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Is there such thing as "passive swing trading" for minerals?
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LoBlo Fet
Terra-Formers
#1 - 2012-04-08 16:01:17 UTC
I'm not a business type in RL so excuse my noobishness when it comes to trading.

Here's a fundamental question in regards to mineral profits.

If a player buys huge quantities of minerals in anticipation for a rise in sell prices and then sells them a a higher price... did he make any real profit? Given that increased mineral prices will ultimately lead to increased item prices, it seems like although the player makes a 'profit' he really is just breaking even, because his 'profits' will be equal to the rise in item cost and his net buying power unchanged.

If this is true then aren't mineral "swing-trades' really a means to protect oneself from increased operations cost and inflation with no real increase in buying power?

Any real-life business people that can tell me whether I'm way off with flawed thinking or wheter I'm looking at things correctly?
Thanks!
corestwo
Goonfleet Investment Banking
#2 - 2012-04-08 16:18:28 UTC  |  Edited by: corestwo
LoBlo Fet wrote:
If a player buys huge quantities of minerals in anticipation for a rise in sell prices and then sells them a a higher price... did he make any real profit? Given that increased mineral prices will ultimately lead to increased item prices, it seems like although the player makes a 'profit' he really is just breaking even, because his 'profits' will be equal to the rise in item cost and his net buying power unchanged.

I'm no IRL business guy, but it seems to me that the only scenario in which your thinking is not flawed is the one where the profits realized by the trade are exactly equal to whatever he'll spend on goods for his own use in the future. But, if I realize a 25% profit on commodity speculation and that commodity only actually rises 10%, causing a 10% rise in finished goods, I am ahead of the game.

Also - all of my mineral speculation right now is in zydrine and nocxium, where I am expecting to take 200-300% profits. While minerals are rising across the board, I would not necessarily expect them to rise 200-300% across the board, so I'm ahead of the game in that regard as well. And, similarly, the goods I am buying may not necessarily be mineral based - perhaps I'll go buy a Golem, where the minerals involved in the Raven that goes into it are only a fraction of the total cost, meaning that a 100% rise in the mineral cost is actually only a 20% rise in the cost of the Golem.

This post was crafted by a member of the GoonSwarm Federation Economic Cabal, the foremost authority on Eve: Online economics and gameplay.

fofofo
Dersk
Perkone
Caldari State
#3 - 2012-04-08 16:23:57 UTC
The problem with that is not all items are produced with or directly tied to minerals. A drake may be double the price it was six months ago, but the rigs and modules used to fit it are not twice as expensive. So, someone doubling his/her isk off of mineral speculation can, in this example, "buy more fitted drakes".

If someone were riding an inflationary rise in prices, makes x% profit but everything is x% more expensive, then yeah, the person isn't weathlier, and it's just a hedge.

Since skillbooks, ice products, moon minerals, salvage, datacores, BPOs, and meta module drops aren't experiencing the same changes minerals (and mineral products) are, buying power will be increased, more or less depending on how well the speculator performs.
Barakach
Caldari Provisions
Caldari State
#4 - 2012-04-08 16:45:30 UTC
The price of items are determined more by the average cost. If you can buy-low sell-high, you will on average make a profit.

Lets assume what you said is true and you really just "broke even". The money that you invested into said item doesn't "gain value", but instead retains value relative to that item.

Two possibilities will most likely happen as there are a limited amount of said item.

1) The item is growing faster than other items, so you "gain money" by investing into an item that is gaining value
2) You don't gain value relative to the item, but not everyone was able to invest into the item, so you gained value relative to the vast majority of the players.

No matter what, your relative value increases.
MushroomMushroom
State War Academy
Caldari State
#5 - 2012-04-08 16:54:29 UTC
Also, plex, T2, T3, Faction, Deadspace, Meta, planetary interaction, rigs, BPO, and sov costs are all either only partially tied to or independent of mineral prices. (probably some more important categories I forgot)
Aina Sasaki
Garoun Investment Bank
Gallente Federation
#6 - 2012-04-08 17:05:10 UTC
As others have said here, because minerals are not used to create all items in the game, you cannot equate the rise in mineral prices exactly with a general rise in inflation in the eve market. If you make a nice tidy profit off mineral speculation, then you will make a nice tidy sum of cash. :)

- Rei
Darth Tickles
Doomheim
#7 - 2012-04-08 17:14:54 UTC
Good question, good answers.

This is the kind of **** I like to see on MD.
LoBlo Fet
Terra-Formers
#8 - 2012-04-08 17:26:49 UTC
Ah yes, I see. I don't know enough about the manufacturing side of Eve to know what percentage of an items resources are made up of the 8 corp asteroid minerals. These answers all make sense.

Thanks
Vaerah Vahrokha
Vahrokh Consulting
#9 - 2012-04-08 17:27:56 UTC
LoBlo Fet wrote:
I'm not a business type in RL so excuse my noobishness when it comes to trading.

Here's a fundamental question in regards to mineral profits.

If a player buys huge quantities of minerals in anticipation for a rise in sell prices and then sells them a a higher price... did he make any real profit? Given that increased mineral prices will ultimately lead to increased item prices, it seems like although the player makes a 'profit' he really is just breaking even, because his 'profits' will be equal to the rise in item cost and his net buying power unchanged.

If this is true then aren't mineral "swing-trades' really a means to protect oneself from increased operations cost and inflation with no real increase in buying power?

Any real-life business people that can tell me whether I'm way off with flawed thinking or wheter I'm looking at things correctly?
Thanks!



Yes minerals are one of the few best markets for swing trading.

No, the player won't just break even. ATM I am up 30% across the board in unrealized profits.

EvE Online portal | EvE markets tutorials
Johnny Frecko
Federal Navy Academy
Gallente Federation
#10 - 2012-04-08 17:52:57 UTC
Won't repeat the many good answers, but one last possible solution.

Mineral prices change much faster than item market prices.
Meaning that especially on large scale production you might see a lag between the mineral price and the item prices.
So if the minerals rise by 100% in a course of a week, the impact will take a while to go through all the items.
Given that people have inflation-related expectations, you can see how even if items were made 100% of pure minerals, you would still increase your buying power in the short run.

Add this to everything else being said, and you've got what i believe is a pretty comprehensive answer.

Johnny