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Professor Bunsen
Optech Scientific
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Posted - 2007.09.24 09:04:00 -
[1]
In line with our policy of daily innovation, Eve Index has developed software to host what I believe is New Eden's first mineral futures exchange.
We are entering a week of closed alpha testing/selected previews before going live in a few days time. Current features are :-
 Automated credit to your betting account via the API, usually within one hour.
The first mineral options to be rolled out will be trit based on the previously published Jita Trit Index.
Contracts are for 1 mil units of mineral, so for example 1 contract for Dec Trit Calls with a strikeprice of 3.4 gives you the right to buy 1 mil units of trit at any time between now and 1 Dec at a price of 3.4 isk.
Facility to write covered calls and puts. Calls require traders to deposit the appropriate amount of mineral as security, writing puts requires 100% of the isk at risk as security, so from an option traders perspective these are guaranteed contracts (at least as good as my rep which is hopefully good for a few bil).
Buying and selling of uncovered calls and puts is available of course with 24/7 trading available on the Eve Index site. Due to the slightly lumpy nature of updates to the underlying index, buy and sell orders are on placed on the basis of a % above or below fair value (calculated using Black- Scholes for the options gurus out there). Your buy and sell orders therefore move in line with the index to preserve that premium/discount.
The methodology for the underlying index, the Jita Trit Index has been previously published [here]. Working with 3 partners I am getting between 6-12 market logs a day via FTP upload on which to base the mineral index. Contributors still welcome BTW. A chart of the [^JTI] is here for interest.
There are no trading charges for using the Eve-Index traded minerals market, I am proposing a 1% fee for withdrawals (because that requires manual processing on my part).
NOTE 1 : Trading is not yet live, so keep your powder dry.
NOTE 2 : Expressions of interest from potential option writers (as opposed to traders) welcome, Eve mail Bunsen.
NOTE 3 : It is very likely that Optech will be seeking to raise capital for a mineral trading fund in due course.
Bunsen - One in the eye for the School of Applied Knowledge !
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Dr Slurm
General Commodities
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Posted - 2007.09.24 10:29:00 -
[2]
Sounds great. I look forward to seeing how this turns out.
<sig>
Tired of the inane ramblings of the incompetent? Click here
</sig> |
Shadarle
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Posted - 2007.09.24 17:33:00 -
[3]
Wow... I have absolutely no clue what that screen shot is even showing, heh.
Perhaps some explanation of what exactly this is all about for those of us who are not financial guru's? I know many financial experts on this forum will understand this and probably will be very excited... but I have to think a lot of people here are going to read this thread and go:
"What?"
Tanking Setups Compared
Stacking Penalty / Resists Explained |
Hexxx
Minmatar
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Posted - 2007.09.24 18:22:00 -
[4]
 Originally by: Shadarle
Wow... I have absolutely no clue what that screen shot is even showing, heh.
Perhaps some explanation of what exactly this is all about for those of us who are not financial guru's? I know many financial experts on this forum will understand this and probably will be very excited... but I have to think a lot of people here are going to read this thread and go:
"What?"
This idea has been floated a few times (I even tried to do it once myself, the technical hurdles were too much for me) but this is basically a Futures Exchange. Futures Contracts are used to hedge your risks essentially. This service would benefit mineral traders the most.
See wikipedia for additional info. =)
Consulting, IPO Template, and Stock/Bond definitions.
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Shar Tegral
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Posted - 2007.09.24 20:22:00 -
[5]
Um, errr, ... wow!?!
As Shadarle said, this is over my head. I understand it, some, but this is getting into the deep end of high finance. I'm just going to be totally stunned if this proves to be very functional. Not to mention I'm more than just mildly excited about a functional options market. (Did I say wow yet?)
Might I also suggest some talented individual write a plain language faq for those of us a bit challenged on this?
It's A GIRL!!!!! |
Jon Asus
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Posted - 2007.09.24 20:52:00 -
[6]
Edited by: Jon Asus on 24/09/2007 20:55:14
Wowzers, I want in.
Edit: Nevermind, question was ansered by screenshot.
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Professor Bunsen
Optech Scientific
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Posted - 2007.09.24 22:35:00 -
[7]
Edited by: Professor Bunsen on 24/09/2007 22:46:22
OK, so here's a traded options 101 as it applies to mineral options in Eve. Just for a moment forget the "real eve" limits on trit price, trit is just the first mineral I'm rolling out so lets use that as an example.
As I write the Jita Trit Index is 3.007-3.294 In other words you can buy a decent chunk of trit (2 bil units) at Jita 4-4 for an average price of 3.294 or sell it for 3.007
An option is a contract giving the buyer the right ( but not the obligation ) to buy or sell a mineral at a set price at some time in the future. A call option gives you the right to buy the underlying mineral, a put option gives you the right to sell.
e.g. "Trit Dec 3.3 Calls are priced at .270 isk"
In fact one option contract relates to 1 million units of the mineral so what is being offered is the right to buy 1 million units of trit at price of 3.3 isk (which is called the strike price) at any time before 1 Dec (the expiry date). The cost of buying this option is 0.27 isk (x 1 mil units) = a total cost of 270,0000 isk.
So as things stand, you can buy trit on the open market for 3.29 isk per unit, why pay for the privilege to buy at 3.3 isk?
The answer is that no matter how far trit rises, by buying the call option you always have the right to buy at 3.3. isk. If trit is selling for 3.5 isk, you still have the right to buy at 3.3 . If CCP scrap NPC shuttle production and trit rises to 4 isk, you can still buy at 3.3 isk any time before Dec.
The pricing of an options contract is composed of 2 elements. Firstly the intrinsic value, if trit is trading at 3.4 and you hold the the 3.3 call option theres a hard value of 0.1 isk. Secondly, theres the time value, the longer the option has before expiry the more valuable it is. Basically theres more time for the market to move in your direction so a greater speculative value. As the option gets closer to its expiry date the time value approaches zero so a Dec 3.3 call with 2 1/2 months to run might might cost .27 isk whereas one expiring in 1 1/2 months would be .21 isk
Lets compare 2 scenarios. You think trit is on the rise, so you buy 1 mil trit at 3.3 off the open market, total cost = 3.3 mil.
2 weeks later you were right, trit is now selling for 3.6 so you sell
Profit is 3.6-3.3 = 0.3 mil i.e. 9.1%
Instead you buy 1mil trit call options (1mil = 1 contract) at a 3.3 strike price for a cost of (0.27x1mil) = 0.27 mil Trit rises as before and 2 weeks later is at 3.6 isk, the call option is now worth 0.44 isk, you sell your contract for 0.44x1mil = 0.44 mil
Profit is 0.44-0.27 = 0.17 mil i.e. 62.9%
Looked at another way say you invest 1 mil isk into your rising trit prediction. Buying the mineral itself your profit is 90k. If you are right and instead buy call options your profit is 620k.
An alternative outlook is that you predict wrongly and trit falls to 3.0 isk. Buying the mineral at 3.3 and selling at 3 loses you 0.3 mil isk i.e. 9.1%
The call option you bought for .27 is now worth 0.12 isk and you sell it back to limit any further losses.
