MA - Please allow item short-selling

antomeister

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Allow a tab for item lending in the auction house, the lender makes interest by lending the material to said short-seller, and the short-seller in question puts up PED as collateral or anything with TT value for 125% or 150% of the position (Enough to make up for MU and risk). Then with the borrowed material, your market prediction starts off with a sale of the material on the auction house. Say, I predict muscle oil will decrease by 0.5% during merry mayhem. I borrow muscle oil at 101.5% and pay .1% interest per week, but borrow the muscle oil on the day that it is 101.5% and sell it on that day.

Next week, when merry mayhem hits, lets say my prediction is correct - it drops to 101%. I would buy back the muscle oil at 101% and pay the .1% interest, give back the oil to the lender and unlock my previously locked PED collateral, netting a profit margin of +0.4% of capital. Lender wins and investor wins!

(The Reverse) When merry mayhem hits, my prediction is incorrect - it rises to 102%. I have a choice to buy back the oil to close my position at 102%, plus 0.1% interest, netting a loss of -0.6%. Because my collateral is 125 or 150% of the position, this accounts for the losses that a person may make, and leaves the lender risk-less.

*One More Choice* - Let's say im a gambler and choose not to take a loss. For some weird reason muscle oil keeps rising to abnormal levels, say 105 or 110%. The loan will automatically calculate when to liquidate the position so that the lender leaves risk-free, by using the PED collateral to buyout the cheapest muscle oil on the market.

For Calculation purposes -
I want to short 100 PED of muscle oil at its current MU of 101.5%+0.1%Interest. I must put up 125% collateral, so the equation is - 100p*1.016(1.25)=127 PED Collateral.
3 Days goes by, a huge crafters soc decided to buy up all the oil, MU rises to 120%. The loan calculates that the risk-free limit for the lender is 120% based on the cheapest buyout offers available and the MU history (Say, using a 50 day Simple Moving Average and accumulation/distribution calculation). All of this is included in the loan calculation to ensure that it is risk-free. at 120% MU the collateral is automatically liquidated, and the short-seller take a loss, purchasing the cheapest muscle oil buyout and fulfilling the lender's material. Any excess oil is reserved in MA's "reserve" bank, for future lending and fulfilling, as we cannot ensure that auction house offers will fulfill the exact quantity of the material.

Now most importantly, what does this solve?
1. Liquidity
- This provides more opportunities for trades and lending, allowing more opportunities and more people to trade the market. The more trades occur on the market, the less volatile items can become. If i'm an uber hunter who has no time to spend putting items on the market or am looking to hold materials for the long term, I can provide an opportunity to lend and acquire interest.

2. Price Accuracy - This allows prices to be more accurate, because if our only choice is to invest in something and make money when it goes up, then it is more vulnerable to price mismatch. Like for example, I can assume that at a certain time at night when everyone is sleeping, MU may rise, but I can only take advantage by buying low and selling high. What if a person in another country wants to sell high and buy low, making the MU more accurately priced, and making it harder for any individual reseller to take advantage.

2. Prevents Manipulation - Now this is something that we all are worried about. Short-selling as an option actually prevents price manipulation. Let me explain why. Systems where participants have contrarian views tend to be more efficient. Imagine a situation at work where we are all happy-go-lucky people and do not provide effective criticism to each other. The profit margin for this company would be low compared to a company that states to their workers why certain methods of work and what they believe they should be doing may be incorrect. This does not constitute an insulting opinion, but actually an efficient one. Thoughtful discussion tends to lead towards increased knowledge and productivity. And that's what prices are! A communication between buyer and seller at the micro level, and supply-and-demand at the macro level.
 

Katie Chalmers

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No thanks.

You seem to propose introducing an overly complicated set of mechanics into a system that already works fine. There is a lot of things that this game needs, but one thing we don't need is wannabe stock traders playing with our muscle oil trying to make 16 pec of us for doing nothing.
 
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TheOneOmega

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It would be fun to able to tell people complaining about how ComPet Deeds, A101s, etc., have no real value or are in bubble of resellers trading each other to actually put some captial behind their convictions.
 

Westy

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We don't need a stock exchange or related securities. We do need a lending system to eliminate the need for swapping assets as security. These should only be for single items and not consumables or stacks.
 
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im sorry but, no ty...


i'm all for a system that allows us to lend items for a price, that'd be frickin' rad.

imagine if the entropia banks (PA bank, Twin bank etc) allowed us to BORROW an item - for say a week for a certain cost. That, would be sweet. I'd happily pay that bank to borrow a specific item at a specific cost.

Say.. (PED amounts are just taken out of thin air:)

I visit the bank, and the bank offers a Mod 2350 for 500 ped / week.

I then pay 500 peds, and at the end of the week the item automatically transfers from my inventory back to the bank, allowing someone else to rent it. (Maybe someone already queued to rent it?)



Item borrowing service but without the collateral using a built-in system would be sweet. My only worry is that it would damage the (L) Market because it could render (L) weapons (and paying MU) useless.
 

Ripcraze

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No, we don't need shorters, they shouldn't be allowed on the stock market either, we don't need that cancer here too.
 

stormick

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Why don't you just take your monthly/yearly EU deposit and put it in a brokerage account.
Then buy some puts if you want to short, but do not want potentially unlimited losses aka short squeeze. The most you lose is the premium paid for puts.
And leave EU to people who actually want to play the game and not the auction.
 

SoberPhil

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TheOneOmega

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I'm going to drop a video that, at a very elementary level, began to seed my thinking on welfare analysis of short selling (in general, not in EU specifically). It's not meant to be a "gotcha" to those taking an anti-shorting stance, but to hopefully move those taking a very ideological-sounding anti-shorting stance, calling it a "cancer" or just saying "no" without further analysis, toward a more nuanced point of view.

 

TheOneOmega

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I think this video impeaches the short selling argument , more than it advances it.
That certainly isn't how I would interpret the intent of the video. I can see how some economic actors, i.e., day traders, would question the assumption that low volatility is universally beneficial, but that would at most undercut (not rebut) his first argument, and leave his second argument untouched. It is hard to see how either argument might be taken to impeach short selling arguments.
 

antomeister

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I think this video impeaches the short selling argument , more than it advances it.
How does it impeach it? He completely said in the video that almost every role in the investment world (Including the government) has an incentive to be 'positive' and only short-sellers have an incentive to be 'negative' on a stock. That's a good thing wouldn't it be? Why do you want to live in a world where everyone is in constant agreement...It hides the truth.
 

Power

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Allowing short selling would be excellent for the economy.

It would help keep prices in check without the need of MindArk stepping in which would essentially take some of the burden off their balance/support teams. That means more money for them to spend in other places.

Brilliant idea.
 

Lyrisiana

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If I understood correctly the original poster wants a reliable software enforced lending contract, if we want to short sell then is our own decision, I doubt the positive effects of short selling would be much bigger in comparison to how short selling would work now (based on trust) and it would be expensive but we don't have to discuss that, establishing the lending mechanism I think is a good idea, that contract then should work with deeds I want to point out though because they would be more interesting in the context of short selling. With the whole programmable money thing around the corner anyway I think this is a logical idea to come up with.
 
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