It’s always prudent to ask “Cui bono?” or “Who benefits?” But just because someone benefits from an occurrence doesn’t mean they started it.

If you read anything about Friday’s silver crash on X, you’d see a load of conspiracy theories about who crashed the market.

It was the bullion banks!

No, it was the government!

No, it was the Chinese who couldn’t sell their own ETFs!

None of that malarkey is true, though I’m sure some banks that were still stupidly short silver were more than a little pleased to close out month-end with a slightly better profit-and-loss statement.

No, the real story is far more interesting than that. That’s why, today, I’m thrilled to present my friend and Paradigm Press options expert Nick Riso’s riveting explanation of Friday’s silver crash.

Nick’s blow-by-blow account of Friday’s price action reads like a spy novel. You simply won’t get a better, more detailed explanation anywhere else. Nick’s got the receipts, and he’s showing them.

This edition of the Rude is what Sherlock Holmes might call a “three cup problem.” That is, it’s about three coffee cups long rather than the usual one.

But I promise you, once you’re done, you’ll know more about the option market and its microstructure than you ever thought possible. This is real “inside baseball” stuff.

Enjoy, and I’ll see you tomorrow!

- Sean Ring

How The Machine Ate Itself

Market crashes announce themselves in whispers before they arrive as screams.

The Friday options market whispered its intentions at exactly 7:00 AM ET, when news broke that President Trump had nominated Kevin Warsh to chair the Federal Reserve. 

By 1:15 PM that afternoon, silver had collapsed 27.1%, and the whisper had become a deafening roar.

I watched the entire sequence unfold in real-time, tracking every tick, every absurd volume spike, every widening spread in the options market.

What I witnessed wasn't a repricing based on fundamentals or even news, really. It was something stranger and more mechanical: a complete market structure collapse so total that by early afternoon, price discovery had stopped functioning altogether. The market had become a self-devouring machine.

I. The Architecture of Fragility

To understand what happened on January 30, you must understand what the market looked like before that. And that’s a story we’re already familiar with. 

Silver had gone parabolic. The metal touched $121 per ounce during Thursday's session, capping a rally that had started from the low 40s only a year earlier. The move had attracted exactly the kind of frenzied attention that late-stage rallies always attract: retail traders who'd missed the first hundred percent and were desperate not to miss the next hundred.

The options market reflected this enthusiasm with brutal clarity. The ratio of call option open interest to put option open interest stood at 4.2 to 1. Simply put, for every contract betting on a decline, there were four betting on further gains. It was consensus over confidence, which in markets is usually a precursor to extreme volatility, if not outright violence.

The positioning was overwhelmingly concentrated in out-of-the-money calls - the $110 strike, the $120 strike, even the $125 strike. These were bets that silver would continue to climb, purchased by retail accounts that had learned over the previous months that every dip was bought. The market had trained them to buy weakness, and they'd learned the lesson well. Maybe too well.

On the other side of these trades sat the market makers - the dealers who provide liquidity by taking the opposite position. When retail investors bought calls, dealers sold them. And when dealers sell calls, they hedge their risk by buying the underlying asset.

This creates a feedback loop: rising prices elicit more call buying, which in turn elicits more dealer hedging, which in turn drives further price increases. It's a perpetual motion machine that works beautifully… until it doesn't.

Essentially, this is what happened with Gamestop in the now-infamous “gamma squeeze” in 2021. 

Think of it like a seesaw, but one where the fulcrum, the thing on which the seesaw balances, can slide from side to side.

When the market's above a certain price, dealers are sitting on the heavy end of the seesaw. They stabilize things, lean against momentum, keep the seesaw from tipping too far in either direction.

But below that price, the fulcrum shifts and suddenly they're on the light end. Now, instead of stabilizing, they're amplifying. Every movement gets exaggerated. In mechanical terms, the seesaw functions as a catapult more than a level. 

The critical threshold, the price at which the fulcrum would shift and the machine would reverse, was $96.50.