Loss is 0.27-0.12 = 0.15 mil i.e. 55% loss
You can see from the above how options can be used to generate greater profits (or losses) than trading in the underlying mineral, in other words they can be used speculatively to magnify the result of market movements.
(cont)
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Professor Bunsen
Optech Scientific
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Posted - 2007.09.24 22:45:00 -
[8]
The other way to use mineral options is to reduce risk, often called hedging as in hedging your bets.
Say you ride the rising trit prices with your 1 mil trit stockpile all the way to trit at 3.5 isk per unit and you feel sure it can't get much higher. You don't want to sell the trit because you may need it for manufacturing later and it took you many trips in your Ibis to assemble it in one place, but you want to insure yourself against a short term dip in the price of trit. You buy 1 Trit Dec 3.3 Put contract. This gives you the right to sell 1 mil of trit for 3.3 isk/unit any time before Dec. The contract costs you 0.3 isk (x1mil) = 0.3 mil total cost.
You were right and trit falls to 3 over the coming month. You lost 0.5 mil isk on the trit you still hold, but your put contract is now worth .55 mil, so not only did you hold your trit but you actually made a small profit.
The above is by no means a comprehensive view of possible ways to use traded mineral options. As well as buying calls or puts you can be on the other side of the contract and "write" options. E.g. the person buying the put option buys the right to sell at 3.3 isk, the person "writing" the put option commits to buy at 3.3 if the option holder requires them to.
By altering the combination of calls or puts you buy you can pretty much increase or reduce your exposure to risk in either a rising or falling market. You can even set up so you profit if the market moves up or down (but you lose if it stays still) or vice versa. Try googling traded option strategies for some mindblowing ideas.
At its simplest though its a good way to get potentially big profits off a small stake in the market, or alternatively can be used to reduce the risks of the market moving against you when sitting on several million/billion units of a mineral.
The nub of it as always is to be able to correctly predict the market in the first place, but thats always a tricky one ! Hope that wets your appetite Shar
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KarateKid
D00M.
Triumvirate.
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Posted - 2007.09.25 00:56:00 -
[9]
I am truely impressed.
Really looking forward to this goes live.
Will take mineral speculatino to a whole new level.
________________________________________________________
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Shar Tegral
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Posted - 2007.09.25 03:25:00 -
[10]
Originally by: Professor Bunsen
Hope that wets your appetite Shar
Yes it does. I'd like to point out that I am, myself, quite comfortable with the basics. It's the mathematics of Black- Scholes that drives me bonkers. And I don't want a primer on that thank you very much. My ignorance protects me from straining my brain. Please don't tarnish its, my ignorance, purity.
It's A GIRL!!!!! |
Jon Asus
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Posted - 2007.09.25 10:20:00 -
[11]
Feeling inquistive I typed Black-Scholes into wikipedia, I now wish I hadn't ¼_¼.
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Auri Hella
The Graduates
Brutally Clever Empire
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Posted - 2007.09.25 11:43:00 -
[12]
I think I'll have to borrow a few of my brother's books on economics now 
But I think I'll give it a shot anyway. It looks promising, let's hope people will use it.
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Ionia
Advanced Manufacturing
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Posted - 2007.09.25 12:54:00 -
[13]
The defining feature of options trading is that you can bet on the movement of a market by making or securing commitments of sales of commodoties without actually owning them.
Please correct me if I misunderstand, but aren't you suggesting that people need to own the items before making the commitment to sell, or need to have the isk before making the commitment to buy?
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Professor Bunsen
Optech Scientific
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Posted - 2007.09.25 13:44:00 -
[14]
Originally by: Ionia
The defining feature of options trading is that you can bet on the movement of a market by making or securing commitments of sales of commodoties without actually owning them.
Well its one possibility. Traders on Eve-Index can do just that by buying and selling call and put options. No need to exercise the option if they don't wish to and losses are limited to the price paid for the option in this case.
Originally by: Ionia
Please correct me if I misunderstand, but aren't you suggesting that people need to own the items before making the commitment to sell, or need to have the isk before making the commitment to buy?
Yes I am, for writers of option contracts in a Eve context. In RL when you enter a contract promising to pay $xxx for a stock at some time in the future there are sanctions which follow if you default. As we all know in Eve that doesnt apply, so I'm insisting that option writers either deposit the minerals theyre promising to sell, or the isk they are promising to pay with Eve Index to ensure the contract holders don't get ripped.
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Ionia
Advanced Manufacturing
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Posted - 2007.09.25 13:54:00 -
[15]
Originally by: Professor Bunsen
Yes I am, for writers of option contracts in a Eve context. In RL when you enter a contract promising to pay $xxx for a stock at some time in the future there are sanctions which follow if you default. As we all know in Eve that doesnt apply, so I'm insisting that option writers either deposit the minerals theyre promising to sell, or the isk they are promising to pay with Eve Index to ensure the contract holders don't get ripped.
Ok, understood. This kind of nullifies a huge portion of the options market though. Many people make money by selling things that they don't yet have.
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Block Ukx
KDM Corp
Firmus Ixion
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Posted - 2007.09.25 14:43:00 -
[16]
Hi Prof. Bunsen,
IĘm not familiar with options so my questions may sound odd to you, but IĘm giving it a try. My main interest is writing calls and puts. I explored your website and these are a few of the questions that I have.
1) Are there any fees associated with writing calls/puts?
2) Once I write a call/put do I have to set up a sell order? Could this be done automatically for a predetermine premium?
3) Where is the money from sales deposited? Are there any fees associated for cashing premiums?
4) Is there a delivery/pick up location for exercised options?
5) What are your current plans on options expiry intervals? Weekly, monthly, bi-monthly?
I understand your reasons behind asking for writerĘs collateral. However, for many reasons, I have no intentions in depositing ISK or minerals to secure my options. Main reason is that it will hinder my operations; no one is going to tie 1 B ISK for a December option.
I think you need a better explanation on how options work if you want the less financial incline to use your site. At first, I was completely lost and I had a hard time figuring out some of the columns. Your explanation of option trading is good, but it took me a while to understand the difference between writing options and trading options.
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FastLearner
Fury Holdings
Brutally Clever Empire
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Posted - 2007.09.25 14:47:00 -
[17]
Originally by: Professor Bunsen
Originally by: Ionia
The defining feature of options trading is that you can bet on the movement of a market by making or securing commitments of sales of commodoties without actually owning them.
Well its one possibility. Traders on Eve-Index can do just that by buying and selling call and put options. No need to exercise the option if they don't wish to and losses are limited to the price paid for the option in this case.
Originally by: Ionia
Please correct me if I misunderstand, but aren't you suggesting that people need to own the items before making the commitment to sell, or need to have the isk before making the commitment to buy?
