Sustainability of High Premium and Risk Assessment of Arbitrage Strategies for SDIC Silver LOF

Based on the latest market data and analysis collected, I will systematically assess the sustainability of the high premium rate of SDIC Silver LOF (161226) and the risks faced by LOF fund arbitrage strategies for you.

The extreme premium of SDIC Silver LOF is mainly formed by the superposition of the following three factors:

SDIC Silver LOF is currently the , with absolute scarcity [1]. During the silver price surge, this fund almost became the only convenient channel for ordinary investors to layout silver assets. The fund size increased from 2.178 billion yuan at the end of 2024 to 6.64 billion yuan at the end of Q3 2025, an increase of over 200% [1].

Silver led the global precious metals market in 2025. As of December 29:

• London spot silver rose nearly
  170%
  this year, far exceeding gold’s 72% performance in the same period [3]
• It broke through
  $83.99 per ounce
  intraday on December 29,刷新历史新高 [3]
• COMEX silver futures rose more than 120% this year [2]

The fund has implemented strict purchase restrictions since October 20:

• The daily purchase limit for Class A shares was raised from 100 yuan to 500 yuan (December 22)
• The daily purchase limit for Class C shares was reduced from 1000 yuan to 500 yuan, then to 100 yuan [1]
• Purchase limits restricted the participation of large arbitrage funds, leading to severe shortage of on-exchange supply

• December 24
  : Premium rate soared to
  61.64%
  (peak reached 68.19%)
• December 26
  : Rapidly fell back to
  23.22%
  [1]
• December 29
  : Rose again to
  34.06%
  [3]

This sharp fluctuation itself indicates that the premium is extremely unstable and highly influenced by market sentiment.

Since December 23, arbitrage funds have poured in疯狂:

• Net inflow shares were 81 million, 104 million, 162 million and 98 million respectively
• Cumulative net inflow reached 445 million shares
• At least
  400,000 accounts
  participated in arbitrage every day on average [1]

These funds will form huge selling pressure after T+2 days, which will inevitably compress the premium space.

UBS SDIC Fund Management has taken strong cooling measures:

• Released
  14 risk warning announcements
  in December [1]
• Implemented intraday temporary suspension multiple times (two consecutive days of suspension on December 25 and 26)
• Clearly stated that “the high premium rate in the secondary market is not sustainable” [1]

The net value growth of SDIC Silver LOF cannot keep up with the trend of silver futures:

• Net value rose 102.94% in the past six months, but the market price soared 149.41% [user-provided]
• The net value of fund shares rose only
  42%
  this year by the end of Q3 [1]
• While the main silver futures contract rose as much as
  152%
  this year [1]

This divergence indicates that the on-exchange price has completely deviated from fundamentals.

Based on current situation analysis:

• Short-term (1-2 weeks)
  : The premium rate is likely to fluctuate in the range of
  20%-35%
  • Continuous selling by arbitrage funds will suppress the premium
  • But if the silver market remains strong, it may form certain support

• Medium-term (more than 1 month)
  : The premium rate may further fall back to the normal high range of
  10%-20%
  • As arbitrage funds are gradually cleared, supply and demand tend to balance
  • The fund company’s continuous adjustment of purchase limits will抑制 speculation

: There is a T+2 operation cycle for LOF fund arbitrage. After investors subscribe for shares off-exchange on T day, they have to wait until T+2 day to sell them on-exchange [1].

:
During these 2 days, the market may change dramatically:

• Arbitrageurs who subscribed on December 22 made huge profits when they sold on T+2 day (December 24)
• But arbitrageurs who subscribed on December 24 encountered consecutive limit downs on T+2 day (December 26) and could not sell

:
Some investors saw the fund drop more than 7% intraday after a one-hour suspension in the morning on December 19 to cool down. Although it rebounded in the late trading, the daily amplitude exceeded 11% [1]. If investors sold on that day, their returns would shrink significantly or even suffer losses.

: As arbitrage funds sell concentratedly, it may trigger a surge in on-exchange selling pressure. In extreme cases, there will be a liquidity exhaustion phenomenon where limit down cannot be transacted [1].

:

• December 25 and 26
  : The fund hit limit down for two consecutive trading days
• The premium rate fell from nearly 70% to less than 30% quickly
• Due to two consecutive days of limit down, some arbitrage funds have not been sold yet and will continue to act as short-side forces
  [1]

This is a typical “liquidity trap” - arbitrage funds are trapped in the dilemma of wanting to sell but cannot.

: The high premium itself is extremely unstable and may contract or even disappear quickly in a short time.

:

• From December 24 to 26, the premium rate plummeted from 61.64% to 23.22% in only
  2 trading days
• This means that the arbitrage space shrank by more than 60% in a very short time [1]

:
If you subscribe at a high level, when you sell on T+2 day, the premium rate may have fallen sharply:

• Originally expected arbitrage return of 30%-50%
• Actually, it may only be 5%-10%, or even a loss

: The silver price itself has volatility risks. If the silver price corrects, the fund’s net value will fall synchronously.