This number represented what traders call the "zero gamma" line. Above it, dealers were long gamma, meaning they stabilized prices by buying when prices fell and selling when prices rose. Below it, they would flip to short gamma, meaning they would destabilize prices by selling when prices fell and buying when prices rose. The difference between these two states is the difference between a market with shock absorbers and a market with accelerants.

Nobody seemed to be paying much attention to this number on Thursday night. Silver was at $121. The $96.50 threshold felt impossibly distant, like worrying about sea level when you're standing on top of a mountain.

II. The Catalyst

At 7:00 AM Friday morning, while most of the East Coast was still waking up, President Trump announced his nomination of Kevin Warsh to chair the Federal Reserve. Warsh was a known quantity: a former Fed governor who'd spent recent months criticizing the central bank's policy stance while somehow positioning himself simultaneously as a rate-cutting advocate and an inflation hawk. The market had no clear way to price what his chairmanship would mean.

Uncertainty is absolute poison to leveraged positions.

Within 30 minutes, the dollar index began to spike. The move was sharp and sustained, the kind that suggests large institutional flows rather than just algorithmic noise. When the dollar strengthens, commodities priced in dollars tend to weaken. Silver started sliding in pre-market trading.

Then, at 7:30 AM, the CME Group - which operates the futures exchanges where silver trades - announced an immediate 36% increase in maintenance margin requirements. Translation: if you were holding leveraged silver positions, you now needed to post significantly more collateral, or your broker would liquidate your positions for you. No discussion or grace period.

This was the lit match. The positioning was gasoline, and the market structure was a building with no fire exits.

III. The Opening: 9:30 AM

SLV, the largest silver-backed exchange-traded fund, opened at $101.87, down roughly 6% from the previous close. The gap was notable but not catastrophic. Implied volatility - the market's expectation of future price swings - sat at 34%, which was elevated but nowhere near actual panic levels. The market was treating this as a simple correction.

Big mistake.

Retail traders, conditioned by months and months of successful dip-buying, began accumulating call options. The order flow was unmistakable: small accounts buying single-digit contract quantities, concentrated in strikes around $100. The psychological support level. The line that wouldn't break, couldn't break.

Market makers absorbed this flow by selling calls and buying the underlying ETF shares to hedge their short option exposure. For about an hour, this dynamic stabilized the price at approximately $101.50. The dip was being bought. The machine was working just fine.

But beneath the surface stability, something was shifting. The put-call volume ratio, which had opened at 0.42, began creeping higher: 0.48, 0.52, 0.65. Someone was buying portfolio insurance. Not retail accounts chasing momentum, but institutional flows seeking protection. The kind of protection you buy when you think the market is about to do something genuinely violent.

They were right.

IV. The Break: 10:42 AM

At 10:42:17 AM Eastern, SLV printed a trade at $96.49… one penny below the gamma threshold.

What happened next was a mathematical inevitability.

Every major dealer desk runs real-time risk models that specify exactly how much of the underlying asset they need to hold at each price level to remain delta-neutral. That is, to maintain a hedged position. These models had a very clear instruction programmed for the moment SLV broke below $96.50: sell.

The seesaw had flipped. The dealers were no longer the stabilizing weight. They'd become the amplifying force.

The mechanics are straightforward but brutal. Above $96.50, dealers were long gamma, meaning as prices fell, they became buyers. This had a stabilizing effect, like a shock absorber. Below $96.50, they flipped to short gamma, meaning as prices fell, they became sellers. For every dollar the price fell below the threshold, internal models indicated dealers would need to liquidate approximately $42 million in notional SLV to maintain delta neutrality. 

What we must recognize here is that the selling wasn't a prediction that silver was overvalued. It wasn't a bet on fundamentals. It was a hedging requirement. The market had become a derivative of its own hedging imperatives, a closed loop in which price movements forced position adjustments, which in turn forced further price movements, which in turn forced further adjustments. The seesaw was catapulting, and nobody could stop it.

By 11:00 AM, SLV was trading in the low 90s. The descent was orderly at first, almost mechanical in its weird consistency. Ten cents down, a small bounce, 20 cents down, another small bounce. This wasn't panic selling quite yet. 

But panic was coming.