Yes I am, for writers of option contracts in a Eve context. In RL when you enter a contract promising to pay $xxx for a stock at some time in the future there are sanctions which follow if you default. As we all know in Eve that doesnt apply, so I'm insisting that option writers either deposit the minerals theyre promising to sell, or the isk they are promising to pay with Eve Index to ensure the contract holders don't get ripped.
There could be a way to reduce the collateral needed. If some boundaries can be defined for min/max price-ranges of a mineral then in theory option writers need only provide collateral equal to the maximum loss they could take by fulfilling the options they write.
e.g. Say we agreed that the maximum feasible price for Trit is 3.65 (which is probably about right). If I wrote an option for someone to buy Trit at 3.3 then my maximum exposure is .35 per unit. So if I provided ISk collateral of .35 per unit I wrote at 3.3 then, if I defaulted, the option holder would get given that collateral - and I'd never have to buy Trit in advance. Worst case for the person buying the option is that they get given .35 per unit of trit they have an option on - and can buy from market or refine shuttles to effectively get trit at the price they're entitled to. Of course, if I defaulted, then I'd never be allowed to write another option.
Anything which reduces the collateral neeed - without making written options rely on trust - has to be a good thing. I may be interested in writing options - it'll depend very much on what the collateral situation is: any minerals/ISK tied up in collateral have an associated opportunity cost.
You could, possibly, consider depositing any collateral in Fury Bank - earning 1.4% interest per week which could be (partially) returned to option writers to defray the opportunity cost of collateral. That's another reason why I'd prefer collateral to be in ISK - you can gain passive income on ISK, whilst money tied up in minerals is totally dead as far as generating income is concerned.
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Professor Bunsen
Optech Scientific
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Posted - 2007.09.25 15:15:00 -
[18]
Originally by: Block Ukx
1) Are there any fees associated with writing calls/puts?
2) Once I write a call/put do I have to set up a sell order? Could this be done automatically for a predetermine premium?
3) Where is the money from sales deposited? Are there any fees associated for cashing premiums?
4) Is there a delivery/pick up location for exercised options?
5) What are your current plans on options expiry intervals? Weekly, monthly, bi-monthly?
I'll answer as best I can.
1) No.
2) Yes, when you have "written" i.e created the option you will see it in the central "holdings" column with an [S] next to it. Click the S to set up a sell order. Not really ideal to automate it as you need to select your sell price, and anyway its a quick step.
3) The Eve-Index website holds your virtual balance, reflecting your account deposits (actually isk are sat in corp wallet). Money from sales is credited to the web site balance. You can withdraw up to that balance at any time and I will transfer the cash back from Utility Bot usually every day or two. Transfers out I am proposing a 1% fee to offset the grind of doing it.
4)Jita 4-4
5)I am thinking quarterly option expiry cycles.
Originally by: Block Ukx
I understand your reasons behind asking for writerĘs collateral. However, for many reasons, I have no intentions in depositing ISK or minerals to secure my options.
Well I think that's the only way the option buyer is going to be sure that the contract is certain to be honoured. I'm certainly not going down the route of having non-anonymous contracts and having the buyers have to take a view on creditworthyness, it just wouldnt work on a market system. There is of course nothing to stop you personally outlining an option contract apart from Eve-Index on whatever terms you wish, but I think as far as Eve-Index goes I want to stick with the buyer knowing that for puts the moneys in the bank, or for calls the mineral is at Jita in the vault.
Thanks for your queries Block, I figured you might have some minerals to hand 
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Ray McCormack
hirr
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Posted - 2007.09.25 15:26:00 -
[19]
Originally by: FastLearner
There could be a way to reduce the collateral needed. If some boundaries can be defined for min/max price-ranges of a mineral then in theory option writers need only provide collateral equal to the maximum loss they could take by fulfilling the options they write.
This is a good idea. You could even use the lowest and highest all-time figures as boundaries if no suitable boundary can be found for the other minerals. If you can limit the collateral, and allow it to be ISK which then generates interest (possibly covering any shortfall the boundaries didn't) you may be on to a winner.
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Mensageiro Cai
Connect Productions
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Posted - 2007.09.25 15:41:00 -
[20]
I'm really liking this idea. If I had spare ISK floating around i'd chuck it at this. |
Block Ukx
KDM Corp
Firmus Ixion
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Posted - 2007.09.25 15:50:00 -
[21]
I wish we could work something out because I think your options idea would be very beneficial to BSAC. Yes, BSAC Mineral Reserve holds a lot of minerals in locations far away from Jita. Minerals are constantly used in the production lines, and it would be completely unreasonable for me to move minerals to Jita, and hold them there for a few months away from my production lines. I intent to write calls/puts that I can guarantee 100%, otherwise I wouldnĘt write them in the first place. Betting is not part of my strategy; IĘll leave that to the options traders. I do not wish to trade options.
We could agree to limit the size of my options and I can provide you with references that will be willing to cover for me in the event that IĘm not available. The consequences of BSAC defaulting on a contract will be devastating to BSACĘs business. Again I will only write options that I can guarantee 100%.
From a business stand point, we loose money when minerals sit idle in a hangar.
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FastLearner
Fury Holdings
Brutally Clever Empire
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Posted - 2007.09.25 15:52:00 -
[22]
Originally by: Ray McCormack
Originally by: FastLearner
There could be a way to reduce the collateral needed. If some boundaries can be defined for min/max price-ranges of a mineral then in theory option writers need only provide collateral equal to the maximum loss they could take by fulfilling the options they write.
This is a good idea. You could even use the lowest and highest all-time figures as boundaries if no suitable boundary can be found for the other minerals. If you can limit the collateral, and allow it to be ISK which then generates interest (possibly covering any shortfall the boundaries didn't) you may be on to a winner.
I was looking at it from the perspective of a potential option writer - and collateral is the big stumbling block. The minimum return I'll accept on an investment is about 2% per week - as I offer 1.4% interest on Fury Bank deposits and keep 20% of deposits as cash I have to make 1.75% per week on active ISK just to cover the interest I pay.
If I wrote an option with a life-span of 3 months and had to deposit 100% collateral then I'd have to make around 27% profit on the amount deposited as collateral just to achieve a 2% per week compounded return. No way I can see anyone paying 30% of the cost of minerals offered on an option as the purchase fee (e.g. if I wrote an option to buy Trit at 2.3 then I'd have to sell that option at a cost of .62 per unit - meaning, if exercised, the trit would actuallyu be costing 2.92 per unit). Cut the collateral down and that break-even price becomes much lower. Invest the ISK to generate at least minimal returns and suddenly the numbers start to become worthwhile.
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Shar Tegral
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Posted - 2007.09.25 16:45:00 -
[23]
Originally by: Professor Bunsen
4)Jita 4-4
I'm going to have to ask, can this be changed?
I don't care which alternate station in Jita just not this blackhole of ships and isk. Breaking Jita must start somewhere and this should be the first place imho.
It's A GIRL!!!!! |
FastLearner
Fury Holdings
Brutally Clever Empire
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Posted - 2007.09.25 19:11:00 -
[24]
On thinking about it more, I believe the collateral HAS to move to an ISK basis - or the entire purpose of writing options sort of gos out of the window.
