Last post on Mar 15, 2008 at 7:16 PM
You are in the Car Stock Exchange
What is this discussion about?
#1 of 7 Idea for pricing and shorting
Mar 14, 2008 (2:16 pm)
How about this as a way for fixing current prices and shorting:
-Price is capped at 200% of production capacity
-The short scale is then based upon that 200% production capacity stock price limit instead of on an arbitrary number.
This way, if a stock is trading at the estimate price, it costs you the same amount of money to buy it or short it. The estimate becomes equilibrium, the farther you get away from that equilibrium the more expensive it gets to push the price farther to the extreme and the cheaper it becomes to push it back to the middle.
This would simplify the market considerably, and anchor the prices to reasonable values better.
However, what this does NOT fix is the stocks that will have extremely low volume car sales. The problem is that we got this huge sum of money to spend, and some of these stocks are going to be retired at under $10 a share. Because it will be so cheap to buy/sell these stocks, they would need to be far more resistant to price swings, i.e. they need to start with an extremely large "book" that is based upon estimate unit sales to offer resistance against the new shares being purchased.
As I've mentioned before I think it would be better to have all stocks treated equally with their share prices representing an index with base $100.00 that percentage changes are calculated against. While it would be a very significant change from the current system, it would at least put all stocks on equal footing.
#2 of 7 Re: Idea for pricing and shorting [doctorlove]
Mar 14, 2008 (6:02 pm)
I'm not sure I understand your proposal, but my understanding of this game is that it is an attempt to bring the theme of auto sales into the world of finance. As I mentioned in another post, the way these instruments work make them futures rather than stocks. Why not go all out and make the game about trading financially settled futures? When you enter a future position (long or short) you don't actually pay anything. The exchange does however require you keep some money with them as margin to protect their exposure to the risk of you defaulting. If the position moves in your favor (price goes up if you're long or down if you're short), you may be able to call back some of your margin. If the position moves against you, the exchange may demand more cash from you. If you fail to produce the cash, the exchange may liquidate your position at market prices. Players would then want to keep some cash reserved to avoid being forced out of positions.
#3 of 7 Re: Idea for pricing and shorting [yuant]
Mar 14, 2008 (9:21 pm)
No offense man but the current system is already a kind of a stretch for the average person to get into, you want them to understand futures instead? Good luck with that :p
#4 of 7 Re: Idea for pricing and shorting [doctorlove]
Mar 15, 2008 (6:11 am)
I think it's a stretch because it doesn't really work like anything in the financial markets right now. Because it is described as analogous to trading stocks, they think along those lines. But the game doesn't really behave like trading stocks. Stocks are worth whatever the market thinks they're worth because that's what you can get for them. They do not expire to some externally determined settlement price except in the rarest instances, like when the company goes under and you can only get pennies back if you're lucky. This game doesn't work that way. These instruments expire at a value determined by something totally outside of this game.
Another thing, shorting stocks is much more complicated than going short in a futures position. To short stocks, you have to deal with options on stocks. As individuals, you cannot simply sell stocks you do not have. Dealing with options means knowing about strike prices, which are not involved in this game. And those of us who have had experience selling naked stock options would also have had experience with margins. Shorting a future on the other hand is simply taking the opposite side of the long future position. The long side receives the floating price while paying a fixed price. If you buy the future at $25 and it settles to $30, you're getting $30 while paying $25, netting you $5 per share. If you're short, you just take the opposite side of that. You pay the floating while getting the fixed.
If the game is not meant to model stocks or anything in the financial markets, then don't bring that aspect into it as it confuses people who try to think that way.
#5 of 7 Seriously guys...
Mar 15, 2008 (2:50 pm)
Shorting is NOT that complicated.
You buy when you think the price will up and you short when you think the price will go down.
It's really that simple.
#6 of 7 Re: Seriously guys... [louiswei]
Mar 15, 2008 (3:17 pm)
It's the inverse pricing that throws people off more than anything I think
#7 of 7 price caps based on production capacity!!! yes!!!
Mar 15, 2008 (7:16 pm)
Finally, someone is thinking about 'production capacity' price caps like me.
Even if Toyota could sell 580,000 corrolla's in today's market in 6 months, (the current rate on CSX is around 580 dollars) they couldn't produce that many in the first place. So if this game is about sales volume, I think it should be equally balanced with realistic production capacity for each model.
If they don't do something, they should just figure this game is more about the projected image or popularity value of each car rather than facturing in sales figures. More like the hollywood stock exchange.