Naked shorts are not the problem

[Quixote2]

In the CRIMEX, for every short sale there is the other side of the trade, a long buy position. When you were accumulating your position in silver, the J P Morgue shorts were to your benefit in keeping the price down and you were not complaining. Now that you have your position, you complain that the short sales are depressing the price.

The problem is not with the naked short sellers, it is with the naked long buyers. Most of the long positions have no intent of taking delivery and are just in the market betting the price will go higher and want their winning position in fiat. If the naked long buyers would take metal instead of fiat, the price would go to the moon as the sellers scraped up physical for delivery.

Rebel, start a campaign that all long positions must take delivery. The naked longs are responsible for depressing the price of silver.

[Glass]

there is one already underway @ maxkeiser.com

[Ragnarok]

Imho:
The whole silver long/short contract/option/put/call scheme is a big problem, and

If you have silver to sell, delivery to the market should be mandatory if you execute a contract for such. Also,

If you want to buy silver, delivery to youfrom the market should be mandatory if you execute a contract for such., and

No cash settlement should be allowed except when force majeure is declared. In addition,

If you want to trade an index or fund that bets solely on the price movements in silver, even the concept of delivery of metal either way should be null.

Lately, even allocated gold/silver accounts in Swiss banks (supposedly bastions of integrity and privacy) are experiencing delivery difficulties!

R.

[bellevuebully]

In the CRIMEX, for every short sale there is the other side of the trade, a long buy position. When you were accumulating your position in silver, the J P Morgue shorts were to your benefit in keeping the price down and you were not complaining. Now that you have your position, you complain that the short sales are depressing the price.

The problem is not with the naked short sellers, it is with the naked long buyers. Most of the long positions have no intent of taking delivery and are just in the market betting the price will go higher and want their winning position in fiat. If the naked long buyers would take metal instead of fiatthe price would go to the moon as the sellers scraped up physical for delivery.

Rebel, start a campaign that all long positions must take delivery. The naked longs are responsible for depressing the price of silver.


That's quite an assumption. I never in my years of trading comex contracts worried about it. I bought and sold as the conditions were favourable.

The problem is not with the long buyers. It is a choice. If you want to play in the paper derivitives market, that is choice. The problem is with the rules of being allowed to short naked. That creates an unequal playing field and the appearance of increased supply. Your theory is based on what you want to see.....higher prices....without consideration for capitalistic mechanisms.

Have you never taken a profit on something? What is wrong with taking a profit on a position. If you want metal, buy metal. If you want fiat, play fiat. Or in my case, build profits and then take thier metal.

Should all capitalistic mechanisms be changed so that you get what you want?


Futures have a place in capitalism. The rules are the problems. It seems to me that you do not understand them, and you want what you want, without considering the bigger picture, imo. Sorry if that sounds harsh, but your post has a waahhhh sound to it.

[Quixote2]

The problem is with the rules of being allowed to short naked. That creates an unequal playing field and the appearance of increased supply.

I am not complaining. I do not understand what short rule is different than the long rule. The naked longs in the market create the appearance of increased demand.

I just have a problem with the blame being on naked shorts. The banks, J P Morgue, is providing a service covering the bets, the banks do not go out on the streets and drag you in to make a bet, they stand there and cover any action they feel is advantageous. I view the market as naked longs are betting on future price increase in silver. The banks take the position of the house (gambling in Vegas) and cover your bet. The bank no doubt covers prices above their formula level based on history that will show a profit. The contango price is equivalent to including interest charges on the metal you are betting on, the J P Morgue bank is in the business of covering your paper with interest included. Over the long term, the bank wins some and loses some while making a profit overall, just like the casino house in Las Vegas.

[bellevuebully]

The problem is with the rules of being allowed to short naked. That creates an unequal playing field and the appearance of increased supply.

I am not complaining. I do not understand what short rule is different than the long rule. The naked longs in the market create the appearance of increased demand.