Example:
Trit is currently at 3.2. I believe the price of Trit is going to crash and stay below 3.2 for the next 3-4 months. So I decide to write call options on Trit at 3.3 (i.e. offering people the right to buy Trit from me at 3.3 for the next X months). I do this because they have to pay for those options - and I'm confident the market price will never be such that they'll exercise their options.
The problem with the current proposal is that for every call option I sold, I'd have to actually go and buy Trit to cover the possibility that the option would be exercised. That's precisely the thing I don't want to do - as if I'm right I'll end up with a pile of Trit which I bought at 3.2 and which is worth less than that when the options expire. Not only is my ISK sitting around not earning income - but it's invested in something which I'm confident will drop in value.
The same thing (the other way round) applies if I believe the price of Trit is going to rise - and hence would want to write Put options at, say, 3.1. Again, I don't anticipate that the options I write will ever be exercised (you don't write options you expect to be exercised unless you're covering a position). So I don't want to have ISK sitting idle in escrow - as if I'm right I'd prefer to have that ISK invested in actual Tritanium.
Reducing the collateral so that it only covers the likely maximum loss largely addresses this issue. Ensuring some income on collateral further addresses the issue.
Note that the problem I'm discussing has NO impact on people buying options - just on those writing them. But without anyone writing options, there's no futures market.
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Professor Bunsen
Optech Scientific
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Posted - 2007.09.25 23:33:00 -
[25]
Do you know Fastlearner, you're right  Thanks for that persuasive flurry of posts. It would certainly be possible to move to a situation whereby the market prices of the minerals simply set the value of the option and no minerals change hands at all. So a day before expiry, when there is next to no time value in the option price with trit at 3.5 if you held the 3.1 call and exercised it you would receive the 0.4 isk = 400k per contract.
The issue of collateral for option writers is a slightly more thorny one. Both the suggestion of limiting the supported range of the mineral and of allowing collateral to remain on deposit are good ones. I'm going to give this some thought and chat to some people to try and come up with a credible proposal. Its more important to get it right than be a few days early to launch.
If you think you have a solution, fire away.
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Rethmynon
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Posted - 2007.09.26 01:08:00 -
[26]
Edited by: Rethmynon on 26/09/2007 01:12:35
Edited by: Rethmynon on 26/09/2007 01:09:49
If you think you have a solution, fire away.
First of all immense respect at having a go at creating a futures/options exchange, though I can see hurdles where options trading tritanium is concerned.
1. In options trading the biggest risk taker is the writer. This is because there can be potential unlimited losses to them and that is why there has to be collateral. Using tritanium as that collateral is a no go for reasons stated above. Best to keep to ISK and use tritanium as purely the base product and not an actual transaction of tritanium at the end of it's term.
2. The writer is gambling that the buyer of the call or put is wrong. That means for every written option there is a winner and loser, unless of course the close out price is neutral to both parties. Would there really be enough people trading in EVE for and against a future price rise or fall in Trit? I don't know the answer as I don't trade in minerals.
3. Have you thought about doing it more on the lines of a spread bet index? At least the investors are just gambling on the tritanium price movement and not the tritanium itself.
i.e say the Trit 31 Dec spread has been calculated at 3.20 - 3.40, and I believe the offer price (3.40) is too cheap. I will then buy ISK 1 million per point. A point is every 0.01 movement from 3.40.
Therefore, if it moves to 3.50 and I wish to close my position on or before 31 Dec, I make ISK 10 million . Of course, if it never goes over 3.40 during the assigned period, and in fact drops to 3.20 and I close my position, then I lose ISK 20 million. There will be a question about securing a margin for potential loss, which may open another can of worms, but thought I would throw that "option" in as you were looking for ideas :)
All the best in your venture.
Edit - just re-reading above posts and the spread bet idea has already been suggested in a round about way. Typing this at 2am is not good for my tired brain cells 
Reth
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Benvie
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Posted - 2007.09.26 01:15:00 -
[27]
It seems like one of the big problems here is collateral. It all comes down to that. In the real world you don't need collateral, or at least not total collateral, because if you default there are laws and enforcement of said laws in order for the people you owe money to get their money. In game there is no such thing. To solve this we need to solve that problem.
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FastLearner
Fury Holdings
Brutally Clever Empire
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Posted - 2007.09.26 11:39:00 -
[28]
Originally by: Professor Bunsen
So a day before expiry, when there is next to no time value in the option price with trit at 3.5 if you held the 3.1 call and exercised it you would receive the 0.4 isk = 400k per contract. In fact, given you will either be up or down on paper and nothing is physically changing hands you would just program the cashing exercise automatically.
I disagree with making the settling of options by ISK automatic. Take the above example - where I hold a 3.1 call and it's the end of the option period. Are you really proposing that if the trit price is currently 3.0, all I have to do is buy up all trit below 3.5 in Jita and I'd receive 0.4 isk = 400k per contract? Price manipulation to alter the value of options is fine - but if someone exercises an option the default settlement should be to receive what the option was for. The ISK settlement I discussed was a fall-back position if a writer defaulted, not a proposal for the normal settlement of exercised options.
Manipulating the Jita trit price in the short-term is entirely possible - especially if you only have to "fix" the price for a period of an hour or two. And if settlement was automatic then you'd, in theory, only need to fix the price for a few minutes: as presumably the price would be sampled at the time at which you chose to exercise an option.
Despite me advocating no depositing of Trit, settlement still (by default) needs to be made in it. And, unfortunately, not having trit deposited in advance means that some means of verifying the fulfilment of contractual obligations needs to be implemented.
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FastLearner
Fury Holdings
Brutally Clever Empire
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Posted - 2007.09.26 11:55:00 -
[29]
Edited by: FastLearner on 26/09/2007 11:55:45
Originally by: Rethmynon
First of all immense respect at having a go at creating a futures/options exchange, though I can see hurdles where options trading tritanium is concerned.
1. In options trading the biggest risk taker is the writer. This is because there can be potential unlimited losses to them and that is why there has to be collateral. Using tritanium as that collateral is a no go for reasons stated above. Best to keep to ISK and use tritanium as purely the base product and not an actual transaction of tritanium at the end of it's term.
2. The writer is gambling that the buyer of the call or put is wrong. That means for every written option there is a winner and loser, unless of course the close out price is neutral to both parties. Would there really be enough people trading in EVE for and against a future price rise or fall in Trit? I don't know the answer as I don't trade in minerals.
3. Have you thought about doing it more on the lines of a spread bet index? At least the investors are just gambling on the tritanium price movement and not the tritanium itself.
i.e say the Trit 31 Dec spread has been calculated at 3.20 - 3.40, and I believe the offer price (3.40) is too cheap. I will then buy ISK 1 million per point. A point is every 0.01 movement from 3.40.
Therefore, if it moves to 3.50 and I wish to close my position on or before 31 Dec, I make ISK 10 million . Of course, if it never goes over 3.40 during the assigned period, and in fact drops to 3.20 and I close my position, then I lose ISK 20 million. There will be a question about securing a margin for potential loss, which may open another can of worms, but thought I would throw that "option" in as you were looking for ideas :)
All the best in your venture.
