Scene 1 — You spot a $10 gap: Shanghai $101 (physical) vs London/NYC $91 (paper)
$91/oz
Paper easy. Physical for you: none.
$91/oz
Futures available. Margin matters.
$101/oz
Physical available. Higher local price.
Factory Buyer (You)
Need 1,000 oz
Due: Mar 2026
Objective: don’t run out of silver and don’t get forced out of your hedge by margin calls.
Final Decision Summary (One Page)
Your choices + what each choice teaches
Your path through the game
Cash left: — • Futures: — • Margin locked: —
Ask: “Which risk did you choose to carry—price risk, supply risk, or liquidity/margin risk?”
Decision cheat-sheet
- Physical: secures production; risks storage + price drop + working capital.
- Futures: hedges price; risks margin calls + rule changes + forced liquidation.
- Split: reduces extremes; adds complexity; still carries both types of risk.
- Wait: keeps cash liquid; risks cost spikes + missed supply.
Core finance lesson
- Paper can be liquid while physical is tight.
- Leverage creates fragility: you must stay liquid.
- Hedging transfers risk; it doesn’t delete risk.
Next week preview
- Basis and local premiums.
- Initial vs maintenance margin; why rules change.
- Delivery vs cash settlement.