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Professor Bunsen
Optech Mineral Ventures
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Posted - 2008.01.17 21:27:00 -
[1]
Long anticipated, often imminent, now launched!
OPTECH is pleased to announce the launch of Eve-Index http://www.eveindex.cfdeveloper.co.uk/, New Eden's first mineral futures exchange allowing the pod pilot community to speculate on the future prices of minerals.
Profit in a rising or falling market (if you predict the trend correctly of course!)
Limit your trading risks but still have high profits.
Learn how to use [gearing] to generate high profits.
Protect the value of your mineral stockpile from falling prices with [hedging] strategies.
The first minerals which are available for trading are trit, pyer, and mex.
Automated credit to your betting account via the API, usually within one hour.
No charges for trading (1% fee for withdrawals).
Full trading tutorial [here].
The methodology for the underlying indexes has been previously published [here].
Bunsen - One in the eye for the School of Applied Knowledge !
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Asriel Grumman
Minmatar Hi-Tech Industries
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Posted - 2008.01.17 21:58:00 -
[2]
Friendly bump for a great Idea...hope to give it a spin soon
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Danari
Amarr Viper Squad Triumvirate.
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Posted - 2008.01.17 22:00:00 -
[3]
Who are the option writers?
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Professor Bunsen
Optech Mineral Ventures
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Posted - 2008.01.17 22:28:00 -
[4]
Originally by: Danari Who are the option writers?
Anyone who wants to can write i.e. create options but at 100% collateral which fully covers the contracts isk commitment. If there is non delivery of an exercised contract the guilty party also gets a 10% of contract value fine and a ban from further option writing, so it's an expensive once only default.
There is then a progression down in collateral required for option writing as people accrue a track record of delivering on exercised contracts.
Of course anyone can buy and sell the option contracts as far as option trading is concerned.
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Cergorach
Amarr The Helix Foundation
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Posted - 2008.01.17 23:39:00 -
[5]
Edited by: Cergorach on 17/01/2008 23:39:41 Very interesting, I was reading the tutorials at the beginning of the week and was wondering when it would go live.
The 'problem' currently is that when you create a call option you need to provide the isk (now) and the minerals (later), effectively tying up twice the resources you normally would when trading minerals. The put options don't suffer as badly from this as only the isk is needed, but the isk is still tied up for the duration of the option. That doesn't motivate folks to create options unless the collateral goes down.
So how many options do i have to create before the collateral goes down? How much will it go down?
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Astorothe
Aperture Science Industries
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Posted - 2008.01.18 02:33:00 -
[6]
I like the layout - clean and simple with a straight forward instructions. I knew nothing about this service when I visited, and after less than a minute I knew exactly what to do to get involved.
I'll give this a good spin tonight when I get home from work. Looks very interestin!
Ze logs show NOTHING! ~ Eve Corp and Fansite Web design, development and hosting services
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Danari
Amarr Viper Squad Triumvirate.
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Posted - 2008.01.18 08:49:00 -
[7]
Edited by: Danari on 18/01/2008 08:52:43 Forgive the denseness but I don't see a 'profit by being an option writer' section of your website tutorials? Is he the miner who basically surfs for what he thinks is good sell prices for his stocks? (If so cute)
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Professor Bunsen
Optech Mineral Ventures
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Posted - 2008.01.18 10:09:00 -
[8]
Edited by: Professor Bunsen on 18/01/2008 10:10:13 In essence option contracts are a 2 - way bet with the option writer and the option holder on opposite sides of the coin. In order to buy an option contract someone has to write (create) one. If one is winning the other will be losing. It is true market PVP, no wealth is created, it is simply moved between people depending on who makes the right prediction on what the markets are doing.
If you think trit will go up and want to profit from that then you either
A) Buy "call" options (giving you the right to buy at the strikeprice) any time up to 1 March 08.
B) Write (i.e. create) "put" options which gives you an immediate return from the sale but the obligation to buy x units of trit at that fixed strikeprice any time the option holder exercises his option (you have 5 days to get your act together and put the contract up for them).
You are right in that I do not give examples in the tutorial pages showing how option writers ( i.e. the person creating the contract) might profit so here's an example for you.
Example - Profit from writing options
Trit is currrently around 2.75 and you think trit prices will rise. You could write and then offer for sale trit put options at a 2.7 strikeprice.