Edit - just re-reading above posts and the spread bet idea has already been suggested in a round about way. Typing this at 2am is not good for my tired brain cells
Reth
Spread-betting on Eve mineral prices essentially wouldn't work. The volume traded is sufficiently low that it doesn't require a whole ton of ISK to manipulate the price at a specific time. It would just degenerate into who can buy (or place sell orders) the most effectively in the minutes/seconds preceding the instant at which the closing spread is calculated. That's why settlement has to be, by default, in the actual underlieing commodity.
Let's say I hold the trit 3.2 call option and, with the expiry of the option approaching, trit is available in Jita at 3.1. The option I hold is basically worthless - I got it wrong.
If, however, settlement was by default in ISK, then I could buy up all trit below (say) 3.4 - and suddenly my option is worth 0.2 ISK per unit. That's grossly unfair on the option writer - who knows that trit is actually trading at 3.1 - but is denied the right to settle in trit. Now obviously if I can force the trit price to stay at 3.4 and the option writer has no Trit to hand then he may well have to buy it from me at 3.4 to provide back to me at 3.2 - but he has the option of sourcing it elsewhere (and if the "normal" price at Jita was 3.1 before my manipulation then he can likely get it at 2.9 a few jumps away).
In short: standard settlement MUST be in the underlieing commodity unless otherwise agreed by both parties. The ISK collateral is just a protection against default - and anyone who defaults should be banned from ever option trading again AND named/shamed as a defaulter (agreement to which should be part of writing/buying an option).
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Shar Tegral
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Posted - 2007.09.26 12:02:00 -
[30]
Originally by: FastLearner
some means of verifying the fulfilment of contractual obligations needs to be implemented.
Originally by: FastLearner
In short: standard settlement MUST be in the underlieing commodity unless otherwise agreed by both parties. The ISK collateral is just a protection against default - and anyone who defaults should be banned from ever option trading again AND named/shamed as a defaulter (agreement to which should be part of writing/buying an option).
As this idea keeps getting debated I forsee that it is confirmation of completion, one way or the other, that is the major hurdle here. And barring administrative oversight/overload or complete honor system there doesn't seem to be a solution coming to my mind. I need coffee, too early.
It's A GIRL!!!!! |
FastLearner
Fury Holdings
Brutally Clever Empire
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Posted - 2007.09.26 13:29:00 -
[31]
Originally by: Shar Tegral
Originally by: FastLearner
some means of verifying the fulfilment of contractual obligations needs to be implemented.
Originally by: FastLearner
In short: standard settlement MUST be in the underlieing commodity unless otherwise agreed by both parties. The ISK collateral is just a protection against default - and anyone who defaults should be banned from ever option trading again AND named/shamed as a defaulter (agreement to which should be part of writing/buying an option).
As this idea keeps getting debated I forsee that it is confirmation of completion, one way or the other, that is the major hurdle here. And barring administrative oversight/overload or complete honor system there doesn't seem to be a solution coming to my mind. I need coffee, too early.
I don't think it's quote as big a problem as it may at first seem. As always, an example is best way to address it:
Person A holds an option to buy Trit. The option was written by person B.
In the currently proposed system, things would work smething like this:
When person B wrote the option, they deposited as collateral with Eve-Index the amount of trit they'd written options on.
Person A indicates that they want to exercise their option.
Person A creates an item-exchange contract to Eve-Index to purchase the quantity of trit they have options on at the price their option was written at.
Eve-Index complete the contract.
With full administrative oversight, the system would work something like this:
When person B wrote the option, they desposited ISK collateral with Eve-Index to cover the defined range of trit prices.
Person A indicates that they want to exercise their option.
Person A creates an item-exchange contract to Eve-Index to purchase the quantity of trit they have options on at the price their option was written at.
Eve-Index inform person B that the option they wrote is now being exercised.
Person B creates an item exchange contract to Eve-Index, giving the amount of trit required in return for their collateral back.
Eve-Index complete the contract from person B
Eve-Index complete the contract from person A
The amount of extra work required from Eve-Index is relatively small.
There are two key differences in the process:
1. Collateral is now such as to make writing options more feasible.
2. When an option is exercised it'll now take substantially longer to get your trit.
The time delay is the issue which really needs to be addressed if this sort of system is implemented. It needs to be addressed from two perspectives:
1. Delivery of trit covered by an exercised option needs to be predictable to the option holder - otherwise the system becomes worthless for use by anyone who actually wants to buy/sell tritanium for use.
2. Option writers need a reasonable warning of when an option is exercised, so they aren't defaulted just because they happen to be away for a few days.
My feeling is that both of these issues are best addressed by having predefined settlement periods/days. For example, the system may be:
Options exercised on Thursday-Saturday are due for settlement on Monday, Options exercised on Sunday-Wednesday are due for settlement on Friday.
In that example, anyone writing options would know that so long as they check for exercised options on Sunday and Thursday, they'd never miss a settlement request against them. And people exercising options would know when they could expect to get their ISK/minerals. Notification of exercised options would presumably be automatic via the website - and hence not reliant on anyone from eve-index being online. Eve-Index' involvement would just be to check and complete 2 contracts per exercised option.
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Block Ukx
KDM Corp
Firmus Ixion
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Posted - 2007.09.26 15:19:00 -
[32]
You are overlooking the simple fact that the current set-up offers no incentive to option writers to use this system. Using the market is more efficient, secure, and faster.
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FastLearner
Fury Holdings
Brutally Clever Empire
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Posted - 2007.09.26 15:33:00 -
[33]
Originally by: Block Ukx
You are overlooking the simple fact that the current set-up offers no incentive to option writers to use this system. Using the market is more efficient, secure, and faster.
I'm guessing this was addressed to me - if so, you're wrong. The whole thrust of my posts has been that the system proposed in the OP offers no incentive to option writers - and proposing ways to amend it so that it does.
Even IF the market were more efficient, secure and faster it can only only compete with the options market when it comes to call options. There's no current market mechanism I can think of which allows you to profit from the equivalent of put options. If you think the price of a mineral is going to rise you can buy it up - but if you think it's going to fall how do you make a profit from that? And how does a mineral producer cover themselves vs such a fall in price?
The extent to which Bunsen's option trading competes with the market on call options depends on a couple of main factors:
1. The collateral required - this plays a major part in determining whether writing call options is competetive with just buying minerals up and holding on to them.
2. The price of options - this determines whether buying options is competetive with buying minerals up as a reserve. This also plays a part in determining whether writing call options is worthwhile.
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Block Ukx
KDM Corp
Firmus Ixion
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Posted - 2007.09.26 16:00:00 -
[34]
Sorry, Let me re-phrase it. The current proposals offer no incentives to BSACĘs Mineral Reserve to participate in writing options; something IĘm very interesting in doing.
