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Bunker Hunt on his Life and Times

Tuesday March 9 2010

Bunker Hunt bought position limits of silver futures contracts in 1980. Then instead of closing out the position with cash settlement, he wanted physical delivery of the silver. There was not that much silver to be had so the price sky rocketed as traders scrambled to cover their positions. Unamused, the exchange increased the margin requirements, unable to meet them, Hunt had to liquidate forcing the price down as fast as it had risen. Whoops, read the story here. 

We will shortly be studying derivative contracts in intermediate accounting. Reading such actual history wil help you understand the workings of such markets. 

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4 responses to “Bunker Hunt on his Life and Times”

  1. Steven Beeler Avatar
    Steven Beeler

    I’m a little confused. How can the exchange “change the rules” and suddenly increase the margin requirements?

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  2. Dennis Elam Avatar
    Dennis Elam

    Because they are the exchange, It’s not nice to fool Mother Nature

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  3. Aaron Avalos Avatar
    Aaron Avalos

    Okay,so because of the large investment that Hunt put into silver, that allowed the market to change the rules; because of a single family. Like Hunt said we weren’t the only one’s buy silver, thousands of other people were too.
    Also, why was sliver the “Big” thing to invest in. How did it over power gold?

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  4. Dennis Elam Avatar
    Dennis Elam

    Good question, the answer is that silver is less expensive than gold, and since so much attention is lavished on gold, the market did not expect a silver bull. Even Hunt did not have the money to attempt to corner the gold market.
    Back then gold and silver were THE inflationary commodities. There were not ready exchange markets for oil for example. Now risk can be directed to a specific market such as copper, aluminum, etc. Yes everyone was buying silver, we are not to the manic phase of gold and silver yet in this market run up.

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