If some takes the contrary view that trit prices will fall they buy the put contracts from you (giving them the right to sell to you at 2.7) and you (as the option writer) bank the 300k per million trit contract value which is the premium for your risk.
If you as the option writer are right and trit goes up to (say) 3 the option is not going to be invoked (who wants the right to sell to you at 2.7 when they can sell on the market at 3?) so you made an 300k per contract and you never touched any trit at all.
Of course if the price of trit falls to 2.0 you can bet that your contract will be exercised and you will be called on to buy someones trit from them for 2.7 when its only worth 2.0 on the market, so you would lose money.
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Professor Bunsen
Optech Mineral Ventures
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Posted - 2008.01.18 10:23:00 -
[9]
Originally by: Cergorach Edited by: Cergorach on 17/01/2008 23:39:41 The 'problem' currently is that when you create a call option you need to provide the isk (now) and the minerals (later), effectively tying up twice the resources you normally would when trading minerals.
If you are writing (creating) a call option you are betting on the value of the mineral going down so you wouldn't normally hold onto the mineral. You can't really compare it to normally trading minerals as you can't make money from falling prices with conventional trading.
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Block Ukx
KDM Corp Firmus Ixion
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Posted - 2008.01.18 13:36:00 -
[10]
I like the idea of a Mineral Futures Market. Unfortunately, due to collateral requirements, I wonĈt be writing calls/puts.
BSAC manages two Mineral Reserve Funds, and I will be willing to look at defaulted contracts, and fulfill them for a fee if the price is right.
Good luck Professor
NOTE: IĈm not vouching for this venture, and my statement is not a guarantee that BSAC will fulfill defaulted contracts.
BSAC Mineral Market Manipulation (MinMa) Information Desk |
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Danari
Amarr Viper Squad Triumvirate.
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Posted - 2008.01.18 17:55:00 -
[11]
Order writers need a way to see the options that they've sold.
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Monty Kvaran
Caldari Consolidated Sprocket
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Posted - 2008.01.18 18:14:00 -
[12]
Edited by: Monty Kvaran on 18/01/2008 18:15:24 My understanding was that real life futures markets exist primarily to fund industrial operations. For example, a mine owner will sell his future production, then use the money from that sale to pay his miners who are doing the production. The furure is sold at a discount due to the delay in delivery and risk of default. Futures also allow the mine owner and his buyers to insulate against price fluctuations.
As I see it, your offering only provides the latter... Lets say I just trained to Exhumer III but can't afford a hulk, I would then offer the ore I will mine with the hulk in the next 2 weeks on the futures market so that I can buy the hulk, and do the mining. But wait! I need to provide collateral on the ore?! So to be able to offer my production, I need to have the money to buy the hulk already... but then why use the market at all?
Really, for the miner, this is the same problem as that 100% secured stock market...
Though I admit, this is still very useful to protect both miners and manufacturers against price fluctuations...However, why ban someone for defaulting? If they provided collateral, couldn't you just buy the materials with it and the money paid for the future? They take a loss, and the buyer gets thier minerals as ordered (unless prices more than double ). Or are you going to pay out the purchase but hold to collateral? . |
Brisco Smiley
Peppermint Bay Trading Company
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Posted - 2008.01.18 19:22:00 -
[13]
Edited by: Brisco Smiley on 18/01/2008 19:22:59 edit: typo
I created a contract. It is not the full commodity value that must be escrowed. I wrote a 2.9 tritanium call for 770,000 escrow; the expected value of tritanium involved would be 2.9M. I placed an order to sell the option for 0.152. If I understand correctly, I will receive 152,000 if the option sells, leaving me at 620,000 net negative cash.
When the option is executed (or expires), I will receive the 770,000 escrow back (if I understand). At that point, I will be at 152,000 net positive cash. If no one ever buys my option, I presume I will receive the escrow back, leaving me at net zero cash (I was not charged any fees to write the option).
So, yes, your cash position does take a hit, but it is not as big as it would be if you sent your veldspar to someone else we all know and love.
In my case, if my option sells, I forfeit my stake in the gamble that tritanium may rise above 2.9. In return I get 152,000 isk for simply continuing to run my operation as I do already. It sounds like fun.
