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  1. #1
    Namssob's Avatar
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    Question Short Selling & Derivatives - is it possible?

    Something I've thought about for a long time, but have never been able to come up with a good answer: can you short sell in WoW? And if you can, under what circumstances?

    For those who aren't familiar with the concept, short selling is betting that prices will FALL. Normally, you buy a stock low and sell it high, in that order. Selling short basically means you sell it high and buy low, in that order. The left over cash is your profit. it's easy to do if you already have the items. But what if you don't?

    This concept is often touched on a little by some speculators in the early days of an expansion. For example, upon Cataclysm's release, farming ore and SELLING IT, then later buying more ore at a fraction of the cost so you could level up Blacksmithing. Not exactly the same thing, but about as close as I've seen you can get.

    Secondly, derivatives. These are instruments based on OTHER instruments, for example stock options. I wonder how this would/could be implemented in WoW.
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  2. #2
    Quote Originally Posted by Namssob View Post
    For example, upon Cataclysm's release, farming ore and SELLING IT, then later buying more ore at a fraction of the cost so you could level up Blacksmithing. Not exactly the same thing, but about as close as I've seen you can get.
    On the topic of shortselling I would say this is as close as you're going to get, and I wager is something many of us do every day. If I check the AH and see x is selling for a higher price than usual and I happen to craft with x regularly and so have some stockpiled, I'll sell some of my reserves of x with the full intent of buying more later when the prices are more favorable to buyers than sellers.

    Along similar lines, we all know that the price of Darkmoon Cards is going to plummit on our servers when the fair arrives again. A smart goblin would be liquidating inventory now before the fair in anticipation of lower priced cards in the future, and then stocking up low-priced cards during the fair week to sell during the inter-fair period.

    Again, not exactly the same as a real world short, but probably as close as you can get in WoW.

  3. #3
    Kathroman's Avatar
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    I think this is definitely possible under the right conditions. I have always envisioned that the ultimate large-scale operation would look something like this:

    - purchase all mats that are a below a certain percentage of market value (ie. 85%)
    - craft all available products that are both profitable and "sell"able within a day
    - relist leftover mats at market value or slightly above
    - rinse and repeat the next day

    This cycle gives you maximum exposure in as many markets as possible, which greatly increases the likelihood of making sales. It also saves you the trouble of needing storage space. I guess the "short selling" aspect revolves around the expectation that by relisting excess mats back at market value, additional supply produced will be listed below market value which will be available for you to buy the next day. I'm sure there are flaws in my system, as I haven't really put a lot of it into practice (need to get a few more alts leveled up, first) but I think it definitely represents an extremely efficient way of handling a large-scale diversification type of operation.

    Thoughts?
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  4. #4
    Quote Originally Posted by Kathroman View Post
    I think this is definitely possible under the right conditions. I have always envisioned that the ultimate large-scale operation would look something like this:

    - purchase all mats that are a below a certain percentage of market value (ie. 85%)
    - craft all available products that are both profitable and "sell"able within a day
    - relist leftover mats at market value or slightly above
    - rinse and repeat the next day

    This cycle gives you maximum exposure in as many markets as possible, which greatly increases the likelihood of making sales. It also saves you the trouble of needing storage space. I guess the "short selling" aspect revolves around the expectation that by relisting excess mats back at market value, additional supply produced will be listed below market value which will be available for you to buy the next day. I'm sure there are flaws in my system, as I haven't really put a lot of it into practice (need to get a few more alts leveled up, first) but I think it definitely represents an extremely efficient way of handling a large-scale diversification type of operation.

    Thoughts?

    The only trouble with is strategy is that if you are solely reliant on the AH for your mats - this technique will drive up the cost of your mats and decrease your margins. For example I get my herbs for my glyphs solely from the AH. I deliberately leave some cheap herbs on the AH hoping someone will continue to try to undercut those items and keep the prices low. I don't leave enough out there for my glyph competitors to restock though. If I were to completely buy out the market and reset the prices with my own herbs - I will make a short term profit but I will negatively impact my longer term cost of mats and reduce my overall margins.

  5. #5
    Shorting in WoW is difficult because any agreement you make is not legally binding so if you agree to supply ores tomorrow at today's market price in the hope that ores will tank tomorrow, the buyer can check the market price tomorrow and tell you to get lost without any repurcusions.

    Something similar to shorting happens in WoW when crafters agree with farmers on COD prices in an attempt to secure steady supply. Obviously the farmer's main motivation is not the belief that his trade goods are going to tank, but if he is also buying out items on the AH below the COD price, I guess he is shorting the trade goods.

 

 

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