The Epic American Credit and Bond Bubble Laboratory Message Board

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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: ild who wrote (47780)	12/20/2005 8:46:38 PM
From: aknahow	Read Replies (1) of 110194

"Why does anyone have to be short?" An ETF is neither an open end nor a closed end mutual fund. If it were a closed end fund the premium/discount would end up all over the map, while if it were an open end fund there would be no premium or discount. True anyone wanting to buy, (or sell)any amount of shares can do that just by buying or selling on the NYSE. More willing buyers than willing sellers would result in the premium increasing. GLD's function is to hold gold delivered to it until delivery of such gold is requested. Only when gold is delivered are shares issued. Only when shares are redeemed is gold exchanged for the shares. Thus there is an incentive for the participant broker/dealers to go short shares whenever the premium provides opportunities for profitable arbitrage. What I don't and probably can't understand is how and what determines or the timing of the short sale and the decision to cover. I agree $50,000,000 is not a large amount for a mutual fund, financial institution nor a broker dealer.

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