Cheers,
Brisco Smiley
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Hexxx
Minmatar
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Posted - 2008.01.18 19:29:00 -
[14]
Originally by: Monty Kvaran Edited by: Monty Kvaran on 18/01/2008 18:15:24 My understanding was that real life futures markets exist primarily to fund industrial operations. For example, a mine owner will sell his future production, then use the money from that sale to pay his miners who are doing the production. The furure is sold at a discount due to the delay in delivery and risk of default. Futures also allow the mine owner and his buyers to insulate against price fluctuations.
As I see it, your offering only provides the latter... Lets say I just trained to Exhumer III but can't afford a hulk, I would then offer the ore I will mine with the hulk in the next 2 weeks on the futures market so that I can buy the hulk, and do the mining. But wait! I need to provide collateral on the ore?! So to be able to offer my production, I need to have the money to buy the hulk already... but then why use the market at all?
Really, for the miner, this is the same problem as that 100% secured stock market...
Though I admit, this is still very useful to protect both miners and manufacturers against price fluctuations...However, why ban someone for defaulting? If they provided collateral, couldn't you just buy the materials with it and the money paid for the future? They take a loss, and the buyer gets thier minerals as ordered (unless prices more than double ). Or are you going to pay out the purchase but hold to collateral?
Could always take out a loan.
Consulting, IPO Template, and Stock/Bond definitions.
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Professor Bunsen
Optech Mineral Ventures
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Posted - 2008.01.18 21:48:00 -
[15]
Originally by: Monty Kvaran However, why ban someone for defaulting? If they provided collateral, couldn't you just buy the materials with it and the money paid for the future? They take a loss, and the buyer gets thier minerals as ordered (unless prices more than double ). Or are you going to pay out the purchase but hold to collateral?
In the event of default the aggrieved party simply gets the isk collateral which puts them back to the same isk position as if a default had not occurred. I'm not getting into the work of completing the mineral buy/sale on behalf of the defaulter. As to banning people who default on contracts, I simply don't want them in the Eve-Index marketplace.
It would be lovely not to require collateral but as game mechanics provide no sanction against "lawbreakers" its not an option. [Eve-Index][Traded Mineral Options Tutorial] |
Professor Bunsen
Optech Mineral Ventures
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Posted - 2008.01.18 22:17:00 -
[16]
Originally by: Brisco Smiley Edited by: Brisco Smiley on 18/01/2008 19:22:59 edit: typo
I created a contract. It is not the full commodity value that must be escrowed. I wrote a 2.9 tritanium call for 770,000 escrow; the expected value of tritanium involved would be 2.9M. I placed an order to sell the option for 0.152. If I understand correctly, I will receive 152,000 if the option sells, leaving me at 620,000 net negative cash.
When the option is executed (or expires), I will receive the 770,000 escrow back (if I understand). At that point, I will be at 152,000 net positive cash. If no one ever buys my option, I presume I will receive the escrow back, leaving me at net zero cash (I was not charged any fees to write the option).
So, yes, your cash position does take a hit, but it is not as big as it would be if you sent your veldspar to someone else we all know and love.
In my case, if my option sells, I forfeit my stake in the gamble that tritanium may rise above 2.9. In return I get 152,000 isk for simply continuing to run my operation as I do already. It sounds like fun.
Cheers,
Brisco Smiley
Entirely correct. In order to limit the potentially unlimited liability of option writers (and hence the need for unlimited collateral if you want to 100% secure it) each mineral has a supported trading range. For trit its currently 1.6 to 3.6 so the worst possible outcome for you (selling 2.9 calls) is that trit rises to 3.6 and you still have to sell your trit for 2.9 . You are also correct in that if you hold the mineral and write call options (so called covered calls) you effectively sell the possibility of profit if the mineral rises in value for the guaranteed isk for selling the contract today. [Eve-Index][Traded Mineral Options Tutorial] |
Professor Bunsen
Optech Mineral Ventures
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Posted - 2008.01.20 08:38:00 -
[17]
Originally by: Danari Edited by: Danari on 18/01/2008 22:33:19 Edited by: Danari on 18/01/2008 22:09:04 Option writers need a way to see the options that they've sold, that is, the amounts in escrow.
Agree Danari, I'll add a report screen. [Eve-Index][Traded Mineral Options Tutorial] |
Danari
Amarr Viper Squad Triumvirate.
