Future/Option Contracts

Any one think there’s any interest in contacts for minerals; Cash-Secured Puts and Covered Call type contracts? I’m not suggesting a web site or a new system in Eve, although that would be nice.

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It would have to be simpler than real life.

You need to be able to but a call or put, and either exercise it, or, sell the contract itself.

And no automatic execussion if you hold it until whatever date.

  1. Yep, simple is key

  2. Yes and No. I figure the only way to do this is and make a go of it is for me (or anyone who wanted to do this too) would be the contract seller. For example, I would offer to say sell a put for zydrine at X with the contract to expire at some date. If someone wanted to offer a lower bid, then I could choose to sell at that price or not. Another way might be to offer the availability of a call or put contract for an item at some expiration date and others could bid, then I choose to accept or not. To protect my own a$$, I would only sell contracts I could cover. Someone else could take the risk of a naked contract, but it wont be me.

  3. Yes - there is no way to force anyone in this environment. If the underlying was in the money (at expiration), then I as the contract seller would send an “eve contract” containing the underlying. The contact owner could choose to exercise from that, or not. If the underlying were out of the money (at expiration), (expired worthless) then no need to send an “eve contract” containing the underlying.

So back to simplicity and Item three, these would be European style contracts, not American.

Edit - Clarified item 3 with expiration stated

I’m think how calls and puts on stocks work in the real world.

You can buy a call or put and if it’s in the money later you can execute it for the arbitrage, or, you can sell it for a profit.

A key point has to be it’s an option and not a requirement to execute.

Yes, of course - See item 3 above. As the contract (option) seller, it would be my responsibility to send the eve-contract. The contract (option) owner would then have the ‘option’ to exercise or not, up until the point that the eve-contract expired.

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We already have contracts. Good enough. Futures contracts would just lead to price volatility.

I doubt a handful of Eve market nerds, trading a handful of derivatives will make any impact on the Eve markets :slight_smile:

And to the contrary, futures have been proven to decrease volatility. Go look it up.

You do not just trade derivatives, you also end up manipulating the price of the asset to benefit your derivatives hustle.

My intent if to trade these options on minerals, because they are big, liquid and difficult to manipulate. If you think I have the ISK to manipulate those markets, I am flattered.

And something is up with quoting posts.

there’s no enforcement mechanism, so good luck. the utter lack of a legal regime in eve markets limits the complexity pretty well.

You’re 100% right on that. I don’t see CCP ever building a formal options system into Eve, so it would all have to be player driven.

The idea is that individuals sell the option and are then obligated to fulfill terms at expiration if the option is in the money. Those people who have a record of fulfilling their part of the deal would also be able to sell at a higher premium.

I don’t think it needs to be too complex. For instance, I’d start a post in the forums, probably this one, listing the terms, underlying, strike, expiration date and ask price. Those interested would bid and send isk to the option seller, or perhaps haggle a bid in the forum thread. Then at expiration the option seller would notify on the forums that they had fulfilled obligations and the option buyer could confirm.

In-game eve-contracts would be used to fulfill obligations. The option buyer would then be able to exercise if they so chose to do so. Since the option seller would not be obligated to create a contract for out of the money options, I can’t see why anyone would ever not exercise.

There would be no middle-man, no market maker. The options would be direct between seller and buyer. Although, were CCP to ever code it, they could be the market-maker. They’ve an infinity of in-game resources. They’d have to devise formal greeks though, so as to not unbalance faucet and sinks.

what i meant by complexity is something more than just an ongoing agreement to supply x at y price. you can do that now.

using the forums would limit your potential market. a really big chunk of the pbase either doesn’t read forums or just skims at most. ideally, you’d need an ingame sort of thing, but that would expand it only so much.

the problem is that eve is pretty backward when it comes to finance. sure, there’s a bunch of investment vehicles that spam this subforum, but they’re all just joint stock ventures ala the 16th century no matter how much they label themselves “hedge funds.” you can kind of approximate a futures contract by making deals with players and/or corps to supply you with x for y price. unfortunately, you can’t really trade that contract. what you can do is take delivery and then maybe offload the stuff to another buyer directly or sell at a hub or backwater. it’s pretty simple price arbitrage, but it works.

You’re not wrong. When it comes to finance, Eve is indeed behind the times. For me, this may be a pet project. At this stage I’m exploring feasibility and attempting to gauge interest.

Since I would be on my own, and having to manage it myself, and provide responsive service, a limited amount of participation may be good thing. I don’t want my Eve time to turn into a paper work chore. If I could do 10 option-contacts a month, I’d consider it a success.

i’d say give it a go. i don’t know if you have, but you should check interest on r/eve as well. that forum is pretty busy also. You just have to wade through 47 billion threads about the same null war :stuck_out_tongue:

Yeah maybe. I tend to avoid most social media stuff, except eve forums.

For those who have read this thread and are interested, below is the idea more fleshed out. Feel free to give thoughts, ask for clarification, and of course the usual assortment of speculative “this is a scam” posts, as appropriate for the Eve-O forums.

Do excuse syntax and formatting, this is a paste.

