LOF hits the daily limit again in intraday trading! Silver arbitrage is "trending", and warnings for "fat finger" and "abnormal trading" have been issued!

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The epic silver short squeeze is triggering a cross-market liquidity chaos and speculative frenzy. As the only silver futures fund in the entire market, the SDIC Silver LOF has encountered a “hunt” by funds in the secondary market, hitting the daily limit for several consecutive trading days, and with its premium once exceeding 68%. This has forced the fund manager to frequently issue risk warnings and adjust subscription limits.

According to the latest data, after trading resumed on December 24, SDIC Silver LOF quickly surged to the daily limit, with an intraday turnover rate exceeding 6% and the premium rate soaring to a historical high of 68.16%.

The extremely fervent market sentiment even triggered a “fat finger” incident, where SDIC Ruiying LOF, with a similar code and name, was mistakenly purchased and also hit the daily limit due to capital misallocation. This irrational surge detached from the net asset value has caused the topic “silver arbitrage” to trend rapidly on social networks, with a large number of retail investors trying to earn risk-free profits by exploiting the price difference between on-market and off-market trades.

In response to this abnormal phenomenon, the fund company has implemented emergency interventions. Since December 2, SDIC Silver LOF has issued 13 premium risk warnings and announced the adjustment of the subscription cap to 500 yuan, attempting to curb the premium by increasing supply and warning that the high premium is not sustainable. Market analysts point out that the current secondary market price has created a “scarcity bubble.” Investors are facing not only the risk of a significant price correction but also a liquidity trap under the arbitrage mechanism.

The macro background of this chaos is the surge in silver prices. Driven by expectations of Fed rate cuts and supply-demand imbalances, London silver has risen by more than 150% this year, and COMEX silver by over 130%, far outperforming gold during the same period. The extreme one-sided market, combined with the fund’s special valuation mechanism and T+2 trading rules, is pushing this niche investment vehicle to the eye of the risk storm.

Premium Surges and “Fat Finger” Events

On the afternoon of the 24th, SDIC Silver LOF announced that the closing price of the fund in the secondary market was 3.116 yuan, significantly higher than the net value of the fund’s shares. Investors blindly investing in shares with a high premium may face considerable losses. This fund will be suspended from the opening on December 25, 2025, until 10:30 that day, and will resume trading from 10:30 on December 25, 2025. Currently, the maximum subscription amount for Class A shares of the fund is 500 yuan. Later, the fund manager will adjust the subscription limit for Class A shares. The high premium in the secondary market is not sustainable—please pay special attention.

Huitianfu Gold LOF also issued an announcement saying that recently, the secondary market trading price of Class A shares of its Gold and Precious Metals Securities Investment Fund (LOF) has been significantly higher than the net value of the fund’s shares, with a substantial premium. In order to protect the interests of investors, the Class A shares will be suspended from opening on December 25, 2025, until 10:30 that day, and will resume trading from 10:30 on December 25, 2025.

The chase for silver exposure has devolved into irrational speculation in trading instruments. Data shows that SDIC Silver LOF hit the daily limit on both December 22 and 23. By the close on the 23rd, the on-market price premium was already 57.5% over NAV. After a one-hour suspension at the open on the 24th, another wave of buying sent it to the limit-up again, with turnover near 500 million yuan and a premium further expanding over 68%.

This mania has twisted the market’s pricing mechanism, even causing “fat finger” incidents of capital misallocation. Because the codes and abbreviations are similar, SDIC Ruiying LOF was mistakenly regarded as a silver concept stock and speculatively surged to the daily limit on December 24, after large rallies in the prior two trading days as well.

Industry insiders believe this reflects that bullish sentiment has reached an extreme, as funds blindly seek targets in the narrow secondary market, causing trading prices to seriously deviate from the fund’s fundamentals.

Arbitrage Frenzy: The High Risks Behind the Arithmetic

The elevated premium rate has spawned “arbitrage tutorials” flooding social media. The logic appears simple: investors subscribe to fund shares off-market at NAV, then sell them on-market at a high premium, theoretically earning up to 30% price difference. According to Wind data, the fund’s circulating shares have surged nearly 25% within three months, with more than 10 million on-market new shares added in a single day on December 19.

A netizen recently posted that they made 30 yuan in profit from arbitrage that day and “wanted to keep doing it.”

However, according to 21st Century Business Herald, actual operations are far more difficult than theoretical calculation. Arbitrage transactions involve cross-system custodial transfer, usually requiring T+2 days to complete the sale. During this period, if silver prices correct or the premium narrows, the arbitrage spread will quickly be compressed, or even turn to a loss. With the subscription limit raised from 100 yuan to 500 yuan, selling pressure in the next few trading days may increase significantly, causing violent price swings in the secondary market and new arbitrageurs may easily get caught in a stampede.

Institutional “Hard Brakes” and Valuation Issues

Facing out-of-control premiums, fund managers have acted with a “hard brake.” Besides frequent risk warnings, the fund has repeatedly adjusted its subscription cap. Although raising the cap from 100 yuan to 500 yuan appears relaxed, it is actually to introduce more selling to curb irrational premiums inside the market.

In addition, the fund’s special valuation mechanism exacerbates tracking errors. SDIC Silver LOF primarily holds leading silver futures contracts and uses settlement price valuation. During unilateral silver price surges, the futures contract settlement price differs from the close, and frequent rolling and subscription/redemption flows cause the fund’s NAV to lag the index. Data shows that in the past year, the main contract of Shanghai silver futures doubled in return, but this fund’s return was only 88.57%, making the market price spike even less fundamentally supported.

Industry experts generally believe that the current rally in SDIC Silver LOF is a classic price distortion under a resonance of various factors. Nankai University finance professor Tian Lihui pointed out that the root of the high premium is a severe supply-demand imbalance, with funds “hunting” in a small pool, forming a “scarcity bubble.”

For ordinary investors, participating in such speculation is like “playing with fire.” Silver itself has both industrial and speculative characteristics, and its volatility is significantly higher than gold. Once market sentiment passes the inflection point, a liquidity crunch will instantly turn former profit opportunities into deep losses. Market professionals suggest investors should stay away from speculation detached from fundamentals and pay attention to more liquid, purer assets or other channels with controllable risks.

Risk Warning and DisclaimerThe market carries risks; investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investing accordingly is at your own risk. ```