:
UBS SDIC Fund pointed out: Assuming investors buy at a high price of 2.83 yuan on-exchange, if the silver price falls and drives the fund’s net value from 1.80 yuan to 1.60 yuan, and at the same time the on-exchange price falls and causes the premium rate to drop from 57% to 30% (equivalent to the on-exchange price falling from 2.83 yuan to about 2.08 yuan), [3]

: Although the apparent arbitrage yield is amazing, the actual return is very limited due to purchase limits.

:

• The daily purchase limit for Class A shares was only
  100 yuan
  earlier
• Recently raised to
  500 yuan
• During the most fanatical stage of speculation (December 25), the daily arbitrage return per account was about
  300 yuan
• As the premium rate narrowed, the return further shrank to about
  150 yuan
  [1]

:

• Need to monitor the market in real time
• Bear greater psychological pressure
• The actual return may not even be as much as “milk tea money”

There is an investor case: After following the trend to subscribe on December 22, due to worry about subsequent price correction, he was eager to sell at the opening on December 24, and finally only earned 30 yuan “milk tea money”, barely covering the time cost [1].

Indicator	Data
Fund Code	161226.SZ
Latest Net Value	2.0483 yuan (December 29) [3]
On-exchange Price	2.746 yuan (midday on December 29) [3]
Current Premium Rate	34.06% [3]
Recent Volatility	Continuous limit up → continuous limit down → “roller coaster” on December 29 (opened at limit down then rebounded quickly by 8.8%) [3]

• Spot Silver
  : Rose nearly 6% intraday on December 29 to break through
  $83.99 per ounce
  ,刷新历史新高, with an annual increase of over 170% [3]
• Volatile
  : Plunged more than 5% intraday at one point, then rose again [3]
• Fundamental Support
  : Driven by multiple factors such as safe-haven demand, de-dollarization trend, central bank gold purchase, and industrial demand [2]

:

1. Premium Rate Will Continue to Regress
   : As arbitrage funds are gradually cleared, the premium rate is likely to further fall back to around 20%

2. Volatility Will Increase
   : The silver market is highly volatile, and coupled with selling pressure from arbitrage funds, the volatility in the secondary market will increase

3. Fund Company Will Continue to Regulate
   : It is not ruled out to further adjust purchase limits or take other cooling measures

:

1. Risk-Reward Ratio is Seriously Imbalanced
   : The current 34% premium rate seems to still have arbitrage space, but considering:
   • The silver market may reverse during T+2 period
   • A large number of arbitrage funds sell concentratedly
   • Liquidity exhaustion risk

   Arbitrage is no longer a “risk-free return” but a

   high-risk game

2. Suggestions
   :

   • Ordinary investors should stay away from such arbitrage
     , as Tian Lihui, Dean of the Institute of Financial Development at Nankai University, said: “This seems like an opportunity, but it’s actually a danger. You are aiming at the meager profit of arbitrage, but you may be exposed to the double risks of silver price crash and premium collapse in an instant” [1]

   • If you insist on participating, you need to strictly control the position (500 yuan limit) and be mentally prepared to bear all losses

   • A more rational approach is to

     invest directly in silver spot or futures
     instead of indirect gambling through LOF funds

The high premium rate of SDIC Silver LOF

and is in the process of rapid regression. Its extreme premium is a deformed bubble formed by the superposition of product scarcity, silver market boom and supply constraints, rather than value discovery [1].

For the LOF fund arbitrage strategy, it currently faces

: time lag risk, liquidity risk, premium contraction risk, target price risk and meager return risk. The seemingly “躺赚” arbitrage opportunity actually hides huge risks. The fund company has issued 14 risk warnings in a row, clearly stating that “the high premium rate in the secondary market is not sustainable” [1].

: Investors should abide by the principle of “circle of competence” and stay away from such complex and deformed games. Real investment should be based on assets with clear cognition and transparent risks, rather than such speculative symbols that deviate from fundamentals [1].

[1] Time Finance - SDIC Silver LOF Premium Rate Exceeds 61%! Some People Arbitrage 500 Yuan and Earn 350 Yuan in Two Days, 14 Risk Warnings in a Month Can’t Stop Speculation (https://finance.sina.com.cn/jjxw/2025-12-24/doc-inhcxqhz4021107.shtml)

[2] Yahoo Finance - Silver Price Soared 130% This Year, Mainland Manufacturers Strive to “De-Silverize” to Break Through (https://hk.finance.yahoo.com/news/130-銀價暴漲觸發太陽能零組件漲價潮-隆基綠能等-線陋廠力拚-去銀化-220004501.html)

[3] 21st Century Business Herald - “Roller Coaster” Market! SDIC Silver LOF Rebounded Quickly After Limit Down, Premium Rate Exceeds 30% Again (https://www.21jingji.com/article/20251229/herald/71bc31c339e2508622affe86cd63b478.html)

[4] Sina Finance - Silver LOF From Ultra-High Premium to Continuous Limit Down: The Market Has Another Lesson on Risk Education (https://finance.sina.com.cn/jjxw/2025-12-29/doc-inheksxh5392096.shtml)

[5] Futu Information - SDIC Silver LOF Arbitrage: Some People Earn 70%, Some Only Earn “Milk Tea Money” (https://news.futunn.com/hk/post/66658536)