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Nocxium Short Investment Opportunity
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sm1thy
southeast investments corp
#21 - 2012-04-15 15:39:35 UTC
Block Ukx wrote:
sm1thy wrote:
...

1) The author creates a contract immediately 'paying out front' to the 'system' the maximum potential profit an investor could get from the deal and also has the corresponding minerals/items/various materials being 'confiscated' until clearing of the contract.

*** for example based on the system the OP is describing and using the numbers he posted. the author 'pays' the maximum profit an investor can have, aka 29,600,000 ISK, and has his 100.000 units of nocxium 'confiscated' from the station hangar. ***




That is not a short sell and it is not what I'm describing here.


In short sell, the investor does not own the Nocxium, he is borrowing it from a third party (me). There is no Nocxium to "confiscate".







When you are creating the contract, you provide the nocxium to a third party alongside with all the isk that may be involved in the transaction. In our case the third party is eve itself, like the third part in a courrier contract is eve itself holding the collateral.

You are confusing the 'receiver' - 'creator' of the contract which is you, with the investor which will be the buyer of the contract.
What i am describing is a way that your idea could be backed by sound game mechanics, so you

a) can be trusted since there is no way you can scam the investor
b) do not have to do that much auditing, housekeeping e.t.c. you can just use the existing formalized contract system

My post may be long and confusing but the idea and mechanic behind is sound. It can be done easily, as well as various other
'advanced trading/financial contracts' that will go a big way helping with the a) and b) mentioned above.




Block Ukx
420 Enterprises.
#22 - 2012-04-16 01:37:17 UTC
sm1thy wrote:
... What i am describing is ...


not a short sell.

In this offer the investor does not own any nocxium. He is borrowing the nocxium from me.
minieme
southeast investments corp
#23 - 2012-04-16 09:09:34 UTC  |  Edited by: minieme
In what he is describing the investor IS borrowing the nocxium from you.
Block Ukx
420 Enterprises.
#24 - 2012-04-16 19:55:21 UTC


I placed 3 contracts under my name so investors can see how a contract would look. Contracts will remain open till the opening price matches market price.
Retar Aveymone
GoonWaffe
Goonswarm Federation
#25 - 2012-04-16 21:24:59 UTC
i will allow you to short sell literally anything you'd like

just send me the isk with the note about what you're short-selling and for how long and I'll send you your profits
Block Ukx
420 Enterprises.
#26 - 2012-04-18 11:20:57 UTC


It seems that there is very little interest in shorting Nocxium. I would like to get your feedback on the lack of interest.

What's holding you back? What is it that you don't like about shorting Nocxium? Your comments will be appreciated. Thank you in advanced.
Vaerah Vahrokha
Vahrokh Consulting
#27 - 2012-04-18 11:35:44 UTC
Block Ukx wrote:


It seems that there is very little interest in shorting Nocxium. I would like to get your feedback on the lack of interest.

What's holding you back? What is it that you don't like about shorting Nocxium? Your comments will be appreciated. Thank you in advanced.





1) I'd like a proper futures contract.

2) I'd like to be able to choose whether to go long or short on it.

3) I'd like to have market data about it.

4) You need to provide contracts for all the minerals.

5) In the way you have posted about your proposal, people IMMEDIATELY ask themselves "where's the catch? If this guys forces me to short then it's because he knows I'll lose".

Also, explaining to people about futures is hard. Most look at price rising NOW and don't even stop a second to think it might go down in 1 month. Therefore they pass on the investment.


Personally, until there won't be a free long / short option, choice of underlying and liquidity this is a "don't bother".
How can I buy / sell stuff if I have all of 3 people in the secondary market willing to sell / buy? Prices will be settled like crap.

EvE Online portal | EvE markets tutorials
Block Ukx
420 Enterprises.
#28 - 2012-04-18 13:33:16 UTC
Vaerah Vahrokha wrote:

1) I'd like a proper futures contract.

2) I'd like to be able to choose whether to go long or short on it.

3) I'd like to have market data about it.

4) You need to provide contracts for all the minerals.


Yes, it would be nice to have all of those. The main issue I have is that such system requires a bit of work and I’m not sure is worth the effort if no one uses it at the end.


Vaerah Vahrokha wrote:

5) In the way you have posted about your proposal, people IMMEDIATELY ask themselves "where's the catch? If this guys forces me to short then it's because he knows I'll lose".


I’m not forcing anyone to short; the investor sets the terms of the contract. The only requirement I have is that the contract is no longer than 6 months, which I think is reasonable. The investor can settle the contract any time before 6 months. I don’t think people are going to lose money, but I could be wrong. I think Nocxium price will peak after patch and then settle at a lower price, which makes short a reasonable investment.