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Posted - 2008.01.20 15:26:00 -
[18]
The 'theoretical price' appears to assume a lot more volatility than I can justify from my experiences tracking mineral movements. Is the volatility factor coming from tracking the actual standard deviations, or is it using an assumed value?
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Selene D'Celeste
Caldari The D'Celeste Estate Dawn of Transcendence
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Posted - 2008.01.20 17:17:00 -
[19]
This should be interesting. You will probably get more feedback from me when I give this a more thorough go-over. I do sense that something isn't as efficient as it needs to be though.
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Professor Bunsen
Optech Mineral Ventures
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Posted - 2008.01.20 17:57:00 -
[20]
Originally by: Danari The 'theoretical price' appears to assume a lot more volatility than I can justify from my experiences tracking mineral movements. Is the volatility factor coming from tracking the actual standard deviations, or is it using an assumed value?
Actual daily spot data from 3 months sample. [Eve-Index][Traded Mineral Options Tutorial] |
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Brisco Smiley
Peppermint Bay Trading Company
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Posted - 2008.01.20 19:50:00 -
[21]
I thought the theoretical price was high too, but then people started buying my options. Time, I suppose, will tell. I may spend the rest of my life eating chocolate-covered tritanium.
As far as I can see, only March options are being traded now. Are there plans to allow trading of longer term options?
It looks like the holder of an option can exercise it at any time up to the maturity date. Are there any plans for a type of option that could be exercised only during a given month, neither after nor before?
In some cases, it seems that the time-value of the money escrowed brings the profit of even a clairvoyant option writer down to a level with which other high-risk investments are competitive. Might it be possible, at some point, for a contract writer to use assets held by one of the banks (i.e. intrest-bearing account or producing BPO) for escrow? Of course, if that is your major revenue source, feel free to keep it.
Cheers,
Brisco Smiley
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Danari
Amarr Viper Squad Triumvirate.
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Posted - 2008.01.21 07:17:00 -
[22]
Well being how one trading technique is to bet on or against the volatility factor, if you have play money to burn and understand the market better than the average bettor, this is one way to convert idle isk into truly free money.
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Professor Bunsen
Optech Mineral Ventures
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Posted - 2008.01.21 10:09:00 -
[23]
Originally by: Brisco Smiley
As far as I can see, only March options are being traded now. Are there plans to allow trading of longer term options?
It looks like the holder of an option can exercise it at any time up to the maturity date. Are there any plans for a type of option that could be exercised only during a given month, neither after nor before?
In some cases, it seems that the time-value of the money escrowed brings the profit of even a clairvoyant option writer down to a level with which other high-risk investments are competitive. Might it be possible, at some point, for a contract writer to use assets held by one of the banks (i.e. intrest-bearing account or producing BPO) for escrow? Of course, if that is your major revenue source, feel free to keep it.
Cheers,
Brisco Smiley
Currently I only have options for 1 March expiry up. The plan would be to roll forward on a 2 or 3 month cycle, any my instinct is that 2 monthly is ideal given the rather exaggerated economic pace in Eve. As I was anticipating a slow uptake I wanted all the action on one cyle initially, but ideally I would have 1 Mar and 1 May options available rolling forward. When I've seen how this cycle pans out it can be refined.
The "exercise anytime" option type is the type I'm sticking to for now. Its already complex stuff for the average Eve player so trying not to muddy the waters any further with further esoteric choices!
Investing money which is current balance + escrow collateral with either Ebank or Fury Bank are possibilities that I considered as a way of improving the return on option writing. It would raise some issues which I couldn't immediately see an easy way to resolve :-
1. Players would have to trust 2 organisations/people rather than 1 (and I accept I am the junior partner in that rating but it still adds to risk). This could be overcome by having it a selectable account option.
2. It would effectively mean that any option trading by Ebank or Fury Bank (or their alts) would be unsecured, which seemed to me to require nothing short of a partnership whereby I would have to trust one of them 100% (not saying I don't btw). They wouldn't have to trust or vouch for me ofc I would be simply another account.
This whole project is something of a first in its complexity and is evolving based on suggestions/feedback/experience, so to those contributing (either by dabbling with using or feedback) many thanks. [Eve-Index][Traded Mineral Options Tutorial] |
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