V. The Liquidity Withdrawal: 11:15 AM

Market makers serve a specific function. They provide liquidity by standing ready to buy when others want to sell and sell when others want to buy. In exchange for this service, they earn the spread, the difference between the bid and the ask prices. In normal conditions on a liquid ETF like SLV, this spread might be 5 cents for at-the-money options. Maybe 10 cents if things are busy.

At 11:15 AM, the bid-ask spread on the $95 put option - which was at-the-money at that moment - widened from 5 cents to 45 cents.

This represented a 9x increase in the cost of liquidity. Market makers were effectively announcing they no longer had confidence in their ability to price these options accurately. The models that told them what fair value should be were breaking down. Volatility was rising too fast, price was moving too erratically, and the correlation structures that usually held stable were coming apart at the seams.

When the dealers who are supposed to provide stability start pulling back, that's when markets tip from correction into genuine crisis. Look at the bid-ask spread like it’s a tax on urgency. The more you need to trade right now, the more you pay. At 45 cents on an option that might be worth $2, you're paying a 22% penalty just to exit. That kind of spread signals a market that's ceased to function properly.

By 11:30 AM, the spread on the $85 put had blown out to thirty-five cents wide - bid at $0.80, offer at $1.15. On a liquid ETF in regular trading hours, this shouldn't happen. But it did. 

VI. The Margin Cascade: 12:12 PM

SLV broke through $88.50 at 12:12 PM. In the span of a single minute, 1.2 million shares changed hands, approximately 30x the normal minute-by-minute volume. The time-and-sales tape, which shows every individual trade, looked like a strobe light. The price was ticking down in fractions of pennies, sometimes multiple times per second.

This was the unmistakable signature of forced liquidation. Retail brokerage accounts that had been holding leveraged positions, either through margin loans or by selling options, were getting cut. When your account value drops below the maintenance margin requirement, your broker doesn't call to have a nice discussion about the situation. They liquidate whatever they need to liquidate to bring your account back into compliance. This happens automatically, algorithmically, without any regard for whether you think the position will recover.

The calls that retail traders had accumulated during the morning dip-buying session were now catastrophically out of the money. The $100 strike calls, which had seemed like such a reasonable bet at 9:30 AM when SLV was at $101, had seen their delta collapse from 0.60 to 0.10. This meant the dealers who'd sold those calls no longer needed to hedge them by holding the underlying stock. They could - and did - sell their SLV inventory into an already falling market.

This is the feedback loop that turns ordinary corrections into crashes. Falling prices trigger margin calls. Margin calls force selling. Selling pushes prices lower. Lower prices trigger more margin calls. Each iteration amplifies the previous one, and the cycle accelerates until either the price reaches a level at which actual buyers emerge or the sellers exhaust themselves completely.

Neither had happened yet.

VII. The Hell Minute: 12:55 PM

Every crisis has a moment where the machinery breaks down completely, where whatever thin veneer of order had been maintained simply vanishes. For silver on January 30, that moment arrived at 12:55 PM.

Between 12:55:00 and 12:56:00, SLV fell from $79.50 to $76.30. Three dollars and twenty cents in sixty seconds. Attempting to keep pace with this sheer violence, the options market recorded 1,183 individual trades in that single minute. Normal velocity would be perhaps twenty trades per minute. This was fifty-nine times normal.

When we analyzed the trade data later, a clear pattern emerged. 80% of the trades were odd lots - positions of one to nine contracts, the size retail traders typically use. But they weren't concentrated in a few strikes or a few accounts. They hit the bid (sold at the best available price) simultaneously across 40 option strikes, from deep in the money to far out of the money, with the eerie precision of automated execution.

This is the fingerprint of volatility-targeting strategies. Risk parity funds and vol-control algorithms don't make directional bets on whether silver is cheap or expensive. They allocate capital based on realized volatility - how much the price is actually moving. When volatility spikes beyond their programmed thresholds, these strategies automatically reduce exposure. 

They sell. Everything. At market. 

Without any regard for price, fundamentals, or any human judgment about value.

