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Hunt brothers silver corner (1979-1980)

The attempt by Nelson and William Hunt to corner the silver market, which drove silver from about $6 to $50 an ounce before exchange rule changes collapsed it to $11 in days.

The Hunts and allied investors accumulated enormous physical and futures positions through 1979, at one point controlling a large share of the deliverable supply. Silver rose more than eightfold. In January 1980 COMEX adopted Rule 7, limiting positions and putting silver into liquidation-only, while margins were repeatedly raised.

With no new buying permitted the price broke. On 27 March 1980 — Silver Thursday — the Hunts failed to meet a $100 million margin call and the resulting forced selling took silver down about 50% in a single day, threatening their brokers' solvency and requiring a bank consortium loan.

Almost every modern rule the futures market runs on — position-limits, accountability-level, aggressive margin-increase powers — traces part of its lineage to this episode.

Example: a position of 100 million ounces equates to 20,000 COMEX contracts. A $1 fall in silver is $5,000 per contract, so the move from $50 to $11 implied roughly $3.9 billion of losses on that notional.

Related: silver-futures, position-limits, margin-increase, liquidation-only, market-manipulation

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

Margin and leverageA small deposit controlling a much larger position, and the point at which losses trigger a margin call.Position you controlnotional value $100,000your margin deposit: $5,000$100,000 / $5,000 = 20:1 leverageYour deposit absorbs every dollar of loss$5,000$2,500$0Equity leftMARGIN CALLequity has fallen to $2,5000%1%2%2.5%3%4%5%How far the price moves against you
Margin and leverage. A $5,000 deposit can control a $100,000 position, which is 20:1 leverage. Because the loss is measured on the full $100,000, a 2.5% move against you halves the deposit and brings a margin call, and a 5% move uses all of it.

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