Currently, we have a set of internal rules to protect against price fluctuations. I view them as internal call/put options. I was hoping to extend it to the public by using BunsenĘs platform.
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Professor Bunsen
Optech Scientific
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Posted - 2007.09.26 18:51:00 -
[35]
Edited by: Professor Bunsen on 26/09/2007 18:54:25
OK considering collateral, let me float this proposal past the assembled brainpower of the forum.
Assume that 6 long-in-the-tooth Eve players of some repute have been approved to write options at Eve-Index. Call them the Mineral Option Writers(MOWs).
SampleMineral is at 4 isk on the market. Considering the historical trading range the MOW's agree that they will cover a trading range of 2-6 isk for SampleMineral.
One of the MOWs, OptionWriter creates (writes) a SampleMineral Call at a strikeprice of 4. The maximum that he can lose is 6-4=2 isk. Each contract is for a million units so to create the option Eve-Index requires that he deposit 2 mil isk as collateral in order to write the options and holds that.
OptionWriter goes on to offer the options for sale (at 0.34) and they are bought by OptionBuyer so he is paid 340k isk.
Bad luck for OptionWriter, SampleMineral rises in price to 5 isk and is now worth 0.42
OptionBuyer could put up a sell order to sell the option for isk, but instead he decides he wants the trit, so clicks on the "Exercise Option" button on the web site.
Eve-Index notifies OptionWriter that his option has been exercised by email and on the web site. OptionWriter has 1 week to deliver the required amount of SampleMineral to OptionBuyer at Jita by setting up a 1 week contract at the exercise price.
OptionWriter clicks on the "Contract Set" button on the Eve-Index website. 1 week later the 2 mil collateral is released automatically, unless OptionBuyer has notified of a dispute.
Dispute resolution - lets park this for now, but contracts are recorded in-game so screen shots can be compared.
Comments?
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FastLearner
Fury Holdings
Brutally Clever Empire
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Posted - 2007.09.26 19:52:00 -
[36]
Originally by: Professor Bunsen
Edited by: Professor Bunsen on 26/09/2007 18:54:25
OK considering collateral, let me float this proposal past the assembled brainpower of the forum.
Assume that 6 long-in-the-tooth Eve players of some repute have been approved to write options at Eve-Index. Call them the Mineral Option Writers(MOWs).
SampleMineral is at 4 isk on the market. Considering the historical trading range the MOW's agree that they will cover a trading range of 2-6 isk for SampleMineral.
One of the MOWs, OptionWriter creates (writes) a SampleMineral Call at a strikeprice of 4. The maximum that he can lose is 6-4=2 isk. Each contract is for a million units so to create the option Eve-Index requires that he deposit 2 mil isk as collateral in order to write the options and holds that.
OptionWriter goes on to offer the options for sale (at 0.34) and they are bought by OptionBuyer so he is paid 340k isk.
Bad luck for OptionWriter, SampleMineral rises in price to 5 isk and is now worth 0.42
OptionBuyer could put up a sell order to sell the option for isk, but instead he decides he wants the trit, so clicks on the "Exercise Option" button on the web site.
Eve-Index notifies OptionWriter that his option has been exercised by email and on the web site. OptionWriter has 1 week to deliver the required amount of SampleMineral to OptionBuyer at Jita by setting up a 1 week contract at the exercise price.
OptionWriter clicks on the "Contract Set" button on the Eve-Index website. 1 week later the 2 mil collateral is released automatically, unless OptionBuyer has notified of a dispute.
Dispute resolution - lets park this for now, but contracts are recorded in-game so screen shots can be compared.
Comments?
Couple of initial comments:
1. It's not explicit in your proposal, but I presume that the definition of range of prices is intended purely for the purposes of determining collateral - and is not intended as some means of capping exposure. Hence the need for option writers to have some decent level of reputation - as potentially they can become liable for more ISK than they have invested in collateral. If this assumption is correct then collateral could be kept reasonably low - as there'd be an additional cost to deafulting of losing an established reputation.
2. My proposal (a few posts earlier) proposed central administration of settlement. Having read your proposal I agree that direct contracting (removing the middleman) makes more sense. There'd be no need to compare screen-shots - it's possible to view other people's contracts directly ingame, so verification would be easy if ever required. The (possible) downside of this is that anaonymity of participants is removed - but as that only happens on settlement I don't see it as a big deal.
3. If the settlement period is 1 week, then auto-repayment of collateral needs to be at least a few days after that. If OptionBuyer is away for a couple of days near the end of settlement period then they could miss their chance to flag that a default has happened. You indicate that OptionWriter has a "contract set" box to tick - far more important is that OptionBuyer has a "contract accepted" box. If OptionBuyer ticks that box, then collateral can be returned to OptionWriter. If, at the end of the week, OptionBuyer hasn't ticked that box then contracts for either/both of them should be checked ingame and appropriate action taken.
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FastLearner
Fury Holdings
Brutally Clever Empire
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Posted - 2007.09.26 20:05:00 -
[37]
There's only one potential area of dispute left - that OptionWriter claims he set up a contract while OptionBuyer claims either that the contract wasn't made or that it was made but not in accordance with the terms of the option. Resolution of that is pretty simple: OptionWriter gives the minerals/ISK to Eve-Index who then contract it to OptionBuyer in return for his minerals/ISK which is then passed back to OptionWriter. As they both agree on two things (that they have the wherewithawal to cover their side of the transaction and that no transaction has occurred) neither can have any legitimate reason not to carry this out swiftly.
Working out who's at fault in such a scenario is next to impossible - as there's no way to view contracts belonging to other people unless they're in a Finished state. Screen-shots are possible in theory - however they're possible to fake.
Having a relatively small number of option writers who write a substantial number of options each further decreases the need for excessive collateral: if they defualt, not only do they lose the collateral on the option they default on, but Eve-Index still holds collateral on all unexercised options written by them.
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Jon Asus
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Posted - 2007.09.26 22:45:00 -
[38]
I disapprove of FastLearner's proposal, these brokers would earn a cut from my work, why should they?
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Shar Tegral
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Posted - 2007.09.26 22:59:00 -
[39]
Originally by: Jon Asus
I disapprove of FastLearner's proposal, these brokers would earn a cut from my work, why should they?
The obvious response, do all the work yourself and eliminate middlemen. Otherwise, pay them for their efforts like you would want to be paid for yours. That's why they call it trade.
It's A GIRL!!!!! |
Jon Asus
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Posted - 2007.09.26 23:09:00 -
[40]
I would do the middlework but what FastLearner is proposing would not allow me to do it, why use these brokers when they aren't needed?
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Hexxx
Minmatar
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Posted - 2007.09.26 23:53:00 -
[41]
Originally by: Jon Asus
Edited by: Jon Asus on 26/09/2007 23:44:13
I would do the middlework but what FastLearner is proposing would not allow me to do it, why use these brokers when they aren't needed?
Edit: Sorry if I seem blunt but this is just another example of something I have been realsiing recently, that this section of the forums might as well be private. That a select few control practically everything and deny access to those that aren't in their club.
Incorrect.
