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Schwigg
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Posted - 2008.04.24 13:37:00 -
[1]
Due to the market mechanics of EVE, it's pretty easy (with solid research and a little luck) to make a mid-to-long-term investment in a market item whose price is on the rise:
1. Buy at price A. 2. Wait for price to rise. 3. Sell at price B.
It doesn't seem, though, that there's a great way to make money on items whose price is on the decline. In the real world, there's the concept of short selling, where you borrow a certain number of stock shares (for example), sell them immediately, wait for the price to fall, and then buy back the appropriate number of shares at the new, lesser price, keeping the difference as profit. But without some way to borrow items in EVE to sell immediately, something like this doesn't seem possible.
I realize that it's possible to make some short-term money off of items in a decline as long as they have a decent margin (and you can unload what you have bought before the potential sell price drops below your buy price), but I'm talking about investments you could hold longer than a few days.
Am I missing anything? I know folks are hesitant to give out specific market secrets, but I'm just looking for a discussion in the general sense, as someone who has a good deal of experience playing the market in other ways. -Schwigg |
Kwint Sommer
Lothian Quay Industries
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Posted - 2008.04.24 14:09:00 -
[2]
Edited by: Kwint Sommer on 24/04/2008 14:09:55
Originally by: Schwigg I realize that it's possible to make some short-term money off of items in a decline as long as they have a decent margin (and you can unload what you have bought before the potential sell price drops below your buy price), but I'm talking about investments you could hold longer than a few days.
That is essentially what you do and I've been making a good bit of ISK doing it. Finding a market with a big margin and stable prices is always ideal but, for me, one where I understand why and how it's declining is almost as good.
If you just try to play the margin like normal then you're going to getting burned. However, if you understand the way the market drops, you can put a low-ball buy order out that is appreciably lower than the current highest-buy but that will get filled when a punctuated drop happens. After a big drop like this the market will usually correct upward a tad and, much more importantly, it won't drop further for a few days. This means you get whatever it is you're trading at a very low rate and you have several days to liquidate it at a nice profit. Plus, the point at which you're making a nice profit is actually several percent below the formerly going rate which really helps move your product. Yes, it is possible that you'll get two tycoons dumping massive stock on the market mere days apart and thus sending it into complete free-fall and in the short-term costing you a lot of ISK but in this highly unlikely event, invest further at the now unheard of low and hold onto your stock for a month or two and you'll make it all back and then some.*
*Unless you invested in something that got nerfed, then you're just screwed and should cut your losses. There's a reason I don't trade in modules, you never know when one will get nerfed or replaced by something better.
Purchasing and Shipping Moon Minerals |
Myrdyr
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Posted - 2008.04.24 14:38:00 -
[3]
Did you just say that trading in modules is higher volatility than the alternatives...like moon reactions networks? Please post constructively. ~Saint |
Kwint Sommer
Lothian Quay Industries
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Posted - 2008.04.24 15:06:00 -
[4]
Originally by: Myrdyr Did you just say that trading in modules is higher volatility than the alternatives...like moon reactions networks?
No, no I didn't.
Purchasing and Shipping Moon Minerals |
Leowen
Industrial Giants
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Posted - 2008.04.24 15:41:00 -
[5]
Broadly speaking markets normally cycle rather than go on a protracted rise or decline. In a cycling market you can effectively short-sell by just buying and selling on the cycle peaks and troughs. Of course it means you must take your buy position first...
I did this recently, I'd bought a fair chunk of something at a low point, someone tried to manipulate the market upwards, I 'sold short' all of my stock to his inflated price-setting buy order. I made about 250m, he went home crying to Momma, everybody wins
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Martosh Toma
Gallente Fraction Investment
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Posted - 2008.04.24 16:24:00 -
[6]
In short: short selling in the manner you suggest is too open to abuse, therefore it will not likely be introduced.
example of abuse: Effectively create items from nowhere and sell to an alt at a price of your choosing. Transfer resulting isk to an alt (if possible). Delete char without resolving the open short position
Effect: you now have modules you never had to aquire (and perhaps isk too).
So this cannot be introduced unless you can think of a way to reolve an open short order on a char were no more payments for subscription are being made.
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Kwint Sommer
Lothian Quay Industries
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Posted - 2008.04.24 17:45:00 -
[7]
Originally by: Martosh Toma In short: short selling in the manner you suggest is too open to abuse, therefore it will not likely be introduced.
example of abuse: Effectively create items from nowhere and sell to an alt at a price of your choosing. Transfer resulting isk to an alt (if possible). Delete char without resolving the open short position
Effect: you now have modules you never had to aquire (and perhaps isk too).
So this cannot be introduced unless you can think of a way to reolve an open short order on a char were no more payments for subscription are being made.
Reading comprehension -1.
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Adonis 4174
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Posted - 2008.04.24 17:56:00 -
[8]
The obvious way to short sell from where I'm sitting is to sell something you don't immediately need but will want in the future. This would be easier to do on a corp scale, for somebody with that responsibility (obviously doing it without permission is not far different than corp theft)
For instance, if your corp has stocks of faction ammo held back for wartime and the price of faction ammo is dropping you could sell your ammo stocks now and then replenish them later from the now-cheaper market. |
Kwint Sommer
Lothian Quay Industries
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Posted - 2008.04.24 18:12:00 -
[9]
Originally by: Adonis 4174 The obvious way to short sell from where I'm sitting is to sell something you don't immediately need but will want in the future. This would be easier to do on a corp scale, for somebody with that responsibility (obviously doing it without permission is not far different than corp theft)
For instance, if your corp has stocks of faction ammo held back for wartime and the price of faction ammo is dropping you could sell your ammo stocks now and then replenish them later from the now-cheaper market.