I suppose the catch is that you need to figure out the opening/closing price.



Vaerah Vahrokha wrote:

Also, explaining to people about futures is hard. Most look at price rising NOW and don't even stop a second to think it might go down in 1 month. Therefore they pass on the investment.


I totally agree.


Vaerah Vahrokha wrote:

Personally, until there won't be a free long / short option, choice of underlying and liquidity this is a "don't bother".
How can I buy / sell stuff if I have all of 3 people in the secondary market willing to sell / buy? Prices will be settled like crap.


In this investment, the price is determined by the eve market, not traders in the secondary market. At opening, Nocxium is sold in the eve market. To close a contract, Nocxium will be purchased from the secondary market.



Part of the reason I’m doing this offer is to gauge interest. If no one is interested, then I’ll punt short sell from the exchange.
Vaerah Vahrokha
Vahrokh Consulting
#29 - 2012-04-18 14:31:49 UTC
Block Ukx wrote:

In this investment, the price is determined by the eve market, not traders in the secondary market. At opening, Nocxium is sold in the eve market. To close a contract, Nocxium will be purchased from the secondary market.


Exactly. The secondary market imo is the weak point of this initiative. I buy today at a certain price (say 950) then 1 month from now the primary market is at say 600 and I decide to sell. What happens? I find 2 guys in the secondary market, one who buys at 800 and one who buys at 770. Result: I have to settle for 770 and thus I realize 950 - 770 = 180 plus I pay you 20% of that. Instead, I should have earned close to 950 - 600 = 350.


EvE Online portal | EvE markets tutorials
Block Ukx
420 Enterprises.
#30 - 2012-04-18 14:51:35 UTC
Vaerah Vahrokha wrote:
Block Ukx wrote:

In this investment, the price is determined by the eve market, not traders in the secondary market. At opening, Nocxium is sold in the eve market. To close a contract, Nocxium will be purchased from the secondary market.

Exactly. The secondary market imo is the weak point of this initiative. I buy today at a certain price (say 950) then 1 month from now the primary market is at say 600 and I decide to sell. What happens? …


I’m assuming that 950 is your opening price and 600 is your closing price.

First, I accept the contract, meaning that I managed to sell the Nocxium in the primary market at your opening price of 950 ISK. Remember the first step is selling the Nocxium you don’t have.

If one month from now the primary market says is 600 (your closing price), then I buy at 600 and your contract is settled. You will earn 950 -600 = 350 per contract minus the management fee.


Your return on investment is 350 * 100,000 *0.80 = 28,000,000, while your investment was 10,000,000 that’s a 280 % ROI.
OllieNorth
Recidivists Incorporated
#31 - 2012-04-18 14:56:04 UTC
I'm sure you are both making intelligent points, but short selling has always made my head turn into a Mobius strip. I would like to see some type of futures contract written into the game, however. It seems like a missing niche.
Vaerah Vahrokha
Vahrokh Consulting
#32 - 2012-04-18 16:30:43 UTC
OllieNorth wrote:
I'm sure you are both making intelligent points, but short selling has always made my head turn into a Mobius strip. I would like to see some type of futures contract written into the game, however. It seems like a missing niche.


Short selling is pro. It lets double the income, plus shorting usually gets to targets in less time than going long.

EvE Online portal | EvE markets tutorials
Xuixien
Solar Winds Security Solutions
#33 - 2012-04-18 16:44:39 UTC
That was cute.

Epic Space Cat, Horsegirl, Philanthropist
Kyshonuba
Science and Trade Institute
Caldari State
#34 - 2012-04-19 10:47:24 UTC  |  Edited by: Kyshonuba
Block Ukx wrote:


An Example
You purchase one contract with a 1,200 ISK opening market price and 800 ISK closing price. We will then sell the Nocxium at 1,200 and purchase it back from the market when it reaches 800 ISK. Let’s assume it took two months for this contract to settle. At closing we will return your margin plus profits. In this case your profit will be:
40,000,000 ISK (sale) – 8,000,000 (20% profits) – 2,400,000 (2% interest)
OR
29,600,000 ISK






If the profit is negative (nocxium rises 30%), how do you calculate ?

-40,000,000 ISK (sale) – ( - 8,000,000 (20% profits)) – (- 2,400,000 (2% interest)) = 29,600,000 ISK loss


OR

-40,000,000 ISK (sale) – 0 (20% profits) )– 0 (2% interest) = 40,000,000 ISK loss

This buisiness modell makes only sense if your are willing to share the loss as well as the profit
Block Ukx
420 Enterprises.
#35 - 2012-04-19 11:13:59 UTC
Kyshonuba wrote:


If the profit is negative (nocxium rises 30%), how do calculate ? Is it .....

