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<p>[QUOTE=&quot;fatima, post: 1317411, member: 22143&quot;]I don&#039;t understand what you are saying.&nbsp; My understanding is this. GLD &amp; SLV are totally different than the CME.&nbsp;&nbsp; I agree with you on GLD and SLV.&nbsp; There is no claim on the physical asset via shorting or other means.&nbsp; &nbsp; (though there might be an exception to this)</p><p><br /></p><p>However at the CME a futures &quot;option&quot; for a physical commodity is an agreement to purchase a physical commodity on a specified delivery date for a given price when the option expires.&nbsp;&nbsp; If you are &quot;short&quot; you are the one selling and the one buying holds the &quot;long&quot; position.&nbsp; This is a different meaning that that of stocks.&nbsp;&nbsp; The seller, for obvious reasons, is expected to possess the physical commodity.&nbsp;&nbsp; When the option expires and assuming the buyer has not offset the option (most are offset) then the seller is legally obligated to provide the commodity by the delivery date.&nbsp; The buyer must pay the remainder of the option and contact the warehouse for delivery instructions.&nbsp; It&#039;s a perfectly valid way to purchase the physical metal and and a low premium.&nbsp; However most don&#039;t do this simply because the minimum gold contract is for 100 ounces and for silver either 1000 or 5000 ounces.&nbsp;&nbsp; i.e.&nbsp; it&#039;s out of most people&#039;s league. </p><p><br /></p><p>(Some time ago a friend of mine who like to play the futures market lost track of a potato future(s) that he had purchased.&nbsp;&nbsp; He was quite surprised when he got a call from a guy with a train load of potatoes who wanted to know where they should go.)</p><p><br /></p><p>A naked short is when the seller does not possess the physical commodity.&nbsp; Since most options are offset (settled for case before the option expires) then they get away with it.&nbsp; However if a large buyer demands the physical silver or gold then the seller can offer to buy them out for a significant premium over the going price.&nbsp; This is where the 130% that I mentioned above comes from.&nbsp; Of course you have to have the financing and balls of steel to play this game because as you mentioned, they could actually call your bluff and provide the metal.&nbsp; It&#039;s a great game for an organization for say, a bank, which has unlimited access to fiat but not much physical to back up the position.</p><p><br /></p><p>The accusation being made by the OP is the banks will sell a ton of naked shorts near the silver options expiration date which can drive the price down a great deal.&nbsp; What this does is fleece all the longs who bought for higher prices.&nbsp;&nbsp; On the other hand, the big longs can ask for delivery and the banks either have to come up with the metal or do a payout.&nbsp; As I said its high stakes gambling stacked in favor of the banks so only very few can win at this game. </p><p><br /></p><p>While most silver bullion buyers here, I suspect, are not involved with this activity, the price they are paying for silver comes from this activity.&nbsp; it&#039;s why they should understand what they are getting themselves into when they are purchasing silver for investment purposes.&nbsp; (And also to a lesser extent, gold)[/QUOTE]</p><p><br /></p>

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