Trying to Figure out the Terms Short and Naked Short

[gunDriller]

To start off, let's say I have a hundred ounces of silver, and I think silver is going to go down from $18.28 to $17.28. So I agree to deliver that silver for $17.50. If the person takes delivery I get $1750 for the bar. If we "settle for differences" then I'm not sure what happens.

So is that basically what a short is, you offer to sell silver at a lower price at some point in the future ?

To try to figure out what a naked short is, I don't actually have the bar of silver. But I agree to deliver it for $17.50 an ounce. But there's got to be more to it than that.

Anyway, there's one webcast where they explain it but I still don't get it.
http://www.iamthewitness.com/audio/Bill.Murphy/TFC.SMITH.RAFEEQ.BILL.MURPHY.GATA%2003-04-2010.mp3

[FreeEnergy]

This is a classic concept of usury and fiat-based, khazarian banking system. In simple layman terms:

SHORT:

1. You don't have silver.
2. You agree to, and sell what you don't have to the Buyer for a current market price (say, $18.28). The intermediary, like a silver broker who knows you, provides actual silver to the Buyer, and you owe broker silver.
3. When price is right, you repurchase silver at $17.50 and return it to the broker. Broker gets commission.

NAKED SHORT:

1. You don't have silver
2. You agree to, and sell what you don't have to the Buyer for a current market price (say, $18.28). The intermediary, like silver broker, says he puts silver onto the account of the Buyer. Broker doesn't have an actual silver and just lists it in the computer.
3. When price is right, you repurchase silver at $17.50 and return it to the broker. Broker gets commission.

The reason it is dangerous, is because you, by virtue of naked selling, since you don't have to have an actual product, you can move the price down to 0. Since there's no actual silver that changes hands, you may keep selling until there's no buyers, virtually destroying the price of an asset. And with publicly listed companies, you can just kick it off the market (if price of stock less than $5 it gets de-listed and is moved into junk, over-the-counter market).

[Ash_Williams]

Basically what FreeE said. You are selling something now, with the hope you can buy it back at a lower price later. If you borrowed that thing to sell it, you're just shorting. If you didn't borrow it, but you are just pretending to have it because you plan on buying it before the other party wants delivery, then you're naked shorting.

You can use shorting to knock down the price of things, but, not without a lot of risk. If the price happens to rise, you lose when you are forced to buy whatever you have sold. That's covering. If you've been selling naked, and others have been, you may have a big problem when it comes time to settle. Everyone has to cover and now there is huge demand for whatever you sold short.

You can potentially lose more than you invested. When you go long you put $10 into a stock and at most you can lose $10. When you go short you may sell a stock for $10, then need to buy it back for $50, resulting in a $40 loss.

A hedge fund trying to knock down VW's price got raped about 2 years back when Porsche took advantage of the situation and started buying.

[steveoc]

A good video explanation here, in relation to Andy Maquire's whistleblowing of Silver Naked Shorts within COMEX :

http://www.youtube.com/watch?v=_0QnMzzRboY