-40,000,000 ISK (sale) –( - 8,000,000 (20% profits) )– 2,400,000 (2% interest) = 29,600,000 ISK loss

OR

-40,000,000 ISK (sale) –( 0 (20% profits) )– 2,400,000 (2% interest) = 40,000,000 ISK loss

This buisiness modell makes only sense if your are willing to share the loss as well as the profit



This offer is neither a shared business nor a partnership. I’m giving you the opportunity to short sell which is something that is not possible to do in game. I’m acting as a third party and collecting a fee based on profits. If you take a loss, I will not charge a management fee. You still need to pay the interest.

Keep in mind that you can close the contract at any time; no need to wait 6 months. You will take a loss if and only if the market price of nocxium never goes below your opening price.


Kyshonuba
Science and Trade Institute
Caldari State
#36 - 2012-04-19 15:34:36 UTC
Block Ukx wrote:



This offer is neither a shared business nor a partnership. I’m giving you the opportunity to short sell which is something that is not possible to do in game.




Why shouldnt a player sell his nocxium by himself ... and buy it back when prizes dropp ?

Block Ukx wrote:


An Example
You purchase one contract with a 1,200 ISK opening market price and 800 ISK closing price. We will then sell the Nocxium at 1,200 and purchase it back from the market when it reaches 800 ISK. Let’s assume it took two months for this contract to settle. At closing we will return your margin plus profits. In this case your profit will be:
40,000,000 ISK (sale) – 8,000,000 (20% profits) – 2,400,000 (2% interest)
OR
29,600,000 ISK




This arragngement is either a 29,600,000 win or 10,400 000 loss (because i can sell and buyback the nocxium buymyself)
Block Ukx
420 Enterprises.
#37 - 2012-04-19 17:23:28 UTC  |  Edited by: Block Ukx
Kyshonuba wrote:

Why shouldnt a player sell his nocxium by himself ... and buy it back when prizes dropp ?



That would'n be considered a short sell. If you need to purchase the Nocxium first, then you are not short selling, you are going long.

EDIT: I'm assuming most people do not own the nocxium.

Kyshonuba wrote:

Block Ukx wrote:


An Example
You purchase one contract with a 1,200 ISK opening market price and 800 ISK closing price. We will then sell the Nocxium at 1,200 and purchase it back from the market when it reaches 800 ISK. Let’s assume it took two months for this contract to settle. At closing we will return your margin plus profits. In this case your profit will be:
40,000,000 ISK (sale) – 8,000,000 (20% profits) – 2,400,000 (2% interest)
OR
29,600,000 ISK


This arragngement is either a 29,600,000 win or 10,400 000 loss (because i can sell and buyback the nocxium buymyself)




Leverage
http://en.wikipedia.org/wiki/Leverage_(finance)


In your example, you would use 10M ISK to purchase about 10,417 units of Nocxium at 960 IKS pu (approximately current market price). Selling at 1,200 will profit 2,500,080 minus EVE’s taxes and broker fees.

Return of investment in your example is 25%

By short selling with this offer you can potentially make 10 times what you normally would.
EDIT: Even if you own the Nocxium your gains will still be much lower due to leverage.
Kyshonuba
Science and Trade Institute
Caldari State
#38 - 2012-04-19 19:28:40 UTC  |  Edited by: Kyshonuba
In other words ......... you lend me (the investor) the nocxium but, you actually dont put it physical in my hangar.
Instead you sell/buy it under the conditons of the contracts to the market.

Vaerah Vahrokha wrote:


........
Yes, the borrowing Nocxium is the definition of "regular short" (opposed to the naked short, where the borrowing does not happen)......



So you are offering "naked shorts" arent you ?

wikipedia wrote:


This means that the buyer of such a short is buying the short-seller's promise to deliver a share, rather than buying the share itself. The short-seller's promise is known as a hypothecated share.



Weather the nocxium contract is called a "future" ore a "forward" doesnt look that important for basic understanding
Block Ukx
420 Enterprises.
#39 - 2012-04-21 01:34:15 UTC
Kyshonuba wrote:

So you are offering "naked shorts" arent you ?



No, I have set aside 20 M units for this project.
Block Ukx
420 Enterprises.
#40 - 2012-04-24 01:11:39 UTC


Don't be shy. This is a great opportunity to make some ISK.
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