Just be smart, tough, and ignore your critics. That's how us "old guard" got to be where we are today.
Send me 1 trillion isk in the next 5 minutes and I'll send you my 10 Step Self-Help Guide to becoming a high roller in the wacky zany Market forum!!!
Consulting, IPO Template, and Stock/Bond definitions.
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FastLearner
Fury Holdings
Brutally Clever Empire
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Posted - 2007.09.27 00:16:00 -
[42]
Originally by: Jon Asus
Edited by: Jon Asus on 26/09/2007 23:44:13
I would do the middlework but what FastLearner is proposing would not allow me to do it, why use these brokers when they aren't needed?
Edit: Sorry if I seem blunt but this is just another example of something I have been realsiing recently, that this section of the forums might as well be private. That a select few control practically everything and deny access to those that aren't in their club.
By brokers I assume you mean option writers? It's not the same thing as a broker. The option writer isn't charging you a cut for doing "middlework" - the nearest thing to a broker here is Eve-Index. Are you sure you understand what an option writer does? The reason they charge a fee is because they're selling you an option - something you can choose to do or not do as you see fit. They, on the other hand, are committed to fulfilling the option if you choose to exercise it.
IF your complaint is that you won't be allowed to write options then your complaint isn't with what I propose - it's with the whole system. Unless you have a decent reputation - meaning you have something fairly tangible to lose if you default - then I'd assume Eve-Index would want you to provide full collateral for any options you wrote. And if you provide full collateral it ends up not being worth your while writing options in the first place.
The proposal for a few select option-writers wasn't mine - it was Bunsen's (who's running Eve-Index). As it happens I agree with that suggestion - but not for the reasons you seem to believe.
If you believe option writers aren't necessary then I seriously question your understanding of how this proposed market is going to work. You can't have options where both parties have optional participation in any exercising of the option - one party has to be able to fulfill the option at the other's whim. The one who has no choice in the agreement is the option writer.
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Jon Asus
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Posted - 2007.09.27 00:32:00 -
[43]
I do not disagree with the use option writers I understand the system totally, I disagree with the reasoning behind me not being allowed to be an option writer. If I am not an option writer how can I trade on Eve Index without using a middleman?
I would much rather deposit in full and be allowed to be an option writer than to be forced to use someone else to write options.
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Block Ukx
KDM Corp
Firmus Ixion
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Posted - 2007.09.27 11:57:00 -
[44]
Originally by: Professor Bunsen
Edited by: Professor Bunsen on 26/09/2007 18:54:25
OK considering collateral, ...
... Each contract is for a million units so to create the option Eve-Index requires that he deposit 2 mil isk as collateral in order to write the options and holds that.
Comments?
Are you asking MOWĘs to deposit 200 Mil ISK to sell 100 Mil units Tritanium?
Who in the right mind would do this? I can double my 100 Mil Trit reserve with the 200 Mil collateral.
I understand your concerns with defaults, but collateral is not the way to do this. You need to attract option writers not scare them away.
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Block Ukx
KDM Corp
Firmus Ixion
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Posted - 2007.09.27 12:10:00 -
[45]
Originally by: Jon Asus
... If I am not an option writer how can I trade on Eve Index without using a middleman?
Trading options and writing options are two separate things.
You are allowed to trade options without been a MOW by simply creating an EVE-index account. There is no collateral for that. The only fee I noticed is the 1% account withdrawal fee.
Anyways, that's how I understood it.
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Professor Bunsen
Optech Scientific
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Posted - 2007.09.27 22:08:00 -
[46]
I have been amending the software to handle contract collateral as discussed. I have had to amend some of the underlying database structure, so in short its taking a while. ETA put back from "imminent" to "soon" likely to be a week. 
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TheDevilsJury
GoonFleet
GoonSwarm
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Posted - 2007.09.27 23:37:00 -
[47]
As far as I can see having an options market that requires collateral won't work very well as that nullifies the main advantage of option trading, that you can use options to gain great leverage. Its also very difficult to hedge an investment if your investment gets locked up by doing so.
However, what would work excellently is a futures exchange. You don't have to deal with people exercising the option before expiration, so you don't need to hold the actual goods on hand. Simply use the same system that a futures trading house uses, the margin account + margin calls when necessary. It also works better with eve mechanics as it might be used to lock in mineral prices by producers whereas options are more of a speculative or hedging tool.
Actually I don't see why a margin account system wouldn't work with an options exchange either.
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firefly1892
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Posted - 2007.11.08 14:58:00 -
[48]
In order to get around exercising option/put early why not simply deal with European options that can't be exercised before maturity.
BTW its great that your going ahead with this, best of luck when you launch it.
Why CCP didn't get into options and forward contracts is beyond me, it would make the economics side of this game that much better.
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Cenzo
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Posted - 2007.11.11 09:06:00 -
[49]
I didn't read the whole thread, way too excited to do so. Count me in on this venture, and sign me up as a market maker.
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SiJira
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Posted - 2007.11.12 19:31:00 -
[50]
this is a huge tool for the market
____ __ ________
_sig below_
devs and gms cant modify my sig if they tried!
_lies above_
CCP Morpheus was here 
Morpheus Fails. You need colors!! -Kaemonn
[yellow]Kaem |
Oron
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Posted - 2007.11.12 20:28:00 -
[51]
I appreciate the dedicated work and everything, but I think the EvE-Markets are too small, and too easy to manipulate for a option market. In real life the worst effects of options are ballanced by mere size, but what would it do in such a perfect yet small market we have in EvE?
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Pang Grohl
Gallente
Sudo Corp
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Posted - 2007.11.12 21:09:00 -
[52]
Originally by: Oron
I appreciate the dedicated work and everything, but I think the EvE-Markets are too small, and too easy to manipulate for a option market. In real life the worst effects of options are ballanced by mere size, but what would it do in such a perfect yet small market we have in EvE?
The capital and effort investment needed to manipulate the mineral market enough to make isk against an options market should be prohibitive, up to the point that enough people adopt option trading to secure their mineral trade. In my opinion "enough" would be approximately 60% of the consumers and suppliers of minerals (manufacturers, miners, & re-processors) on a constant basis.
***
Si non adjuvas, noces
(If you're not helping, you're hurting)
Improve Share Transfers |
Professor Bunsen
Optech Mineral Ventures
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Posted - 2007.11.12 23:14:00 -
[53]
This has taken far longer than I thought possible, but I'm tantalisingly close to either something  or a white elephant
First an update
Programming for Eve Index is complete (I think  )
The issue of collateral for option writers has been addressed as follows: I didn't want to set up an elite club whereby only a few of the great and good could write/create and option contract. But, I wanted no defaults when contracts were exercised as confidence in the Eve Index market is central to success. So my decision was first to set a trading range around each mineral providing a top and bottom underlying price, e.g. Trit is 2.5-4.6 This exposes a lot of the movement in the underlying mineral but sidesteps the "unlimited gains and losses" which are impossible to collateralise. Collateral for option writers (not talking about players buying and selling options here, no collateral needed for that) is set to 100% by default, but there is the facility to take a view on established "names" in the financial game. Effectively Eve-Index can take a view on players with history and reputation and require a reduced collateral %.
