I sell 50 paper certificates for $1 each with a claim to that goat. (there is a disclaimer in the fine print for cash settlement)
I now have $49 profit.
Now I will buy 5 real goats for $1 just in case some of the investors want to take delivery of their goat.
Now my profit is $44. WHAT only $44?? (oh I forgot about the goat storage fee, north of $44)
OK, Now I have an idea! I will take the 5 new real goats and make 50 new paper certificates each, to give the investing public "price exposure" to the goat price.
Well now I have sold 300 goats and my outlay was only the cost of 6 real goats. This is great!!!
WOW look, now I can sell heaps of goats all at once, crash the demand/price, then buy a real goat at a heavily discounted price. AND then start the process all over again!!!!!!! BUT I can only do that if I sell my imaginary goats to a compliant partner (HSBC) in the know..