I just have a problem with the blame being on naked shorts. The banks, J P Morgue, is providing a service covering the bets, the banks do not go out on the streets and drag you in to make a bet, they stand there and cover any action they feel is advantageous. I view the market as naked longs are betting on future price increase in silver. The banks take the position of the house (gambling in Vegas) and cover your bet. The bank no doubt covers prices above their formula level based on history that will show a profit. The contango price is equivalent to including interest charges on the metal you are betting on, the J P Morgue bank is in the business of covering your paper with interest included. Over the long term, the bank wins some and loses some while making a profit overall, just like the casino house in Las Vegas.


The difference is that the shorts are the ones responsible to provide the underlying commodity. The longs are providing a market for that commodity. The longs are never naked as long as they meet margin requirements. Where do you get the term naked long from?

[Quixote2]

The longs are never naked as long as they meet margin requirements. Where do you get the term naked long from?


I invented the term to point out that there are long positions that never intend to take delivery, just as there are short positions that do not intend to deliver metal. As long as the shorts meet margin requirements they are not naked when they cover with another short that intends to deliver?

I believe that 99% of all contracts never involve delivery of metal, they are settled with fiat. The problem is when a 1% long position wants his metal and the counter party did not get out of his short and cover in time, does not have the metal, and offers to settle with fiat at a premium (25%?).

[bellevuebully]

The longs are never naked as long as they meet margin requirements. Where do you get the term naked long from?


I invented the term to point out that there are long positions that never intend to take delivery, just as there are short positions that do not intend to deliver metal. As long as the shorts meet margin requirements they are not naked when they cover with another short that intends to deliver?

I believe that 99% of all contracts never involve delivery of metal, they are settled with fiat. The problem is when a 1% long position wants his metal and the counter party did not get out of his short and cover in time, does not have the metal, and offers to settle with fiat at a premium (25%?).


If you want to have a discussion grounded in reality, don't invent terms that don't exist. It leads one to believe you have a percieved notion of the market that doesn't exist.

Shorts don't put up margin, they put up an obligation.

Yes, longs often don't want the metal....they want the spread between the initiation of the long position and the termination of it.....it called a hedge. It is a useful mechanism for producers as well as the investors in those producers.

Those are the terms in the contract. Nothing there is hidden.

If you strictly want metal, why would you be in the futures market anyway? Buy it outright from a supplier. I think you have an misperception about why the futures market exists.

[Quixote2]

Buy it outright from a supplier. I doubt that they would not let me get in line at the mine/refinery if I wanted multi thousand ounce quantities. Some suppliers sell through COMEX. Thus far in December, 6,400,000 ounces have been delivered to customers and 2,395,000 ounces remain to be delivered in December.
http://harveyorgan.blogspot.com/2010_12_05_archive.html

8,795,000 ounces of silver or about $250,000,000 this December. Appears to me to be the place to buy if I wanted multiples of 5,000 ounce buys.

[Ash_Williams]

In the CRIMEX, for every short sale there is the other side of the trade, a long buy position. When you were accumulating your position in silver, the J P Morgue shorts were to your benefit in keeping the price down and you were not complaining. Now that you have your position, you complain that the short sales are depressing the price.

The problem is not with the naked short sellers, it is with the naked long buyers. Most of the long positions have no intent of taking delivery and are just in the market betting the price will go higher and want their winning position in fiat. If the naked long buyers would take metal instead of fiat, the price would go to the moon as the sellers scraped up physical for delivery.

Rebel, start a campaign that all long positions must take delivery. The naked longs are responsible for depressing the price of silver.

You are correct.
People that don't really want silver are buying from people that don't really have silver.

The only place I disagree with you is that I don't think this is a problem.
Physical demand is being met by physical supply.
I didn't have an issue with longs in the oil market back when that was taking off either... their influence was temporary because they didn't really want oil, they just wanted cash.

This is why, although I think silver may go to the moon, I don't think it will stay there. It doesn't matter that there's many many times more paper silver than real silver out there, because those people don't actually want the real silver.