yes 13fs are stale but that's not it. Citadel is a large and active market maker and authorized participant in ETFs. They (and others) often report large positions in ETFs that are completely non-directional in nature--they are typically hedged /2
ETFs with active options like $SLV will also have these same firms and other options specialists involved as well, hedging their options positions with the underlying ETF (or basket-more on this later) /3
If you scan the top holders , it shows lots of ETF/options MMs with long positions--Citadel, SIG (Susquehanna), Optiver, CTC, Jane St, Peak6, Simplex, Group One. This doesn't mean they all love silver. In fact they probably don't care at all where it goes/4
An added twist with ETFs in the presence of another asset which is the basket/underlying. MMs often hold long or short inventory with an offsetting position neutralizing the exposure. Which means the position has no directional info whatsoever. /5
So with ETFs, you don't really know what these positions are linked to--options, the underlying, or some other highly correlated instrument like futures. They are often just locking in some arbitrage/structural/relative value trade and not taking view. /6
Having a bunch of MMs reporting positions in an ETF is common. But $SLV is also unusual as the underlying is silver itself and not a basket of stocks like with $SPY. And buying physical silver is kind of pain (witness this past weekend's craziness). /7
So to facilitate order flow, it makes sense to warehouse $SLV and/or buy physical silver to deliver to the trust to create new shares when it's quieter. Then they can hedge the exposure with futures and other instruments. /8
The net result is more MMs holding $SLV as (hedged) inventory--and paying the expense ratio like anyone else (which gets baked into quoted prices). But seeing them as holders is absolutely meaningless as an indicator of where they think it's going /9
Back to the guys in Chicago--"Citadel Advisors LLC" looks like the hedge fund but that's how all their positions appear on 13fs, even from the MM side of the business. I know because I've done trades with the MM and that's how they show up when they file /10
So it's most likely just an inventory position. Plus the hedge fund side could get a lot bigger position on using futures--long or short--and you would have no idea what the net at the whole firm would be. Meaningless. /11
Options positions are also reportable. Here's Citadel as the #1 holder in $SLV options by far/12
Wow, 377K calls and 215K puts. Well that diff is 162K x 100sh x $27.50 = $445mm in notional value! Ken Griffin really likes silver. Not so fast, sparky. *Short* positions are not reportable--you're missing a whole other leg of that book /13
The only thing you can conclude from this is that Citadel is a large market maker and active in $SLV. Which I'm sorry to say is just not interesting. It's great for investors to have so much info, but it's also really easy to read too much into things. /14
Be careful out there, don't get in over your head, and stay out of those rabbit holes of disinformation and hype. The moment trading seems easy is right before you get a 2x4 to the head. YOLO is great but living until tomorrow is even better. /end
