Quiet Speculation: Wall St. Wizardry

Posted on October 13, 2010 by Kelly Reid

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  2. I doubt it, but it was just an example. A better example would have been 2x Koth of the Hammer (in 3 weeks) for a Jace, TMS now.

    The “book” value is -15.00 on the Jace side, but you’re buying the use of 85.00 for 3 weeks (which can then be leveraged to trade-up and -get- the Koths when they debut, ideally at a lower price.

    It’s basically a form of trading “on margin” (not to be confused with profit margin), where you basically play with someone else’s money for a nominal fee. The problem is that if you make a bad choice (Jace tanks or Koth spikes), you’ll have to meet a margin call! Let’s get this discussion going, though, since not enough people yet understand how to treat Magic cards like securities!

  3. Specialized pre-orders are an interesting idea- only offer pre-orders on cards that you think are going to crash (Time Reversal anyone?! now 2 tix or less on MTGO). I wonder how hard it would be to set up a market within the game. Maybe someone could code a bot to take in tix as credit and allow people to short (with a transaction fee, of course). The trading example is also something that you can do with people you trust (especially if sentiments about the cards are correct).

    I was also thinking, renting cards could similar to receiving dividends, but I have yet to think of a way to make it worthwhile for the renter AND the seller (risk of price changes and time intervals seem like my most serious obstacles).

  4. The problem with shorting Magic cards is that the analogy begins to break down. Trade value aside, people buy Magic cards 95% of the time because they want them in a deck, immediately. People buy stock 95% of the time because they want to hold onto it for days, months, or years, and not do anything with it. You can “short sell” stock because you’ve essentially promised the buyer that it will be in his or her hands by the time he or she needs to sell it. You can’t “short sell” Magic cards, because they don’t need ownership of the card, they need use of it.

    TL;DR: Magic cards can’t be short sold because the utility is in usage, not in ownership and dividends.

  5. My big problem with this is that pre-sale prices rarely come down to where you want them to within a week of set release. The hype is still there, usually, until the first few rounds of tournaments go by.

    What you want is to ‘short’ in pre-sale and deliver ~1 month after release. I really don’t know anyone who’d take that deal, unfortunately.

  6. Kelly,

    Few quick comments. On mtgo there are (effectively) zero transaction costs. Not so in real life. Selling cards either involves fixed costs (cost of postage/insurance via a stores buylist), or variable costs (e-bay).

    It would be very easy for “shorting” to backfire on a local trader. First, you need to factor in that the “shorter” needs to compensate the other person for giving up the cards for two weeks (or whatever the time frame is). For example, if Jace is worth $80 and Koth is pre-selling for$40, then a fair deal might be Jace now for 2xKoth + $5-$10 in rares in two weeks. Second, even if the price of Koth falls far, you still have to produce them within a week of release. You will need to aggressively trade for cards that everyone wants. Third, because the deal is so unusual, if Koth falls to $20 and you make $40, you will likely have alienated your trade partner.