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Terminology:

  • Option: An agreement to buy or sell something at an agreed price at an agreed date.
  • Underlying: The ‘thing’ for which the Option regards. For Instance: The Underlying of a Tritanium Call Option is, Tritanium.
  • Strike / Strike Price: The agreed upon price of the Underlying for the Option.
  • Expiration Date / Expiry: The agreed upon date of the Option.
  • Multiplier: The count of Underlying in the Option. For instance: If an Option is for 1 million Trit, and the cost of the Option is .05 ISK, then the total cost of the Option would be 5000 ISK. (Ask Price x Multiplier).
  • Option Price: The Option Ask price in underlying single unit terms.
  • Option Cost: The Option Ask price times the number of units – the Multiplier (i.e. for A titanium Option of one million units. Ask is 0.20, multiplier is one million, equating to, 200,000 ISK)
  • Closing Price: The in-game Average Price of the underlying from the previous day (The Forge).
  • Ammatar Trade Syndicate Average (ATSA): The seven-day moving average of the Average Price as recorded in the in-game market history table in Jita 4-4 Caldary Navy Assembly Plant (The Forge).
  • Call Option: An obligation for the seller (me) to sell you Minerals at the Strike Price, if the ATSA is above the Strike Price on the Expiry date.
  • Put Option: An obligation for the seller (me) to buy your Minerals at the Strike Price, if the ATSA is below the Strike Price on the Expiry date.
  • In The Money (ITM): The Option is in your favor. For instance: If you bought a Call for trit at 10, and the ATSA is at 12, then your Option is In the Money by 2 ISK. I would be obligated to sell you Trit at 10 and you get 2 ISK, per unit of Trit (times the multiplier) profit.
  • ATS Reserve (The Reserves): The amount of Underlying and ISK held as a float to accommodate transactions.
  • Vault Reserve (The Vault): Underlying assets other players wish ATS to Manage on their behalf. (Don’t know that this will ever come about, so ‘tis a place holder, we’ll see.)
  • Eve-Contract: The In-game contract system we all know. This is the mechanism that will be used to transfer the underlying for In The Money Options.

Process

I’ll post, monthly, Options available that expire on the last Friday of the following month in a format such as below:

Underlying Availability Multiplier Type Name ATSA Strike Expiry Ask Cost
Tritanium 10 1000000 CALL .TRIT052821C7 6.25 7.00 28 May, 2021 0.20 200,000.00
Tritanium 10 1000000 PUT .TRIT052821P5 6.25 5.00 28 May, 2021 0.20 200,000.00

1 Add Shanua Stravour (my Alt in the Ammatar Trade Syndicate corp) to Contacts – I won’t be paying any mail fees. If there is a mail fee, you wont get mail, but your account will be credited as appropriate.

2 Send ISK to Shanua appropriate for the Option and count. Use the description field when you transfer the ISK. Enter the Option name and the quantity. Please be accurate or I’ll send your ISK back. For Example: .TRIT052821C7 x 2

3 Shanua will send an email back confirming the trade and include a transaction ID. (See step 1).

4 On the day after the expiration date:

  • If the Option is In The Money (ITM) Shanua Stravour will send you an Eve-Contract (to Buy (Put Option) or Sell (Call Option), as appropriate) for the underlying minerals at Jita 4-4 CNA. The Transaction ID will be placed in the Contract’s description field. The Eve contract will be set with an expiration duration of seven days with a cost of 5000 ISK (we split the eve-contract fee). You may then Exercise your Option or not. If you were on vacation or out sick or something and missed your opportunity to Exercise, send Shanua Stravour in-game mail asking for a re-issue of the Eve-Contract, please include the Transaction ID, so that I can find it in the records. There are no silly rules, like a Jita ISK doubler, no silly fees or other such non-sense. If it takes you more than 30 days to ask for a re-issue, you may have to wait until the market is in my favor, if the Reserves are insufficient at the time. If you don’t want to wait, we can work out terms to Roll to an Option with a later Expiry. So don’t wait please.
  • If I am on vacation, I’ll give ample warning. If I am unavailable due to something unexpected then I will make every effort to notify. If I get hit by a bus or a meteor lands on my house and I die … well too bad.
  • If the Option is Out of The Money (OTM) Shanua Stravour will not send you an Eve-Contract as the Option has expired worthless.

Risks to You

  • The Closing Price is Out of The Money and your Option expires worthless.
    • For Example: You buy a one Call Option for one million Trit with a Strike Price at 9 ISK for 0.20 ISK per unit, with an expiry of May 28th, 2021. (This costs you 200,000 ISK, units of underlying x Option Price.) On May 29th, the ATSA, ending on the 28th is 8 ISK. Your option has expired worthless and no Eve-Contract for the underlying will be issued. You will have lost 200,000 ISK.
  • I shaft you and steal your ISK.

Risks to Me

  • The Closing Price is In The Money and your Option expires not worthless.
    • For Example: You buy one Call Option for one million Trit with a Strike Price at 9 ISK for 0.20 ISK per unit, with an expiry of May 28th, 2021. (This costs you 200,000 ISK.) On May 29th, the ATSA, ending on the 28th is 10 ISK. Your option has expired In The Money. Shanua sends you an Eve-Contract for one million Trit at the cost of nine million ISK plus one half of the broker fee (5000 ISK). You just bought one million trit for one ISK below the market. You turn around and sell it and make a gross profit of one million ISK minus the cost of the Option, so 795,000 ISK. I’m out whatever it cost me to sell you Trit at 9 ISK a unit.
  • I shaft you and steal your ISK and I’m marked as a scammer for all time.

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Thanks for reading,

*as

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