The matching engine - the exchange's computer system that pairs buy orders with sell orders - was overwhelmed. It wasn't designed to handle this kind of concentrated velocity. Trades were executing at prices that made no mathematical sense, options changing hands for values that violated basic arbitrage relationships, but there was no time to arbitrage anything because by the time you saw the price, it had already moved.

The market had ceased to be a mechanism for price discovery and had become a liquidation engine. Machines selling to machines, with humans reduced to spectators watching their account balances crater in real time.

VIII. The Vega Explosion: 1:15 PM

By early afternoon, the options market had entered a regime that most traders will never witness in their entire careers. Implied volatility on the front-month option chain - the market's expectation of future price swings - had spiked from 34% at the open to 412%.

To understand what this means, you need to understand how options are actually priced. When you buy a put option, its value comes from different sources – called “the Greeks” in options parlance.

Delta measures sensitivity to the underlying price moving lower. Vega measures sensitivity to volatility increasing. Normally, puts make money because the stock falls. But when implied volatility explodes, puts can make money simply from increasing fear, even if the stock hasn't moved that much.

Consider the January 30 expiration $75 put. At noon, with SLV trading around $90, this option was fifteen dollars out of the money. Basic option theory suggests it should be trading near zero - maybe five cents, maybe ten. But at 1:15 PM, it was trading at $1.38. Not because there was any realistic probability that SLV would fall to $75 in the next few hours, but because implied volatility had become so absurdly elevated that the pricing models were assigning value to even the most remote possibilities.

This created its own perverse feedback loop. As implied volatility rose, market makers' risk models assigned higher delta values to out-of-the-money options. This meant dealers who were short these options needed to sell more of the underlying stock to maintain delta neutrality. More shorting pushed prices lower. Lower prices increased panic. Panic drove volatility higher. Higher volatility required more hedging. The seesaw was in full catapult mode now.

The January 30 $80 put, which had opened at five cents - five cents! - was trading at $6.50 by mid-afternoon. That's a 12,900% return in less than four hours. The February 6 $87 put option had risen from $0.12 to $13.62, an 11,250% gain. They were lottery tickets that happened to hit, pricing anomalies created by a market structure that had ceased to function rationally.

Someone had sold those five-cent puts at 9:30 AM, thinking they were collecting basically free money for taking on zero risk. By 1:15 PM, they were staring at catastrophic losses. The market doesn't care about what seemed reasonable six hours ago.

IX. The Bottom: 1:00 PM to Close

SLV touched $73.61 at its intraday low. From the opening print of $101.87, this represented a decline of 27.1%. A six-sigma event - the kind of move that statistical models say should happen once in several million years. It happened on a Friday in January because enough people were positioned the same way at the same time, and when the structure broke, there was nowhere to hide.

Between 1:30 and 2:00 PM, the ETF attempted a rally, climbing back from $74 to $78. For twenty minutes, it looked like perhaps the worst was over, that buyers were finally stepping in. But the volatility surface told a completely different story. Implied volatility stayed pinned above 350%. It didn't decline even a little. In any normal bounce, fear subsides and volatility drops as traders who bought protection start selling it back. That wasn't happening.

The dealers were still trapped. They used the rally to offload inventory, selling into every uptick. The $78 level became a ceiling, not because of any fundamental resistance, but because every approach to that price triggered more dealer selling. The hoped-for V-shaped recovery - the pattern retail traders had learned to expect over the previous months - never materialized.

At 3:01 PM, as the session entered its final hour, a second wave of systematic selling arrived. Deep-in-the-money puts saw their implied volatility spike again to above 380%, even though SLV had stabilized at around $75. This wasn't fear anymore. This was the final deleveraging. Risk management systems at brokerages and funds were unwinding whatever exposure remained, regardless of current profit or loss, simply to bring volatility exposure back within acceptable ranges.

The bid-ask spreads remained grotesquely wide. At-the-money options that should have nickel-wide markets were still showing spreads of a dollar or more. The liquidity tax - the penalty for needing to trade right now - stayed at around 5% through the close. In a liquid ETF during regular trading hours, this shouldn't be possible. Yet…

By 4:00 PM, when the closing bell rang, SLV settled around $75. The total notional value of options that had traded during the session exceeded $1.4 billion - 12x the daily average. Wealth had officially moved from those who were structurally short volatility - mostly retail traders who didn't even realize that's what they were - to those who were long volatility, primarily the market makers and institutions that understood what was coming.