That's the other big reason I traffic so heavily in moon minerals and POS stuff.
Purchasing and Shipping Moon Minerals |
Schwigg
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Posted - 2008.04.24 18:18:00 -
[10]
Originally by: Martosh Toma In short: short selling in the manner you suggest is too open to abuse, therefore it will not likely be introduced.
I wasn't suggesting that we be allowed to borrow items from the market in order to sell them short. That's just an example of how investors make money on a declining market in the real world.
The simplest solution currently in EVE is just to find something that you're fairly sure is on its way up... to switch markets. However, in some cases, I'm more convinced that certain items will fall in price over the next few months than I am that other items will rise in price.
Say, for example, that you believe that Widget X has just been manipulated to 120% (or more) of its value over the past week, but you weren't fortunate enough to have a stockpile of them from the original price point. In most cases, we all know that the price will eventually fall back down to the original value. However, it doesn't appear that there's a way to make ISK off Widget X after it has already risen in price... unless you think it'll be manipulated even higher. Then you're talking about the process from my original post of buying low, selling high.
Still staying somewhat generic, look at the entire T2 module market. When invention came out, most folks correctly predicted that the modules would all fall in price as supply rose faster than demand. But I'm not sure that there would have been a way to profit off of this trend, strictly speaking in terms of market trading and not invention/production. -Schwigg |
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Marie deMedici
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Posted - 2008.04.24 18:39:00 -
[11]
To profit you would sell short.
example with tritanium:
1.find a person with lots of tritanium he doesnt need right now 2.loan the tritanium from him for a collateral of equal amount of isk (this can be done with a loan contract i think) 3.immediately sell the trit in jita 4.wait for the duration of contract 5.buy tritanium back after price has declined 6.return trit and regain your collateral. You profit the difference between sell and buy price
this ofcourse requires you to have a trusted partner who is willing to loan tritanium against a small premium (in effect the loan interest) |
Ava Santiago
Minmatar
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Posted - 2008.04.24 23:33:00 -
[12]
Originally by: Schwigg
The simplest solution currently in EVE is just to find something that you're fairly sure is on its way up... to switch markets. However, in some cases, I'm more convinced that certain items will fall in price over the next few months than I am that other items will rise in price.
Say, for example, that you believe that Widget X has just been manipulated to 120% (or more) of its value over the past week, but you weren't fortunate enough to have a stockpile of them from the original price point. In most cases, we all know that the price will eventually fall back down to the original value. However, it doesn't appear that there's a way to make ISK off Widget X after it has already risen in price... unless you think it'll be manipulated even higher. Then you're talking about the process from my original post of buying low, selling high.
Still staying somewhat generic, look at the entire T2 module market. When invention came out, most folks correctly predicted that the modules would all fall in price as supply rose faster than demand. But I'm not sure that there would have been a way to profit off of this trend, strictly speaking in terms of market trading and not invention/production.
Several ways to profit off this trend - bundling is probably the easiest. By bundling items into contracts, you confuse people about "value". Say you had a stack of missile launchers you expected to have decline in price. By bundling them with caracals, missiles, and other standard caracal fittings you may be able to sell them around your original purchase point as the contract buyer may pay more for a "package deal".
You can hike them out to low or null sec space. Lower competition in low traffic areas means you may be able to maintain your margin but you will sacrifice your turnover to do so. Concord doesn't provide consequences. Concord provides insurance payouts. |
Brun Thorvald
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Posted - 2008.04.25 00:59:00 -
[13]
Originally by: Marie deMedici To profit you would sell short.
1.find a person with lots of tritanium he doesnt need right now 2.loan the tritanium from him for a collateral of equal amount of isk (this can be done with a loan contract i think) 3.immediately sell the trit in jita 4.wait for the duration of contract 5.buy tritanium back after price has declined 6.return trit and regain your collateral. You profit the difference between sell and buy price
This is essentially how short selling works with stocks in Australia. We're seeing debate over the whole model after the ANZ pulled the Lofty scam via Opus Prime and burned suckers called in killers to get their cash back (no, really. This is all happening in real life).
In an EvE setting, you might be able to do this but it'd need a bank to guarantee things and an industrial corp that is willing to lend out their mineral stocks.
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Called girl
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Posted - 2008.04.25 11:09:00 -
[14]
Quote: 1.find a person with lots of tritanium he doesnt need right now 2.loan the tritanium from him for a collateral of equal amount of isk (this can be done with a loan contract i think) 3.immediately sell the trit in jita 4.wait for the duration of contract 5.buy tritanium back after price has declined 6.return trit and regain your collateral. You profit the difference between sell and buy price
That is a trading model I would dream to see appearing in eve ... Someone rich ... and clever enough (does not need to be a bank) to support this will adjust his loan prices to match the expected value decrease. And cover his losses through the same type of contracts with people thinking the price is going to ... increase
For example, how could people enter the business of creating options (like buying the right to purchase 100 mil trit at 3.10 in three months), or sell it at same price, compute the price for that right - and guarantee the correct execution of the contract. A type of trusted 'broker' I would assume. The beauty in this is that no party needs the 100 mils trit physically, he will just pay the difference with the contract price.
The other problem is ... price manipulation that is rather easy in eve ...
Ideas ?
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