The issue this brings up is who decides everyones collateral %, and I'm thinking some kind of virtual board might be needed to judge reputation vs default risk. Suggestions would be helpful about this.
I'm currently writing the supporting pages, the tutorial, FAQ (how do you know whats a FAQ before anyones ever asked?), and guide to the interface. I'm bored and it's menial work for my planet sized brain but...  Although the programming has been a mental teaser for me (only a keen amateur programmer in RL) I believe that the success or otherwise in this project lies predominantly in the marketing and explaining of mineral options to the Eve population. Again, I would value tapping into the collective brainpower of the forum on this one. I think I might need to employ a marketing man.
Data. I've been so long in delivering on this that I think I've lost the attention of my data samplers. Again I need help on this, or will do before launch. If you think you could support the project by exporting trit, pye and mex data from an alt parked anywhere in the The Forge Region and FTP'ing it to the web site please let me know.
Cold feet.  I think the coding is sound, I've run through every permutation I can think of, I've put in defences against every anti-social trick I can think of but because there's real isk involved (!) I want it to be watertight. Again, if anyones got any software/web app QA skills and could give me some pointers I would be grateful.
So much as it's not the natural thing for an instinctive loner like Bunsen to do, I need to ask for help please!
Log on is here
Player name is : Eveplayer
Password is : pass
Please give it a good kicking for me. If nothing else go look at the pretty graphs of the Jita Trit, Pye and Mex Indexes spiralling downwards!
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Crazy Wong
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Posted - 2007.11.13 00:22:00 -
[54]
A link to some info on options trading concepts in general might be beneficial (or an explanation written by you), especially if you want more people than just those people in the know about how options work to participate. My guess is that those kinds of basic concept questions are going to be your actual Frequently Asked Questions.
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Titus Lewis
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Posted - 2007.11.13 09:05:00 -
[55]
This is very impressive, Professor Bunsen. |
Marq Leosi
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Posted - 2007.11.23 20:32:00 -
[56]
Out of curiosity:
- what vol are you using to price the options? Calculated historical ones?
- What interest do you use in your formula as risk-free interest?
- Which model do you base your calculations on?
- Are you planning on moving into exotic options as well? I'm thinking knockout options as well as binaries.
Great project and good luck with it!
Marq
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Calgorac
The Arrow Project
Morsus Mihi
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Posted - 2007.11.24 03:28:00 -
[57]
rtr
Latest News |
Professor Bunsen
Optech Mineral Ventures
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Posted - 2007.11.24 19:47:00 -
[58]
Edited by: Professor Bunsen on 24/11/2007 19:48:03
- what vol are you using to price the options? Calculated historical ones?
Calculated historical ones, 90 days data so far formula
- What interest do you use in your formula as risk-free interest?
0% based on there being no risk free investment rate in Eve.
- Which model do you base your calculations on?
Black-Scholes
- Are you planning on moving into exotic options as well? I'm thinking knockout options as well as binaries.
No, TBH I'm not familiar with them, and I have my hands full with what I'm doing so far. Even if I c r a c k (stupid *** substitution) the app, the marketing is going to be challenging.
- Great project and good luck with it!
Thanks. Any suggestions fire away
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Ufl
Caldari
Nucon
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Posted - 2007.11.24 20:02:00 -
[59]
Edited by: Ufl on 24/11/2007 20:03:50
Prof. Bunsen
Nucon is extremely interested in this concept, and in becoming a registered broker.
The screenshot you have provided is as close to real life options contrats trading as its going to get!
Do you plan on issuing in game (freeform) contracts to bind the option contracts?
Best Regards
Ufl
Nucon Stock Exchange
[OUR VISION]
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Manfred Macx
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Posted - 2007.11.26 11:56:00 -
[60]
Edited by: Manfred Macx on 26/11/2007 11:57:02
Originally by: Professor Bunsen
Data. I've been so long in delivering on this that I think I've lost the attention of my data samplers. Again I need help on this, or will do before launch. If you think you could support the project by exporting trit, pye and mex data from an alt parked anywhere in the The Forge Region and FTP'ing it to the web site please let me know.
If you need data on historical mineral prices, why not get them from eve-central.com? Look at http://eve-central.com/home/xml_datafeed.html. As far as I can understand you should be able to get *all* uploads ever made to eve-central.com in CSV-format.
:.:: brasse
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Ambo
2nd Outcasters
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Posted - 2007.11.26 12:25:00 -
[61]
This looks great, you have done a really nice job.
Sadly, I have no clue about any of this stuff IRL and am having difficulty wrapping my brain around why I would want to get involved with it. As you already identified, I think this is by far your biggest hurdle.
Most of the interface on the website is totaly meaningless to me as I don't understand the terms used. Now, you could just say I should read wikipedia and find out but frankly I don't want to, nor will I, spend a day researching financial jargon before I can start using it.
It may be that you can't dumb it down at all but if you can I would highly recommend doing so because it's far more likley that people will actually use it imo.
I may well be wrong and I'm sure the technicality will be the main draw for some people but I can't see it ever really taking off in it's current form.
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Professor Bunsen
Optech Mineral Ventures
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Posted - 2007.11.26 21:08:00 -
[62]
I'm aware that persuading people that traded options are "teh sex" is likely to be my biggest hurdle (although some days I think debugging will drive me nuts before then). I'm hopefully doing another round of debugging with Fastlearner Wed/Thurs this week so fingers crossed no further problems. I'll believe it when I see it though.
Here's the first batch of support pages explaining the basics of traded mineral options. It's written with beginners in mind and I've tried to make some pretty complicated ideas as clear as possible, so any comments/questions from beginners would be really helpful.
Eve-Index traded mineral options tutorial
Bunsen
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Ambo
2nd Outcasters
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Posted - 2007.11.27 12:24:00 -
[63]
Just had a quick look through and it looks great.
Will have a proper read when (if) I get time.
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Giovanni F
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Posted - 2007.12.02 01:37:00 -
[64]
Now, I love the idea of having an real-time options market (one of the most intriguing areas of the rl economy imo) and I hope to be able to utilize the Index for any future operations I decide to pursue, but I have one question that has probably been asked before but as I have not read every last word, I find the need to ask.
Once the owner of an option decides to exercise the option on the strike date, how will the number of minerals he has ordered be delivered to the location? I assume that the Index is headquartered in or around Jita, so all of the mineral deliveries will be there, but will it just have to be a necessary evil for those people who need to buy a large quantity of minerals on a later to have the minerals delivered (costing them extra ISK) or just move them themselves (costing extra ISK and needed time).
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Professor Bunsen
Optech Mineral Ventures
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Posted - 2007.12.02 09:22:00 -
[65]
Exercise of the option is any time before expiry, rather than just at the end date. As far as delivery location, the default location is Jita 4-4. Nothing to stop the contract writer and person exercising it agreeing a different location if that suits them better.
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