X. The Whales

At 4:07 PM, three minutes after regular trading had closed, a block trade crossed the tape that made me pause. Twenty-five contracts of the January 2027 $200 put. The $200 strike. SLV had closed at $75. Someone had just paid $126.01 per contract - roughly $315,000 total - for the right to sell silver at $200 more than a year in the future.

This was an institution expressing a very clear view. By late afternoon, borrowing shares of SLV to short had become nearly impossible - the borrow was "hard to locate," trader-speak for "you can't find any." So instead of shorting shares, they bought deep in-the-money puts as a synthetic short position. It's expensive and inefficient, but when you need short exposure and can't borrow stock, you pay the premium.

What struck me wasn't that someone wanted to be short. Plenty of people wanted to be short after a 27% decline. What struck me was the strike price they chose. The $200 put was so far in the money that it was almost pure delta exposure - a straight bet on further downside with minimal optionality value. This was a conviction position that silver had structurally broken, that the rally was finished, that we wouldn't see $90 or $100 for months, possibly longer.

Someone with several hundred thousand dollars to deploy on a single options trade was betting on a "limit down" scenario - a fundamental regime change rather than just a temporary correction. They might be wrong. But they were certainly committed.

XI. What Remains

When the financial press writes about January 30, they'll cite Kevin Warsh's nomination. They'll mention the CME margin increase. They'll note that silver had rallied too far, too fast, and needed to correct. All of this will be true. None of it will be the whole truth.

The whole truth is that modern markets rest on a foundation of leverage and derivatives that create feedback loops - virtuous on the way up, vicious on the way down. The same gamma dynamics that amplified silver's rally to $121 amplified its collapse to $73. The same algorithmic hedging that provided liquidity during the climb withdrew that liquidity during the crash. The machinery ran in reverse, and everyone caught in it discovered that markets don't have a reverse gear that works smoothly.

The $96.50 threshold wasn't arbitrary, either. It was the exact point at which dealer positioning flipped from stabilizing to destabilizing, from long gamma to short gamma, from shock absorber to accelerant. Once breached, each dollar of decline triggered roughly $42 million in forced selling. The market became a derivative of its own hedging requirements. Price discovery stopped being about fundamentals and became about mechanics - about who needed to sell how much at what level to maintain delta neutrality. The seesaw had flipped, and there was no flipping it back.

The $73.61 low represented a clearing price - the level at which forced liquidations finally exhausted themselves, where there was simply nothing left to sell because everyone who could be liquidated had been. Whether this represents actual fundamental value is a different question, one that will take weeks or months to answer.

Implied volatility will remain elevated for weeks. The $90 to $100 zone now represents a massive wall of resistance, not because of any technical chart pattern, but because that's where thousands of retail traders are trapped in losing positions, waiting for any opportunity to exit at something close to breakeven. Every rally toward those levels will be met with heavy supply.

The seven-dollar gap between spot silver and SLV will close eventually, as Authorized Participants slowly arbitrage it away. But slowly is the operative word. The creation mechanism that's supposed to keep ETFs aligned with their underlying assets doesn't function well during extreme stress. It's designed for normal markets, and Friday was anything but normal.

What happened on January 30 wasn't unprecedented. Markets have crashed before and will crash again. What made this one notable was how clearly it exposed the architecture - how visible it made the usually invisible machinery that determines prices. For a few hours, you could see exactly how modern markets work. Gamma thresholds. Delta hedging. Volatility-targeting algorithms. Margin cascade. Liquidity withdrawal.

It was a very particular kind of order - mechanical, mathematical, merciless. The market did exactly what it was programmed to do. The problem is that markets are programmed to amplify stress during moments of stress until something breaks.

On Friday, the assumptions that leverage is free, every dip will be bought, volatility will stay low, and the machine will keep working were broken.

The machine worked. It just worked in reverse.